7. Earnings per Share with Options

Kearney Companys net income for 2019 was $600,000. The tax rate was 20%. The only potentially dilutive securities outstanding were 900 options issued during 2018. Each option can be exercised for one share of common stock at $20 per share. None has been exercised, and 100,000 shares of common stock were outstanding during 2019. In addition, 2,000 shares of 6% $100 par non-cumulative preferred stock were outstanding. Kearneys Board of Directors declares total dividends of $15,000 in 2019. The average price of Kearneys common stock during 2019 was $40.

Instructions: (a) Compute basic earnings per share for 2019. (b) Compute diluted earnings per share for 2019.