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 are NOT convertible and the company has convertible bonds payable, which were issued in 2019. Interest expense on such bonds was $20,000 in 2022. The business tax rate is 25%. The bonuses are convertible into 5,000 common shares.

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

b. Assume that the convertible bonds in this exercise are zero coupon and interest expense recognized in 2022 was $20,000. Explain how this information would affect diluted earnings for 2022.