Tulip Corp. has $1,000,000, 6%, nonconvertible bonds due in 2015 and $1,500,000, 3%, convertible bonds due in 2016. The basic earnings per share are $1.25 and the diluted earnings per share are $1.18. Based upon this information, Tulip must disclose

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The convertible bonds are dilutive because the diluted earnings per share ($1.18) is less than the basic earnings per share ($1.25), indicating that the conversion of bonds into shares would decrease the earnings per share. Therefore, both basic and diluted earnings per share must be disclosed.