Earnings per share-basic and diluted Greenwich Corporation had net income of $1,712,500 in 2015

The company had 300,000 shares of $4 par value common stock and 25,000 shares of 8%, $100 par, preferred stock outstanding throughout the year. Each share of preferred stock is both cumulative and convertible. Each share of preferred stock is convertible into four shares of common stock. Compute the following for 2015:

What will be an ideal response?

(a) Basic earnings per share: ($1,712,500 - $200,000) ÷ 300,000 shares = $5.04 per share
(b) Number of shares diluted: 300,000 common outstanding + 100,000 from assumed conversion of convertible preferred stock = 400,000 shares