On december 31, 2011, Berclaor INC had 200 million shares of common stock and 2 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. Berclair issued a 5% common stock dividend on july 1, 2012. On may 1, 2012 Berclair purchased 15 million shares of its common stock as treasury stock. Net Income for the year ended December 31, 2012, was 140 million.

Also, outstanding at December 31 were incentive stock options granted to key executives on September 13, 2008. The options are exercisable as of september 13, 2011, for 24 million common shares at an exercise price of $55 per share. During 2012, the market price of the common shares averaged $66 per share. The options were exercised on October 1, 2012.

1. Compute Berclairs basic and diluted earnings per share for the year ended December 31, 2012. Show computation.

2. In addition, Berclair has $50 million of 8% bonds, convertible into 5 million common shares issued at face value in 2010. Compute Berclairs basic and diluted earnings per share for the year ended December 31, 2012. Assume its income tax rate is 40%.