Situation: In 2019, its first year of operations, Kanbec Corporation appropriately reported basic earnings per share of $1.05 on its income statement. During 2020, the company instituted a share option plan and is required to report both basic and diluted earnings per share of $1.12 and $0.98, respectively, on its 2020 income statement. In its 2020 annual report, Kanbec presents comparative income statements for 2019 and 2020.

Directions: Research the related generally accepted accounting principles and prepare a short memo to Kanbec's president that explains how to report the 2019 and 2020 comparative earnings per share in its 2020 annual report. Cite reference and applicable paragraph numbers.