On December 31, 2015, Phommachanh Company had 200,000 shares of common stock outstanding and 30,000 shares of 7%, $100 par, convertible (into 3 share of common stock for each preferred share) cumulative preferred stock outstanding. On July 1, 2015 all the preferred stock was converted to common stock. Dividends on preferred stock are paid twice a year on June 25 and December 25 (one half each time). On April 30, 2016, Phommachanh purchased 24,000 shares of common stock on the open market as treasury stock paying $45 per share. Phommachanh sold 6,000 of the treasury shares on September 1, 2016, for $47 per share. Net income for 2016 was $540,000. The income tax rate is 40%. Also outstanding at December 31, 2015, 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 2016. Five hundred 6% bonds were issued at par on January 1, 2015. Each $1,000 bond is convertible into 15 shares of common stock. None of the bonds had been converted by December 31, 2016. 25,000 stock options were exercised on October 1, 2015. On May 1, 2016 a 100% stock dividend was declared for stockholders of record on May 20 distributable on May 31, 2016. All contingently issuable shares were contractually adjusted for the stock dividend. On July 31, 2016, the CEO was granted an option to buy 20,000 shares at $38 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 $8 each. Required: 1. What stock compensation would be recorded in 2016. 2. Compute basic earnings per share for Phommachanh Company for 2016.

3. Compute diluted earnings per share for Phommachanh Company for 2016.