To calculate diluted EPS, the accountant does all of the following except:

a.

adds back to net income any compensation expense recognized on the employee stock options

b.

adds back any interest expense (net of taxes) on convertible bonds

c.

adds back any dividends on convertible preferred stock the firm subtracted in computing net income to common shareholders.

d.

enters only the net incremental shares issued (shares issued under options minus assumed shares repurchased) in the computation of diluted EPS.