On May $1$ of the current year, Kansas Corp. acquired $100\%$ of the voting shares of Magnolia Eletric Co$.$ Kansas reports annually on a calendar basis. As part of the merger agreement, Kansas agreed to distribute $0\mathrm{.}2$ additional shares for each share of outstanding stock to its current stockholders if$,$ by the end of the current fiscal year, five new Magnolia Electric outlets are opened.

On Dec $31,$ Kansas provided the following information:

$$ Net income for the year is $$3,500,000.$

$$ There are $1,000,000$ outstanding common shares for the entire year.

$$ There are $200,000$ contingently issuable shares $($i$.$e$.,2\%$ x $1,000,0001,000,000).$

$$ Seven new Kansas outlets were opened by Dec $31$ with the fifth store opened on November $1.$

$$ Kansas had $$2,000,000$ par value, $5\%$ cumulative, nonconvertible preferred shares outstanding for the full year.

Questions:

a$.$ Describe the effect of contingently issuable shares on basic earnings per share. Provide the ASC used.

b$.$ Describe the effect of contingently issuable shares on diluted earnings per share. Provide the ASC used.

c$.$ Calculate basic earnings per share for Kansas Corp., show calculations.

d$.$ Calculate diluted earnings per share for Kansas Corp., show calculations.