000 WARRANTS, EACH OF WHICH ALLOWS THE HOLDER TO PURCHASE 100 SHARE...

10, - UNDERSTANDING INCOME STATEMENTS 1
UNDERSTANDING INCOME STATEMENTS 1
10,000 warrants, each of which allows the holder to purchase 100 shares of common stock at an exercise price of $1.50 percommon share, were outstanding the entire year.Caledonia's diluted earnings per share for 20X6 are closest to:غ A)$0.165.ض B)$0.15.غ C)$0.180.ExplanationCaledonia's basic EPS = (net income − preferred stock dividends) / (weighted average common shares outstanding)= [$460,000 − ($1,000 × 1,000 × 0.08)] / 2,300,000 = $0.17.Using the treasury stock method, if the warrants were exercised, cash inflow would be 10,000 × 100 × $1.50 = $1,500,000. Thenumber of Caledonia shares that could be purchased with the inflow, using the average share price, is $1,500,000 / $2 =