Sad Man Inc. had 220,000 ordinary shares outstanding in all of 2013. On January 1,2011,Sad issued at par $400,000 in 10% bonds maturing on January 1,2019. Each $1,000 bond is convertible into 9 ordinary shares. Assume that the effective interest rate is 10%. There are 5,000 outstanding cumulative preferred shares that are each entitled to an annual dividend of $0.20. Dividends were not declared or paid during 2013. Each preferred share is convertible into three ordinary shares. Sad's net income for the year ended December 31,2013 was $250,000. Its income tax rate was 35%.
Requirements:
a. Calculate Sad's basic EPS for 2013.
b. Are the convertible bonds dilutive or anti-dilutive in nature? The convertible preferred shares?
c. Calculate Sad's diluted EPS for 2013.

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The Answer of Sad Man Inc. had 220,000 ordinary shares outstanding in all of 2013. On January 1,2011,Sad issued at par $400,000 in 10% bonds maturing on January 1,2019. Each $1,000 bond is convertible into 9 ordinary shares. Assume that the effective interest rate is 10%. There are 5,000 outstanding cumulative preferred shares that are each entitled to an annual dividend of $0.20. Dividends were not declared or paid during 2013. Each preferred share is convertible into three ordinary shares. Sad's net income for the year ended December 31,2013 was $250,000. Its income tax rate was 35%.
Requirements:
a. Calculate Sad's basic EPS for 2013.
b. Are the convertible bonds dilutive or anti-dilutive in nature? The convertible preferred shares?
c. Calculate Sad's diluted EPS for 2013.