Front Line Corporation is a public company with a December 31 year end and a 32% tax rate. Net income for 2020 was $3,000,000. The average share price throughout 2020 was $25.

Front Line's Statement of Financial Position included the following at January 1, 2020: Long term debt:

5% convertible bonds payable (note 3)

Shareholders' equity:

Preferred shares, $3, cumulative, convertible (note 1) (400,000 shares authorized; 200,000 issued and outstanding)

Common shares

(unlimited number authorized; 600,000 issued and outstanding)

The following additional information relating to fiscal 2020 is provided:

$ 5,000,000

$ 350,000 $ 400,000

1. Each of the $8, cumulative, convertible preferred shares is convertible into 2 common shares. These shares were issued at the beginning of 2019. The company has not paid any preferred dividends for 2019 or 2020. No preferred shares were converted in 2020.
2. Front line has the following two outstanding option grants. No options were exercised in 2020.

• Options granted in 2018 to purchase 10,000 shares at $28 per share
• Options granted in 2019 to purchase 20,000 shares at $22 per share.

1. The 5% convertible bonds were issued in 2019 at par, with a face value of $1,000 for each bond. Each bond is convertible into 5 common shares. 50% of the bonds were converted to common shares on September 1, 2020.

REQUIRED: Start this question on a new page. Write neatly and show all of your calculations. Round your numbers in your intermediary calculations to the nearest dollar. Round your EPS numbers to the nearest cent (i.e. two decimal places $0.00).

1. a)Calculate basic EPS for 2020. (6.5 marks)
2. b)Calculate diluted EPS for 2020. If any of the securities are excluded from the diluted EPS number explain why. Include supplemental note disclosure(s) that are required, if any. (15.5 marks)