Select the best answer for each of the following. 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? a. 2,875,000 and 2,925,000 b. 2,875,000 and 3,075,000 c. 3,000,000 and 3,050,000Step 2 of 9 A Determine the weighted average number of shares for computation of basic earnings per share. Step 1: Compute weighted average number of shares, held and outstanding from December 31, 2015 to April 2, 2016 (3 months). Weighted average of shares = Number of shares held x Time period = 2,500,000 shares x 12 . .. ... (1) = 625,000 sharesStep 3 of 9 A Step 2: Compute weighted average number of shares, issued and outstanding from April 2, 2016 to July 2, 2016 (3 months). Weighted average of shares = Number of shares held+ Number of shares issued x Time period = 2,500,000 shares+ 3 ... ... (2) 500,000 shares X 12 = 750,000 sharesStep 4 of 9 A Step 3: Compute weighted average number of shares, issued and outstanding from July 2, 2016 to December31, 2016 (6 months). Weighted average Number of shares held+ number of shares Number of shares issued on April 2+ x Time period Number of shares issued on July 2 2,500,000 shares+ - . . . . . (3) = 500,000 shares+ X 6 250,000 shares 12 = 1,625,000 sharesStep 5 of 9 A Step 4: Compute weighted average number of shares for computing basic earnings per share. Weighted average number of shares, held and outstanding Weighted from December 31, 2015 to April 2, 2016 + average Weighted average number of shares, issued and outstanding number from April 2, 2016 to July 2, 2016 + of shares Weighted average number of shares, issued and outstanding from July 2, 2016 to December 31, 2016 =625,000 shares+750,000 shares+1,625,000 shares 3,000,000 shares Note: Refer to Equations (1), (2), and (3) for all the values.Step 6 of 9 Determine the weighted average number of shares for computation of diluted earnings per share. Step 1: Compute convertible shares issued and outstanding from October1, 2016 to December 31, 2016 (3 months). Number of Number of bonds x convertible shares Number of shares for each bond * Time period = 5,000 bonds*40 sharesx 3 - . . . . . (4) 12 = 50,000 sharesStep 7 of 9 Step 4: Compute weighted average number of shares for computing diluted earnings per share. Weighted average number of shares, held and outstanding from December 31, 2015 to April 2, 2016 + Weighted Weighted average number of shares, issued and outstanding average from April 2, 2016 to July 2, 2016 + number Weighted average number of shares, issued and outstanding of shares from July 2, 2016 to December 31, 2016+ Weighted average number of convertible bonds, issued and outstanding from October 1, 2016 to December 31, 2016 =625,000 shares+750,000 shares+1,625,000 shares+50,000 shares 3,050,000 shares