On December 31, 2012, Heffner Company had 100,000 shares of common stock outstanding and 30,000 shares of 7%, $100 par, cumulative preferred stock outstanding. On February 28, 2013, Heffner purchased 24,000 shares of common stock on the open market as treasury stock paying $45 per share. Heffner sold 6,000 of the treasury shares on September 30, 2013, for $47 per share. Net income for 2013 was $540,000. The income tax rate is 40%. Also outstanding at December 31, 2012, were fully vested incentive stock options giving key personnel the option to buy 50,000 common shares at $40. The market price of the common shares averaged $50 during 2013. Five thousand 6% bonds were issued at par on January 1, 2013. Each $1,000 bond is convertible into 125 shares of common stock. None of the bonds had been converted by December 31, 2013, and no stock options were exercised during the year. On December 15, 2013 a 100% stock dividend was declared for stockholders of record on December 20 distributable on December 31, 2013. All contingently issuable shares were contractually adjusted for the stock dividend. On January 31, 2013, the CEO was granted an option to buy 20,000 shares at $42 a share (the market price at the time) subject to continued employment for two years from the date of the grant and exercisable for four years after they vest. The estimated fair market value, based on an acceptable option pricing model, at the date of the grant was $6 each.

Required:

1. What stock compensation would be recorded in 2013.

2. Compute basic earnings per share (rounded to 2 decimal places) for Heffner Company for 2013.

3. Compute diluted earnings per share (rounded to 2 decimal places) for Heffner Company for 2013.