(1) A partial income statement for a company for the year 2022 is presented below:

Income before interest and taxes $600,000

Interest expense (100,000)

Income before income taxes $500,000

Income tax expense (110,000)

Net income $390,000

The $100,000 interest relates to convertible bonds, $1,000,000 par, 10% interest. Each $1,000 bond is convertible into 25 common shares. The bonds were issued in 2020. Bondholders have the option to convert the bonds starting in 2025.

(a) Compute the basic EPS for 2022

(b) Compute the diluted EPS for 2022