accounting 300b basic and diluted eps 460575

1. Basic and diluted EPS.

Assume that the following data relative to Kane Company for 2010 is available:

Net Income $2,100,000

Transactions in Common Shares Change Cumulative

Jan. 1, 2010, Beginning number 700,000

Mar. 1, 2010, Purchase of treasury shares (60,000) 640,000

June 1, 2010, Stock split 2-1 640,000 1,280,000

Nov. 1, 2010, Issuance of shares 120,000 1,400,000

8% Cumulative Convertible Preferred Stock

Sold at par, convertible into 200,000 shares of common

(adjusted for split). $1,000,000

Stock Options

Exercisable at the option price of $25 per share. Average

market price in 2010, $30 (market price and option price

adjusted for split). 60,000 shares

Instructions

(a) Compute the basic earnings per share for 2010. (Round to the nearest penny.)

(b) Compute the diluted earnings per share for 2010. (Round to the nearest penny.)