You have been asked to prepare the annual earnings per share amounts to be disclosed on the 2020 income statement of Lynbrook, Inc. Your accounting staff has prepared the following information for you:

1. Net income: $130,400. Corporate income tax rate: 30%.

2. Common stock outstanding on January 1, 2020: 20,000 shares.

3. Common stock issuances during 2020: July 2, 4,000 shares; August 28, 3,000

   shares.

4. Stock dividend: On October 19, 2020, the company declared a 10% stock

   dividend that resulted in 2,700 additional outstanding shares of common stock.

5. Common stock prices: 2020 average market price, $30 per share; 2020 ending

   market price, $27 per share.

6. 7% preferred stock outstanding on January 1, 2020: 1,000 shares. Terms: $100

   par, nonconvertible. Current dividends have been paid. No preferred stock issued

   during 2020.

7. 8% convertible preferred stock outstanding on January 1, 2020: 800 shares. The

   stock was issued in 2018 at $130 per share. Each $100 par preferred stock is currently convertible into 1.7 shares of common stock. Current dividends have been paid. To date, no preferred stock has been converted.

8. Bonds payable outstanding on January 1, 2020: $100,000 face value. These bonds were issued several years ago at 97 and pay annual interest of 9.6%. The discount is being amortized in the amount of $300 per year. Each $1,000 bond is currently convertible into 22 shares of common stock. To date, no bonds have been converted.

9. Compensatory share options outstanding: Key executives may currently acquire 3,000 shares of common stock at $20 per share. The options were granted in 2019. To date, none have been exercised.

Required:

1. Compute the basic earnings per share. Show supporting calculations.

2. Compute the diluted earnings per share. Show supporting calculations.