Broken Man Inc. had 100,000 ordinary shares outstanding in all of 2021. On January 1, 2019, Broken issued at par $500,000 in 7% bonds maturing on January 1, 2027. Each $1,000 bond is convertible into 30 ordinary shares. Assume that the effective interest rate is 7%. 

There are 10,000 outstanding cumulative preferred shares that are each entitled to an annual dividend of $0.32. Dividends were not declared or paid during 2021. Each preferred share is convertible into two ordinary shares. 

Broken’s net income for the year ended December 31, 2021, was $150,000. Its income tax rate was 25%.

Required:

a. Calculate Broken’s basic EPS for 2021. 

b. Are the convertible bonds dilutive or antidilutive in nature? The convertible preferred shares? 

c. Calculate Broken’s diluted EPS for 2021.