At December 31, 2017, Farm Company had 300,000 shares of common stock outstanding. Farm issued 50,000 shares on June 1, 2018. Farm declared and distributed a 10% stock dividend on October 1, 2018. On November 1, 2018, Farm purchased 40,000 shares of treasury stock. Farm declared no dividends in 2018. Income from continuing operations and net income for 2018 was $1,500,000; the income tax rate was 21%. In addition, Farm had the following debt and equity securities on its books on December 31, 2018, which had been outstanding all year:

(a) 18,000 shares of $100 par, 12% cumulative preffered stock. Each share of preferred stock is convertible into 4 shares of common stock.

(b) $2,000,000 face value of 9% nonconvertible bonds sold at 10%. Unamortized bond discount is $100,000 at 12/31/18.

(c) $3,000,000 face value of 7% convertible bonds sold at face value. Each $1,000 bond is convertible into 20 shares of common stock.

Options to purchase 10,000 shares of common stock were granted to employees on January 1, 2016. The options were vested and exerciseable as of 1/1/2018. No options had been exercised as of 12/31/2018. Exercise price is $30 per share. Market value of Farm common stock at the option grant date was $28 per share; average market value of Farm common stock for 2018 was $40 per share.

Required: Assume Farm is a US GAPP public company. Reporting of EPS is required on the income statement.

1. Does Farm have a simple of complex capital structure? Identify which and why.

2. Compute all required EPS amounts to comply with US GAAP reporting requirements. Clearly present all steps involved in the computation process.

3. If there are items that generate potential common shares, identify these and show how each is tested to determine dilutive or antidilutive impact on EPS.

4. Identify clearly which EPS amounts would be reported on the face of the income statement for the year ended 12/31/2018.