The Controller of Junee Motorcycles has given you the responsibility of calculating the earnings per share figures for the year ended 12/31/X7. The following information is provided.

Common stock transactions

As of 1/1/X7, the company had 6,000,000 authorized shares of $1 stated value common stock, and 670,000 shares issued and outstanding.

• 10/1/X7, issued in a 2 for 1 stock split. After the stock split, the stated value was reduced to $0.50 per share and there were 12,000,000 authorized shares.
• 12/1/X7 issued 180,000 shares at $52 per share (post-split price)

Treasury stock transactions (accounted for using the par value method)

• 3/31/X7 purchased 20,000 shares at $105 per share
• 7/1/X7 sold 8,000 shares at $102 per share.

Stock Options

On 2/1/X7, 300,000 stock options were granted to officers and key employees to purchase one share of common stock per option at $90 per share. The options had a fair value of $4.50 each on the grant date, and the options are exercisable on or after 2/1/X9. Effective 10/1/X7, each option became exchangeable for two common shares at $45 per share.

Convertible Bonds

$4,000,000 of unsecured, convertible, 25-year, 5% bonds issued on 7/1/X7. The initial conversion rate was 30 shares of common stock for each $1,000 bond. Effective 10/1/X7, the conversion rate became 60 shares per $1,000 bond. As of 12/31/X7, all bonds were still outstanding and unconverted, and all semi-annual interest payments had been paid. No bonds were converted during 20X7.

Net Income

During 20X7, the company reported $3,100,000 of net income.

Tax Rate

The company's applicable tax rate is 32%

Common stock prices

Beginning, quarterly, ending, and average prices for the company's common stock are provided below.

Date	1/1/X7	4/1/X7	7/1/X7	10/1/X7	12/31/X7	Average*
Common Stock Price	97.00	98.00	101.00	52.00	55.00	50.00

*Annual average adjusted for the stock split on 10/1/X7.

Required:

1. Using the information below, compute basic and diluted earnings per share (EPS) for Valiant Motorcycles as of December 31, 20X7.
2. Prepare clear and detailed schedules and explanations to support all parts/steps of your calculations.
3. Provide specific references to the ASC and other resources to document the correct treatment of each item in your computations.
4. Present your solution using the accounting research memo format.