B. The Basic EPS that is reported for 2007 in the 2010 financial statements needs to take into account any stock splits or stock dividends that were declared after 2007. The starting point for our work is the shares outstanding in 2007: 1,000,000. In 2008 there was a 2-for-1 split, increasing this to 2,000,000. In 2009 there was a 20% dividend that increased this to 2,400,000. This is the amount that the 2007 net income of $3,000,000 needs to be divided by to calculate the 2007 BEPS that is shown for comparative purposes in the 2010 financial statements. $3,000,000 divided by 2,400,000 shares gives a Basic EPS of$1.25.

C. This answer does not take into account the stock split or the stock dividend. See the correct answer for a complete explanation.

D. This answer does not take into account the stock dividend. See the correct answer for a complete explanation.