At December 31, 2017, the HM Blue Note Company had 600,000 shares of common stock outstanding. During 2018, HM Blue Note sold 100,000 shares on March 31 and reacquired 40,000 shares on September 30. Net income for 2018 was $1,630,000. The tax rate is 40%. Obama's capital structure contained the following items.

1. 20,000 shares of 8% convertible cumulative preferred stock, par $100, sold at 110. Each share of preferred stock is convertible into 3 shares of common stock.

2. $2,000,000 face value of 7.5% bonds sold at par.

3. $1,000,000 face value of 7% convertible bonds sold at par. Each $1,000 bond is convertible into 40 shares of common stock.

4. $3,500,000 face value of 6% convertible bonds sold to yield 7%. Unamortized bond discount is $120,000 at January 1, 2017. Each $1,000 bond is convertible into 28 shares of common stock. [Remember that interest expense is calculated using the effective interest method].

5. 20,000 options to buy common stock at $42 per share.

6. 40,000 options to buy common stock at $25 per share.

7. 20,000 options to buy common stock at $30 per share.

The average market price of the company stock is $40 per share.

Required

(a) Calculate the basic earnings per share.

(b) Calculate the diluted earnings per share.