On July 1, 2010, Seaway Tools Limited acquired Marine Machinery from John Tweel. The consideration was paid in 100,000 shares issued to Tweel, in addition to contingent consideration. The agreement also allowed for the following:
1. If Marine's profits for the next three years averaged $5 million or more, 50,000 more shares would be issued to Tweel at December 31, 2011. Marine's profits for 2010, 2011, and 2012 were $7 million, $9 million, and $6 million, respectively.
2. 3,000 new shares for each new customer that Marine attracts with an initial contract value of more than $500,000 during 2010 and 2011. During 2010 and 2011, Marine had two (contracts signed August 1 and November 1) and five new customers (two contracts signed March 1, one contract signed May 1, and two contracts signed September 1), respectively, that met this criterion.
The consolidated earnings for Seaway were $22 million, $19 million, and $24 million for the years ending December 31, 2010, 2011, and 2012, respectively. The number of shares outstanding for Seaway at January 1, 2010, before the acquisition, was 1 million.
Instructions
Determine the basic and diluted earnings per share for Seaway for 2010 and 2011.