(EPS with Complex Capital Structure) Diane Leto, controller at Dewey Yaeger Pharmaceutical Industries, a public company, is currently preparing the calculation for basic and diluted earnings per

» share and the related disclosure for Yaeger’s external financial statements. Below is selected financial information for the fiscal year ended June 30, 2008.

The following transactions have also occurred at Yaeger.
1. Options were granted in 2006 to purchase 100,000 shares at $15 per share. Although no options were exercised during 2008, the average price per common share during fiscal year 2008 was $20 per share.

2. Each bond was issued at face value. The 7% convertible debenture will convert into common stock at 50 shares per $1,000 bond. It is exercisable after 5 years and was issued in 2007.
3. The 8.5% preferred stock was issued in 2006.
4. There are no preferred dividends in arrears; however, preferred dividends were not declared in fiscal year 2008.
5. The 1,000,000 shares of common stock were outstanding for the entire 2008 fiscal year.
6. Net income for fiscal year 2008 was $1,500,000, and the average income tax rate is 40%.

Instructions For the fiscal year ended June 30, 2008, calculate the following for Dewey Yaeger Pharmaceutical Industries.

(a) Basic earnings per share.

(b) Diluted earnings per share.

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DEWEY YAEGER PHARMACEUTICAL INDUSTRIES SELECTED STATEMENT OF FINANCIAL POSITION INFORMATION JUNE 30, 2008 Long-term debt Notes payable, 10% $ 1,000,000 7% convertible bonds payable 10% bonds payable Total long-term debt Shareholders' equity Preferred stock, 8.5% cumulative, $50 par value, 100,000 shares authorized, 25,000 shares issued and outstanding Common stock, $1 par, 10,000,000 shares authorized, 1,000,000 shares issued and outstanding Additional paid-in capital Retained earnings Total shareholders' equity 5,000,000 6,000,000 $12,000,000 $ 1,250,000 1,000,000 4,000,000 6,000,000 $12,250,000