Problem 16-5 30, 2017.

Problem 16-5

Amy Dyken, controller at Indigo Pharmaceutical Industries, a public company, is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Indigo's financial statements. Below is selected financial information for the fiscal year ended June 30, 2017.

The following transactions have also occurred at Indigo.

1.

Options were granted on July 1, 2016, to purchase 220,000 shares at $15 per share. Although no options were exercised during fiscal year 2017, the average price per common share during fiscal year 2017 was $20 per share.

2.

Each bond was issued at face value. The 7% convertible bonds will convert into common stock at 50 shares per $1,000 bond. The bonds are exercisable after 5 years and were issued in fiscal year 2016.

3.

The preferred stock was issued in 2016.

4.

There are no preferred dividends in arrears; however, preferred dividends were not declared in fiscal year 2017.

5.

The 1,010,000 shares of common stock were outstanding for the entire 2017 fiscal year.6.

Net income for fiscal year 2017 was $1,480,000, and the average income tax rate is 40%.

For the fiscal year ended June 30, 2017, calculate the following for Indigo Pharmaceutical Industries. (Round answers to 2 decimal places, e.g. $2.45.)

(a) Basic earnings per share.

Basic earnings per share

$

(b) Diluted earnings per share.

Diluted earnings per share

$