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The company had begun their calendar fiscal year of 2018 with 560,000 common shares issued and outstanding.

Mr. Jell provided you with additional information on the company's equity and debt transactions for the year:

• On February 1, it had issued 84,000 shares; 78,000 shares on May 1 and 43,200 shares on November 1, respectively.
• Further on April 1, it had acquired 12,000 shares from the market and had immediately cancelled them.
• The company also had outstanding at the beginning of the year, 8% convertible preferred shares capitalized at $950,000. The preferred shareholders were eligible to convert their shares into 64,000 common shares.
• Jupp Jellies had not declared any dividends since 2015.
• The company also reported convertible debt. These were bonds payable, issued at par on July 1, 2016, for $12,000,000 and paying interest annually at a 5% coupon rate. Each $1,000 par value bond could be converted into 5 common shares of the company. There was no premium recorded for the conversion feature.
• On October 1, 30% of the bondholders submitted their bonds for conversion to the company in exchange for common shares.
• Companies at Jupiter are taxed at a flat rate of 35%.
• Upon inquiring further, Mr. Jell told you about the the two types of options which had been issued in prior years and were outstanding as at the beginning of 2018. Call options had been issued to the management team which enabled them to buy 120,000 common shares at $9.00 each. Put options had been issued to employees which entitled holders to sell 135,000 of the company's common shares to the company for $15.00 each. Jupp Jellies' shares traded at an annual average market price of $12.00 each. This price was not adjusted for the effects of the stock dividends. All options remained outstanding at the end of the year.

Question:

Identify the potentially dilutive securities which could be included in the computation of diluted earnings per share. Rank these securities where required.

Determine the diluted earnings per share to be reported by the company in 2018 assuming preferred shares were cumulative.

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