Dilutive Securities and EPS Iredell Company has 2,500,000 shares of common stock outstanding on December 31, 2015. An additional 500,000 shares of common stock were issued on April 2, 2016, and 250,000 more on July 2, 2016. On October 1, 2016, Iredell issued 5,000, $1,000 face value, 7% convertible bonds. Each bond is dilutive and convertible into 40 shares of common stock. No bonds were converted into common stock in 2016. What is the number of shares to be used in computing basic earnings per share and diluted earnings per share, respectively, for the year ended December 31, 2016? Oa. 3,000,000 and 3,050,000 shares Ob. 2,875,000 and 2,925,000 shares Oc. 3,000,000 and 3,200,000 shares Od. 2,875,000 and 3,075,000 sharesConvertible 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. Weighted average shares outstanding: 26,500 sharesFrancis Company has 24,000 shares of common stock outstanding at the beginning of 2016. 5 January-May (January-1, February-1, March 1, April 1, May-1)f **I-must count-January-1 -first, then I must count every other month. --I must exclude-May-1 in the. very-beginning when I count the months in the beginning. T January 1, February-1, March-1, April-1, May-19 -2 -3\f5 months 12 months Weighted Average Shares Formula = Outstanding shares of common stock x-Fraction of Year outstanding () =.Weighted Average-Shares =-27,000 outstanding shares-x 5 months 27,000 12 months -X 5 1 12 = 135,000 12 =-11,2509Francis issued 2,000 additional shares on September 30. September-December (September-30, October.31, November-30, December 31) September-30, October-31, November-30, December-319 -2. -3 =-27,000-+-2,0009 =-29,0009 3 months 12 months Weighted Average Shares Formula T = Outstanding shares of common stock x -Fraction of Year outstanding =.Weighted Average Shares] =-29,000-outstanding shares-x-- 3 months 29,000 12 months 1 12 87,000 12 =-7,250%Weighted Average Shares T Months.Shares Shares Are + + X + Fraction of Year Equivalent Are Outstanding Outstanding Outstandi Whole-Units January-May-+ 24,000-shares+ -+ 4/12 + --8.0009 July-August---+ 27,000-shares+ -5/12 11,2509 September-Dec + 29,000-shares+ -3/12 -.7.2501 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-26,500.1
