Question
In: Accounting
The following separate income statements are for Burks Company and its 80 percent–owned subsidiary, Foreman Company:
The following separate income statements are for Burks Company and its 80 percent–owned subsidiary, Foreman Company:
| Burks | Foreman | |||||||
| Revenues | $ | (422,000 | ) | $ | (322,000 | ) | ||
| Expenses | 373,000 | 236,000 | ||||||
| Gain on sale of equipment | 0 | (26,000 | ) | |||||
| Equity earnings of subsidiary | (63,000 | ) | 0 | |||||
| Net income | $ | (112,000 | ) | $ | (112,000 | ) | ||
| Outstanding common shares | 60,000 | 33,000 | ||||||
Additional Information
Amortization expense resulting from Foreman’s excess acquisition-date fair value is $36,000 per year.
Burks has convertible preferred stock outstanding. Each of these 6,000 shares is paid a dividend of $4 per year. Each share can be converted into four shares of common stock.
Stock warrants to buy 14,000 shares of Foreman are also outstanding. For $10, each warrant can be converted into a share of Foreman’s common stock. The fair value of this stock is $20 throughout the year. Burks owns none of these warrants.
Foreman has convertible bonds payable that paid interest of $41,000 (after taxes) during the year. These bonds can be exchanged for 11,000 shares of common stock. Burks holds 15 percent of these bonds, which it bought at book value directly from Foreman.
Compute basic and diluted EPS for Burks Company. (Round your intermediate percentage value and final answer to 2 decimal places.)
Solutions
Expert Solution
| Computation of Basic EPS of Parent company B | ||
| Particukar | Amount | Amount |
| Net Income of parent Company (422000-373000) | $ 49,000 | |
| Net Income of Subsidary Company (112000*80%) | $ 89,600 | |
| Less: Amortisation Expense (36000*80%) | $28,800. | $60,800 |
| Less : Preferred Stock Dividend (6000X$4) | $24,000 | |
| Earning applicable to Basic EPS Calculation | $85,800 | |
| Outstanding share of Company B | 60000 | |
| Basic earning per share | $1.43 | |
| Computation of Diluted EPS per share | ||
| Consolidated Net Income ($49000+$76000) | $1,25,000 | |
| Subsidiary net Income | $112,000 | |
| Less: Excess Fair value consideration | $36,000.00 | |
| Income applicable to diluted EPS | $76,000.00 | |
| Less: Non Controlling Interest (1-(33000*80%/36000)) | $0.27 | $20266.67 |
| Parent's Net Income Applicable to diluted EPS | $104733.3 | |
| No. of Share for diluted EPS( As per W/Note) | 84000 | |
| Diluted EPS | $1.2468 | |
| Working Notes | ||
| Outstanding Share | 33000 | |
| Conversion of warrants | 14000 | |
| Acquisition of treasury stock (14000*10)/20 | -7000 | |
| Total Share applicable to Diluted EPS of Subsidiary | 40000 | |
| Outstanding share of companyB | 60000 | |
| Conversion of Preferred Stock (6000*4) | 24000 | |
| Total Share applicable to diluted EPS of Parent | 84000 | |
ekkarill92 answered 2 years agoRelated Solutions
The following separate income statements are for Burks Company and its 80 percent–owned subsidiary, Foreman Company:...
The following separate income statements are for Burks Company
and its 80 percent–owned subsidiary, Foreman Company:
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Foreman
Revenues
$
(420,000
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$
(320,000
)
Expenses
344,000
235,000
Gain on sale of equipment
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)
Equity earnings of
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)
0
Net income
$
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$
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Outstanding common shares
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Burks has convertible preferred stock outstanding. Each of these...
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Revenues $ (448,000 ) $ (348,000 ) Expenses 273,000 249,000 Gain on
sale of equipment 0 (39,000 ) Equity earnings of subsidiary (73,000
) 0 Net income $ (248,000 ) $ (138,000 ) Outstanding common shares
60,000 40,000
Additional Information Amortization expense resulting from
Foreman’s excess acquisition-date fair value is $49,000 per year.
Burks has convertible preferred stock outstanding. Each of these...
The following separate income statements are for Burks Company and its 80 percent–owned subsidiary, Foreman Company:...
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and its 80 percent–owned subsidiary, Foreman Company:
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Revenues
$
(438,000
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$
(338,000
)
Expenses
270,000
244,000
Gain on sale of equipment
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(34,000
)
Equity earnings of
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(68,000
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Net income
$
(236,000
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$
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Outstanding common shares
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acquisition-date fair value is $41,000 per year.
Burks has convertible preferred stock outstanding. Each of these...
The following separate income statements are for Burks Company and its 80 percent–owned subsidiary, Foreman Company:...
The following separate income statements are for Burks Company
and its 80 percent–owned subsidiary, Foreman Company:
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Foreman
Revenues
$
(400,000
)
$
(328,000
)
Expenses
220,000
239,000
Gain on sale of equipment
0
(29,000
)
Equity earnings of subsidiary
(66,000
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0
Net income
$
(246,000
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$
(118,000
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Outstanding common shares
70,000
36,000
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acquisition-date fair value is $34,000 per year.
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