Information from the financial statements of Ames Fabricators, Inc., included the following:

December 31

..........................................................................2018...............2017

Common shares .................................................100,000 ..........100,000

Convertible preferred shares

(convertible into 32,000 shares of common) ..................12,000............ 12,000

10% convertible bonds

(convertible into 30,000 shares of common) .............$1,000,000 .......$1,000,000

Ames's net income for the year ended December 31, 2018, is $500,000. The income tax rate is 40%. Ames paid dividends of $5 per share on its preferred stock during 2018.

Required:

Compute basic and diluted earnings per share for the year ended December 31, 2018.