Given the Following Convertible Securities, Determine the Appropriate Ranking to Determine

question 40

Multiple Choice

Given the following convertible securities, determine the appropriate ranking to determine their impact on diluted earnings per share calculations:
(1) 10% convertible preferred stock with dividends of $7,000 declared during the year and shares convertible into 2,500 common shares
(2) 6% convertible bonds with interest expense (net of taxes) of $8,000 and convertible into 3,500 common shares
(3) 8% convertible bonds with interest expense (net of taxes) of $5,000 and convertible into 1,600 common shares

• A) 1, 2, 3
• B) 3, 1, 2
• C) 2, 1, 3
• D) 1, 3, 2

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