Pendulum Toys Corp. (PTC) was incorporated on January 1, 2018. At that time, it issued 50,000 ordinary shares; 5,000, $100, 5% cumulative preferred shares “A”; and 30,000, $100, 6% noncumulative preferred shares “B.” Dividends were not declared or paid during 2018. PTC also issued at par $500,000 in 7% bonds maturing on January 1, 2021. Each $1,000 bond is convertible into 30 ordinary shares. Assume that the effective interest rate is 7%. PTC’s net income (loss) for the year ended December 31, 2018, was ($400,000). Its income tax rate was 25%. 

Required:

a. Calculate PTC’s basic EPS for 2018. 

b. Are the convertible bonds dilutive or antidilutive in nature? Why? 

c. Calculate PTC’s diluted EPS for 2018.