Catherine Mac, controller of Gravity Inc., a public company, is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Detroit's financial statements, Below is selected financial information for the fiscal year ended May 31, 2020. GRAVITY INC. SELECTED BALANCE SHEET INFORMATION May 31, 2020 Long-term debt Notes payable to banks, 12% $ 4,000,000 4% convertible bonds payable 8,000,000 12% bonds payable 3,000,000 Total long-term debt $15,000,000 Shareholders' equity Preferred stock, 5% cumulative, $100 par value, 100,000 shares authorized, 50,000 shares issued and outstanding $ 5,000,000 Common stock, $1 par, 10,000,000 shares authorized, 2,000,000 shares issued and outstanding 2,000,000 Additional paid-in capital 7,900,000 Retained earnings 2,900,000 Total shareholders' equity $17,800,000 The following transactions have also occurred at Gravity. 1. Options were granted on October 1, 2019, to purchase 150,000 shares at $21 per share. Although no options were exercised during fiscal year 2020, the average price per common share during tiscal Year 2929 12% bonds payable 3,000,000 Total long-term debt $15,000,000 Shareholders' equity Preferred stock, 5% cumulative, $100 par value, 100,000 shares authorized, 50,000 shares issued and outstanding $ 5,000,000 Common stock, $1 par, 10,000,000 shares authorized, 2,000,000 shares issued and outstanding 2,000,000 Additional paid-in capital 7,900,000 Retained earnings 2,900,000 Total shareholders' equity $17,800,000 The following transactions have also occurred at Gravity. 1. Options were granted on October 1, 2019, to purchase 150,000 shares at $21 per share. Although no options were exercised during fiscal year 2020, the average price per common share during fiscal year 2020 was $24 per share. 2. Each bond was issued at face value. The 4% convertible bonds will convert into common stock at 30 shares per $1,000 bond. The bonds are exercisable after 5 years and were issued in fiscal year 2018. 3. The preferred stock was issued in 2018. 4. There are no preferred dividends in arrears; however, preferred dividends were not declared in fiscal year 2020. 5. The 2,000,000 shares of common stock were outstanding for the entire 2020 fiscal year. 6. Net income for fiscal year 2020 was $2,700,000, and the average income tax rate is 30%. Instructions For the fiscal year ended May 31, 2020, calculate the following for Gravity Inc. (a) Basic earnings per share