Calculate Basic Earnings Per Share and Diluted Earnings Per Share.

Additional information: There are 500,000 shares of $20 par 5% cumulative preferred stock outstanding. There are 3 million shares of common stock outstanding. The balances of outstanding preferred and common shares are expected to remain consistent without considering the issuance at hand. Earnings before interest, issue expenses, and taxes is $12 million with an expected increase of 5% year over year. The stock price is $11 per share and is expected to increase 4.5% year over year. The tax rate for all years is 21%.

Issuance 1 Lump Sum Sale Issue 50,000 $20 par 5% convertible and cumulative preferred shares and 500,000 common shares as a lump sum sale to a hedge fund for a total of $30,250,000. Each preferred share can be converted into 10 shares of common stock. The underwriter will charge $250,000 to take the issue to market. The journal entry at issuance would be:

DR Cash 30,000,000

CR APIC - CS 5,500,000

CR PS @ par 1,000,000

CR APIC - PS 23,500,000