Situation In 2013, its first year of operations, Kanbec Corporation appropriately reported basic earnings per share of $1.05 on its income statement. During 2014, the company instituted a share option plan and is required to report both basic and diluted earnings per share of $1.12 and $0.98, respectively, on its 2014 income statement. In its 2014 annual report, Kanbec presents comparative income statements for 2013 and 2014.

Directions Research the related generally accepted accounting principles and prepare a short memo to Kanbec's president that explains how to report the 2013 and 2014 comparative earnings per share in its 2014 annual report. Cite your reference and applicable paragraph numbers.