Assume that the following data relative to Kane Company for 2015 is available:

Net Income $2,800,000

Jan. 1, 2015, Beginning number of Common Shares 700,000

Transactions in Common Shares in 2015

On April 1, the corporation purchased on the market 60,000 of its own outstanding shares. On July 1, the corporation declared and issued a 2-for-1 stock split. On October 1, the corporation issued 240,000 new shares to raise additional capital.

The following dilutive securities were issued prior to 2015.

10% Cumulative Convertible Preferred Stock

Sold at par, convertible into 200,000 shares of common $1,000,000

Stock Options

Exercisable at the option price of $20 per share. Average market price in 2015, $30 90,000 shares

9% Convertible Bonds

Sold at par. Each $1,000 bond is convertible into 20 shares of common stock. $1,000,000

Tax rate is 40% in year 2015.

Required:

1. Compute the weighted average shares outstanding during the year 2015.

2. Compute the basic earnings per share for 2015. (Round to the nearest penny.)

3. Compute the diluted earnings per share for 2015. (Round to the nearest penny.) You have to show the proper intermediate steps to get full credit.