Kamloops Corporation had the following capital structure at the beginning of 2018: Common shares: 1,000,000 authorized, 800,000 issued and outstanding $40,000,000 Preferred shares: 200,000 authorized, 100,000 issued and outstanding $10,000,000 Stock options, A issue: 50,000 outstanding Stock options, B issue, 40,000 outstanding Convertible bonds, issued at par; each $100 bond is convertible into 2.2 common shares; interest of 5% per year is payable on June 30 and December 31; the bonds mature on December 31, 2025, $6,000,000
The preferred shares had a cumulative annual dividend of 4% of their stated value and were convertible into common shares at the rate of 1.80 common shares per preferred share.
The A issue stock options permitted selected executives to purchase 55,000 shares at a price of $45 per share on any date between January 1, 2017, and December 31, 2020.
The B issue stock options permitted selected executives to purchase 44,000 shares at a price of $50 per share on any date between January 1, 2020, and December 31, 2022.
On April 1, 2018, a stock dividend of 10% was declared and paid to holders of the company’s common shares. (All conversion and exercise rates have been adjusted to take the stock dividend into account.) On July 1, 2018, holders of 40% of the bonds converted them to common shares in accordance with the terms of the issue. On December 1, 2018, the company repurchased 120,000 common shares on the market at a cost of $50 per share.
No cash dividends were paid on either class of stock during 2018. The average value of the company’s common shares on the market during that year was $55 per share. The company paid income taxes at a rate of 30% and reported net income of $2,450,000 and other comprehensive income of $550,000 for the year.
Calculate Kamloops Corporation’s basic and fully diluted earnings per share for 2018.