The following data relate to Nevada Ltd. for the calendar year 2014:

Net income (30% tax rate) ................................... $3,500,000

Average number of common shares

outstanding during 2014 ................................. 1,000,000 shares

10%, cumulative convertible preferred shares:

convertible into 80,000 common shares ............. $1,600,000

8% convertible bonds; convertible into 75,000

common shares .............................................. $2,500,000

Stock options, exercisable at $25 per share ............ 90,000 shares

All the convertible securities and stock options were outstanding all year.

The average market price of the common shares in 2014 was $30.

Instructions

Calculate:

a. basic earnings per share

b. diluted earnings per share.