Compute the number of shares of common stock

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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 320 shares of common stock. To date, no bonds have been converted. Francis earned net income of $22,500 during 2016. The income tax rate is 30%.

Required:

Problem 1. Compute the number of shares of common stock that Francis should use in calculating basic earnings per share for 2016.

Problem 2. Calculate basic earnings per share for 2016. If required, round your answer to two decimal places.

Reference no: EM132939213

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