The information below pertains to Richmond Company for the year 2015.

Net Income for the year $1,200,000

8% convertible bonds issued at par ($1000 per bond).

Each bond is convertible into 30 shares of ordinary shares.

The liability component of the bonds is $1,800,000 based on

a market rate of 9%. 2,000,000

6% convertible, cumulative preference shares, $100 par value.

Each share is convertible into 3 shares of ordinary shares. 4,000,000

Ordinary shares, $10 par value 6,000,000

Tax rate for 2015 40%

Average market price of ordinary shares $25 per share

There were no changes in 2015 in the number of ordinary shares, preference shares or convertible bonds outstanding. There are no treasury shares. The company also has ordinary share options (granted in a prior year) to purchase 75,000 ordinary shares at $20 per share.

Instructions

(a) Compute basic earnings per share for 2015. (5 marks)

(b) Compute diluted earnings per share for 2015. (10 marks)