McWade Company has 36,000 shares of common stock outstanding at the beginning of 2014. McWade issued 4,500 additional shares on May 1 and 3,000 additional shares on September 30. It also has two convertible securities outstanding at the end of 2014. These are:
a) Convertible preferred stock: 2,500 shares of 8.5%, $50 par, preferred stock were issued on January 2, 2011, 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.
b) Convertible bonds: Bonds with a face value of $500,000 and an interest rate of 7.5% were issued at par in 2012. Each $1,000 bond is convertible into 20 shares of common stock. To date, no bonds have been converted.
McWade earned net income of $145,000 during 2014. The income tax rate is 30%.
Required:
1. Compute the number of shares of common stock that McWade should use in calculating basic earnings per share for 2013.
2. Calculate basic earnings per share for 2013.