Assume that basic profit for 2022 was calculated from the following way: Numerator = $200,000 - $40,000 = $160,000 Denominator = 80,000 common shares outstanding Basic EPS = $2.00 Exercise:

A. Assume that the preferred shares are NOT convertible and the company has convertible bonds payable, which were issued in 2019. Interest expense on such bonds was $20,000 in 2022. The business tax rate is 25%. The bonuses are convertible into 5,000 common shares.

Calculate the diluted profit for 2022 and indicate whether or not it is presented together with the basic gain.

Assume that the convertible bonds in this exercise are zero coupon and interest expense recognized in 2022 was $20,000. Explain how this information would affect diluted earnings for 2022.

B. Assume that the preferred shares of the company were issued in 2020 and are convertible into 25,000 common shares. The business tax rate is 25%.

Calculate the diluted profit for 2022 and indicate whether or not it is presented together with the basic gain.

Assume that half of the preferred stock had been converted in common stock on July 1, 2022. Explain how this information would affect diluted earnings for 2022.

C. Assume that the bonds in the previous part are NOT convertible, but come accompanied by capital certificates (stock warrants). There are enough warrants to buy 24,000 shares at $35 per share. The median market price for 2022 was $40. Tax rate of the company was 25%.

Calculate the diluted profit for 2022 and indicate whether or not it is presented together with the basic gain.

Suppose the average market price for 2022 was $30. Explain how this information would affect diluted earnings for 2022.