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You are the controller of Thessaionic Wholesale Limited ( TWL ) , a public company, and you have accumulated the following for the purpose of

You are the controller of Thessaionic Wholesale Limited (TWL), a public company, and you have accumulated the following for the purpose of computing earnings per share information for the year ended December 31,2021:
The common share rollforward schedule showed the following:
# of Shares Recorded Value
January 1,2021- Beginning Balance 800,000 $2,000,000
March 1,2021- New shares issued cash 240,000300,000
May 31,2021- Stock options exercised by employees 72,000180,000
December 31,2021- Ending balance 1,112,000 $2,480,000
The employee stock options that were exercised, as shown above, were granted in 2018 and vested in 2020. TWL received $140,000 upon exercise of these options.
Additional employee stock options are outstanding at December 31,2021, as follows: 5000 stock options exercisable in 2023 at $6.00 per option; 42,000 stock options exercisable in 2021 $2.00 per option. All of these additional stock options were granted in 2015 and vested in 2020. One stock option is entitled to acquire one common share, adjusted for any stock splits.
There are 50,000 preferred shares outstanding at December 31,2021. These preferred shares are cumulative and have a stated annual dividend of $6.00 per share. The preferred shares are convertible into common shares, at the option of the holder, at a rate of four common shares for each preferred share. These preferred shares have been outstanding since 2019.
Bonds with a face value of $1,000,000 were issued to an investor, at a discount, on September 30,2021. The bonds are convertible into common shares at the option of the investor at the rate of 27 common shares for $100 bond. The interest expense on these bonds for 2021 was $15,000, which includes $3000 of discount amortization.
Dividends declared and paid during the year were $884,000. The dividends were paid entirely to preferred shareholders. Of the $884,000 of dividends, $600,000 was paid to settle arrears from 2019 and 2020 while $284,000 was paid in respect of 2021.
The average price of the common shares during 2021 was fairly constant and averaged $3.70 per common share while the average price for the preferred shares during 2021 was fairly constant and averaged $6.15 per preferred share.
Net income for 2021 was $1,768,000. There were no discounted operations during 2021. The tax rate for 2021 is 40%.
Required:
Compute basic earnings per share for 2021. Show your work. (3 marks)
Compute diluted earnings per share for 2021. Show your work clearly. (12 marks)

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