Chapter 6, Problem 8P

Bens man Corporation is computing EPS. One of its subsidiaries has stock warrants outstanding. How do these convertible items affect Bensman’s EPS computation?

1. a. No effect is created because the stock warrants were for the subsidiary company’s shares.
2. b. The stock warrants are not included in the computation unless they are antidilutive.
3. c. The effect of the stock warrants must be computed in deriving the amount of subsidiary income to be included in making the diluted EPS calculation.
4. d. The stock warrants are included only in basic EPS but never in diluted EPS.