Select information for George’s Dive Adventures Corp. (GDAC) follows: 

■ GDAC earned net income of $4,000,000 for the year ended December 31, 2021. 

■ GDAC was subject to a 30% tax rate. 

■ GDAC had 2,000,000 ordinary shares outstanding during the entire year; their average market price was $17. 

■ GDAC had $1,000,000 in 5% non-cumulative preferred shares outstanding during the entire year. Each $100 share is convertible into two ordinary shares. 

■ GDAC declared and paid the stated dividend on the preferred shares as well as $400,000 of dividends on the ordinary shares. 

■ GDAC had series A stock options outstanding the entire year that allowed employees to buy 5,000 ordinary shares for $15 each until December 31, 2024. 

■ GDAC had series B stock options outstanding the entire year that allowed employees to buy 10,000 ordinary shares for $20 each until December 31, 2024. 

■ GDAC had $5,000,000 in 7% bonds maturing on December 31, 2024, that were outstanding the entire year. Each $1,000 bond is convertible into 40 ordinary shares anytime before expiry. 

Assume that the effective rate of interest on the bonds equals the coupon rate. 

Required:

a. Calculate GDAC’s basic EPS for the year ended December 31, 2021. 

b. Prepare a schedule that sets out the income effect, share effect, and incremental EPS for each security that is convertible into ordinary shares. Rank order the shares by their dilutiveness. 

c. Calculate GDAC’s diluted EPS for the year ended December 31, 2021.