How Do Outstanding Subsidiary Stock Warrants Affect the Calculation of Consolidated

question 42

Multiple Choice

How do outstanding subsidiary stock warrants affect the calculation of consolidated earnings per share?

• A) They will be included in both basic and diluted earnings per share if they are dilutive.
• B) They will only be included in diluted earnings per share if they are dilutive.
• C) They will only be included in basic earnings per share if they are dilutive.
• D) Only the warrants owned by the parent company affect consolidated earnings per share.
• E) Because the warrants are for subsidiary shares, there will be no effect on consolidated earnings per share.

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Definitions:

Implied Warranty

A legal guarantee that the goods being sold will be functional and meet certain standards of quality and reliability, even if not explicitly stated.

Warranty Of Fitness

This refers to a seller's promise that the goods sold will be suitable for the purpose for which they are bought.

Puffing

Puffing refers to the exaggerated or hyperbolic comments or opinions made by salespeople about a product or service, not considered legally binding promises.

Written Express Warranty

A clearly stated promise by a seller regarding the condition, performance, or quality of a product, documented in a written format.