Zacor Incorporated has 2,500,000 shares of common stock outstanding on December 31, 2005. An additional 500,000 shares of common stock were issued April 1, 2006, and 250,000 more on July 1, 2006. On October 1, 2006, Zacor issued 5,000, $1,000 face value, 7 percent convertible bonds. Each bond is convertible into 40 shares of common stock. No bonds were converted into common stock in 2006. What is the number of shares to be used in computing basic earnings per share and diluted earnings per share, respectively?

a. 2,875,000 and 2,925,000

b. 2,875,000 and 3,075,000

c. 3,000,000 and 3,050,000

d. 3,000,000 and 3,200,000

Please show your work.

Weighted average shares to be used for calculating EPS = [2,500,000* 12/12] + [500,000* 9/12 ] +[250,000 * 6/12] = 2,500,000 +375000+ 125000 = 3,000,000 shares

Shares to be used for calculatin Dilutive EPS = 3,000,000 + [200,000 * 3/12] = 3,000,000+ 50000 = 3050000

COrrect option is "C"

Here is the work for the correct answer. How do you find the 200,000 for dilutive EPS?