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

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

Correct Answer:

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