Convertible Preferred Stock, Convertible Bonds, and EPS , Francis Company has 24,000 shares of common stock outstanding at the beginning of 2016. Francis issued 3,000 additional shares on May 1 and 2,000 additional shares on September 30. It also has two convertible securities outstanding at the end of 2016. These are: 1. Convertible preferred stock: 2,500 shares of 8.5%, $50 par, preferred stock were issued on January 2, 2013, for $60 per share. Each share of preferred stock is convertible into 3 shares of common stock. Current dividends have been declared and paid. To date, no preferred stock has been converted. 2. Convertible bonds: Bonds with a face value of $250,000 and an interest rate of 5.5% were issued at par in 2015. Each $1,000 bond is convertible into 20 shares of common stock. To date, no bonds have been converted. Francis earned net income of $72,500 during 2016. The income tax rate is 30%. Required: 1. Compute the number of shares of common stock that Francis should use in calculating basic earnings per share for 2016. q Weighted average shares outstanding: 26,500 sharesFrancis Company has 24,000 shares of common stock outstanding at the beginning of 2016. January-May (January-1, February-1, March-1, April 1, May-1) 'I must count February-1 first, then I must count every other month."January-1, February-1, March-1, April-1, May-19 4 months 12 months Weighted Average.Shares Formula T = Outstanding shares of common stock-x Fraction of Year outstanding ()| =Weighted Average Shares =-24,000 outstanding shares.x 4 months 12 months 24,000 4 = 1 12 96,000 12 =.8,0009Francis issued 3,000 additional shares on May 1 May-September (May-1, June 1, July 1, August 1, September-1) 1 =-24,000+-3,000T =-27,0009 5 months 12 months Weighted Average Shares Formula'T = Outstanding shares of common stock x Fraction of Year outstanding ( =Weighted Average Shares ] =-27,000 outstanding shares.x 5 months 12 months 27,000 5 1 12 135,000 12 =-11,250%Weighted Average-Shares Months Shares - Shares Are -+ X + Fraction of Year = Equivalent Are Outstanding Outstanding- Outstanding- Whole-Units January-May-+ 24,000-shares+ -....4/12 --8 000 July-August--+ 27,000-shares+ -5/12 11,2501 September-Dec + 29,000-shares+ -4/12 ..7.250 Total-weighted average common shares + 26,5009 The total weighted average number of outstanding shares of a common stock (or total weighted average common shares) is-26,500.1Weighted Average Shares Howard Corporation had 10,000 shares of common stock outstanding at the beginning of the year. On July 1, it issued 5,000 shares, and on September 1, it reacquired 600 shares as treasury stock. What is the weighted average number of common shares Howard will use in computing its earnings per share? Total weighted average shares: 12,300 sharesOn-January-1, 201?, Howard Corporation-had-10,000-outstanding shares of common stock On-July-1, -2. Howard Corporation issued (sold)-5,000-outstanding shares of common stock Howard-Corporation reacquired-600-shares as treasury stock." Weighted Average Shares Months Shares Shares Are + X Fraction of Year Equivalent Are Outstanding Outstanding Outstanding Whole-Units January-June + 10,000-shares+ - -6/12 + 5,0009 July-August---+ 15,000-shares+ -2/12 2,5009 September-Dec 14,400-shares+ -.---4/12 4.800% Total weighted average common shares -+ + + 12,300%Weighted Average Shares Formula T = Outstanding shares of common stock x-Fraction of Year outstanding ( )T =.Weighted Average-Shares On-January-1,-201?, Howard Corporation-had-10,000-outstanding shares of common stock January-June (January, February, March, April, May, June)T =.10,000 outstanding shares.x 6 months 10,000 12 months = 1 12 = 60,000 12 =-5,0009\f=-5,000 +-2,500-+-4,8009 =-12,3009 The total weighted average number of outstanding shares of a common stock (or total weighted average common shares) is-12,300.1