At December 31, 2007, Quirk Company Had 2,000,000 Shares of Common

Multiple Choice

At December 31, 2007, Quirk Company had 2,000,000 shares of common stock outstanding. On January 1, 2008, Quirk issued 500,000 shares of preferred stock which were convertible into 1,000,000 shares of common stock. During 2008, Quirk declared and paid $1,500,000 cash dividends on the common stock and $500,000 cash dividends on the preferred stock. Net income for the year ended December 31, 2008, was $5,000,000. Assuming an income tax rate of 30%, what should be diluted earnings per share for the year ended December 31, 2008? (Round to the nearest penny.)

A) $1.50
B) $1.67
C) $2.50
D) $2.08