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 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%.

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

b. 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.