Answer:
  1st Plan Earning per Share $  1.80
2nd Plan Earning per Share $ 2.30
<em>The Second Plan provides better earnings per share.</em>
Explanation:
1st Plan:
Income before Interest and taxes 1,008,000
Bonds Payable Interest:              <u>     (144,000)  </u>
Income before taxes                        864,000
Income tax expense                     <u>   (345,600)  </u>
Net Income                                        518,400
<u>Quantity of Common Stock:</u>
$ 1,440,000 / $5 = 288,000
Earing per share:
518,400 / 288,000 = $1.80
2nd Plan:
Income before Interest and taxes 1,008,000
Bonds Payable Interest:              <u>      (72,000)  </u>
Income before taxes                        936,000
Income tax expense                     <u>   (374,400)  </u>
Net Income                                        561,600
Preferred Shares Dividends            (120,000)
Available for common stock            441,600
<u>Quantity of preferred Stock:</u>
$1,200,000 / $10 =120,000 shares
Dividends on Preferred Shares: 
120,000 x $1 = 120,000
<u>Quantity of Common Stock:</u>
$ 960,000 / $5 = 192,000
Earing per share:
441,600 / 192,000 = $2.30