December 31, 2022, Joseph Company had 100,000 shares of common stock outstanding and 30,000 shares of 7%, $100 par, cumulative preferred stock outstanding. Preferred stock is convertible into 3,000 shares of common stock.

On February 28, 2023, Joseph purchased 24,000 shares of common stock on the open market as treasury stock paying $45 per share. Joseph sold 6,000 of the treasury shares on September 30, 2023, for $47 per share. Net income for 2023 was $540,000. The income tax rate is 40%.

Also outstanding at December 31, 2022, were fully vested incentive stock options giving key personnel the option to buy 50,000 common shares at $40. The market price of the common shares averaged $50 during 2023. No preferred stock/stock options were converted/exercised during the year. Required: Compute basic and diluted earnings per share (rounded to 2 decimal places) for Joseph Company for 2023.

I'm confused on how to do the preferred stock convertible into common stock. Can someone help me?