Problem
On December 31, 2022, the balance sheet of Suffolk Media showed the following information:
Common stock, $1 par; authorized, 2 million shares;
issued and outstanding, 800,000 shares $800,000
Paid-in capital - excess of par - common $3,200,000
Preferred stock - 7% noncumulative and nonconvertible,
200,000 shares outstanding $600,000
Retained earnings $5,298,452
Suffolk Media had the following information related to its shareholders' equity during 2023:
• Suffolk Media sold additional 100,000 common shares on January 3
• Suffolk Media retired 60,000 common shares on May 31
• Suffolk Media declared and distributed a 20% common stock dividend on July 1
• Suffolk Media paid cash dividends of $48,000 and $30,000 to common and preferred shareholders, respectively, on August 19.
• The market price of the common stock averaged $25 per share during 2023.
Suffolk Media also experienced the following transactions related to its shareholders' equity in recent years:
• As part of an incentive compensation plan, Suffolk granted 150,000 shares (already adjusted for the stock dividend) of incentive stock options to executives on December 31, 2021. Each option permits its holder to buy one share of common stock at an exercise price of $22 and can be exercised one year from that date. On October 2, 2023, 40% of stock options were exercised.
• Also, as a part of a 2022 agreement for the acquisition of AAA Construction, another 90,000 shares (already adjusted for the stock dividend) are to be issued to former AAA Construction's shareholders on December 31, 2024, if AAA Construction's 2024 net income is at least $25,000,000. In 2023, AAA Construction's net income was $25,378,924.
• On November 22, 2020, Suffolk Media issued $3,000,000 of convertible 5% bonds at face value. Since 2023 till 2026, each $1,000 bond is convertible into 20 common shares (adjusted for the stock dividend).
• Suffolk Media also has the restricted stock unit (RSU) plan and granted RSUs representing 200,000 shares of its $1 par common shares to all the employees on January 1, 2022. The shares are subject to forfeiture if employment is terminated within four years. Shares had a market price of $18 per share on January 1, 2022.
Suffolk's net income for the year ended December 31, 2023, was $2,430,000. The income tax rate is 25%.
Task
1. Compute Suffolk's basic EPS for the year ended December 31, 2023.
2. Compute Suffolk's diluted EPS for the year ended December 31, 2023.