P15.6 (LO 5) Groupwork (Computation of Basic and Diluted EPS) Charles Austin of the controller’s office of Thompson Corporation was given the assignment of determining the basic and diluted earnings per share values for the year ending December 31, 2026. Austin has compiled the information listed below.

1. The company is authorized to issue 8,000,000 $10 par value ordinary shares. As of December 31, 2025, 2,000,000 shares had been issued and were outstanding.

2. The per share market prices of the ordinary shares on selected dates were as follows.

Price per Share July 1, 2025 $20.00 Jan. 1, 2026 21.00 Apr. 1, 2026 25.00 July 1, 2026 11.00 Aug. 1, 2026 10.50 Nov. 1, 2026 9.00 Dec. 31, 2026 10.00 3. A total of 700,000 shares of an authorized 1,200,000 shares of convertible preference shares have been issued on July 1, 2025. Each share had a par value of $25 and a cumulative dividend of $3 per share. The shares are convertible into ordinary shares at the rate of one convertible preference share for one ordinary share. The rate of conversion is to be automatically adjusted for share splits and share dividends. Dividends are paid quarterly on September 30, December 31, March 31, and June 30.
4. Thompson Corporation is subject to a 40% income tax rate.
5. The after-tax net income for the year ended December 31, 2026, was $11,550,000.
The following specific activities took place during 2026.
1. January 1—A 5% ordinary share dividend was issued. The dividend had been declared on December 1, 2025, to all shareholders of record on December 29, 2025.
2. April 1—A total of 400,000 shares of the $3 convertible preference shares were converted into ordinary shares. The company issued new ordinary shares and retired the preference shares. This was the only conversion of the preference shares during 2026.
3. July 1—A 2-for-1 split of the ordinary shares became effective on this date. The board of directors had authorized the split on June 1.
4. August 1—A total of 300,000 ordinary shares were issued to acquire a factory building.
5. November 1—A total of 24,000 ordinary shares were purchased on the open market at $9 per share.
These shares were to be held as treasury shares and were still in the treasury as of December 31, 2026.
6. Ordinary share cash dividends—Cash dividends to ordinary shareholders were declared and paid as follows.
April 15—$0.30 per share.
October 15—$0.20 per share.
7. Preference share cash dividends—Cash dividends to preference shareholders were declared and paid as scheduled.
Instructions

a. Determine the number of shares used to compute basic earnings per share for the year ended December 31, 2026.

b. Determine the number of shares used to compute diluted earnings per share for the year ended December 31, 2026.

c. Compute the numerator in the basic earnings per share calculation for the year ended December 31, 2026.