Jaime Turino of the controller’s office of Reed Corporation was given the assignment of determining the basic and diluted earnings per share values for the year ending December 31, 2021. Jaime has compiled the information listed below.

1. The company is authorized to issue 10,000,000 shares of $1 par value common stock. As of December 31, 2020, 4,500,000 shares had been issued and were outstanding.

2. The per share market prices of the common stock on selected dates were as follows:

                      Price per Share

July 1, 2020 $20.00

January 1, 2021 $21.00

April 1, 2021 $25.00

July 1, 2021 $11.00

August 1, 2021 $10.50

November 1, 2021 $12.00

December 31, 2021 $10.00

3. A total of 500,000 shares of an authorized 1,500,000 shares of convertible preferred stock had been issued on October 1, 2020.

The stock was issued at its par value of $100, and it has a cumulative dividend of $4 per share.

The stock is convertible into common stock at the rate of one share of convertible preferred for five shares of common.

The rate of conversion is to be automatically adjusted for stock splits and stock dividends.

Dividends are paid semi-annually on September 30 and March 31.

4. Reed Corporation is subject to a 20% income tax rate.

5. The after-tax net income for the year ended December 31, 2021, was $6,890,000.

The following specific activities took place during 2021:

A. January 1

A 2-for-l split of the common stock became effective on this date.

The board of directors had authorized the split on December 15, 2020.

B. April 1

A total of 500,000 shares of common stock were issued to acquire a distribution center.

C. July 1

A total of 200,000 shares of the $3 convertible preferred stock was converted into common stock.

The company issued new common stock and retired the preferred stock.

This was the only conversion of the preferred stock during 2021.

D. October 1

A 10% common stock dividend was issued.

The dividend had been declared on September 10, 2021, to all stockholders of record on September 29, 2021.

E. November 1

A total of 90,000 shares of common stock were purchased on the open market at $12 per share.

These shares were to be held as treasury stock and were still in the treasury as of December 31, 2021.

F. Common stock cash dividends

Cash dividends to common stockholders were declared and paid as follows:

November 15-$0.40 per share

G. Preferred stock cash dividends

Cash dividends to preferred stockholders were declared and paid as scheduled.

1. Compute the number of shares (denominator) for BASIC earnings per share.

2. Compute the number of shares (denominator) for DILUTED earnings per share.

3. Compute BASIC earnings per share.

4. Compute DILUTED earnings per share.