Winona Company began 2013 with 10,000 shares of $10 par common stock and 2,000 shares of 9.4%, $100 par, convertible preferred stock outstanding. On April 2 and June 1, respectively, the company issued 2,000 and 6,000 additional shares of common stock. On November 16, Winona declared a 2-for-1 stock split. Compensatory share options that currently allow the purchase of 2,000 shares of common stock at $16 per share were outstanding during 2013. To date, none of these options have been exercised. The unrecognized compensation cost (net of tax) related to these options is $2 per share. The preferred stock was issued in 2012. Each share of preferred stock is currently convertible into 4 shares of common stock. To date, no preferred stock has been converted. Current dividends have been paid on both preferred and common stock. Net income after taxes for 2013 totaled $109,800. The company is subject to a 30% income tax rate. The common stock sold at an average market price of $24 per share during 2013.

Required:

1. Prepare supporting calculations for Winona and compute its:

a. Basic earnings per share

b. Diluted earnings per share

2. Show how Winona would report the earnings per share on its 2013 income statement. Include an accompanying note to the financial statements.

3. Next Level Assume Winona uses IFRS. Discuss what Winona would do differently for computing earnings per share, and then repeat Requirement 1 under IFRS.