On June 30, year 1, Lomond, Inc. issued 21, $10,000, 7% bonds at par. Each bond was convertible into 200 shares of common stock. On January 1, year 2, 10,000 shares of common stock were outstanding. The bondholders converted all the bonds on July 1, year 2. The following amounts were reported in Lomond's income statement for the year ended December 31, year 2:

Revenues $977,000

Operating expenses $920,000

Interest on bonds $7,350

IBT $49,650 Income before income tax

Income tax 30% $14,895

Net income $34,755

Required: What is Lomond's year 2 diluted earnings per share?v

The answer is $2.81 but please show computations.