Basic and Diluted Earnings per Share

The following data relate to Schroeder Ltd. for the calendar year 2020:

Net income (30% tax rate)............................................................... $3,250,000

Average number of common shares

outstanding during 2020........................................................... 1,200,000 shares

8%, cumulative convertible preferred shares:

convertible into 90,000 common shares................................... $1,800,000

6% convertible bonds; convertible into 60,000

common shares........................................................................ $2,000,000

Stock options, exercisable at $30 per share.................................... 105,000 shares

All the convertible securities and stock options were outstanding all year. The average market price of the common shares in 2020 was $35.

Instructions

Calculate: a. basic earnings per share b. diluted earnings per share.