Question

ACT506
Module 2 Critical Thinking Assignment
Option #2
Part 1
Consolidated Earnings Per Share
Facts to the situation:
Push Corporation is the parent.	20x7 Financial information:
Summer Corp is the subsidiary.
	Summer Corp has income before taxes		100,000
Push Corporation has 100% control of Summer Corp stock.	Allocated Taxes at 40%		40,000
Both Push Corporation and Summer Corp have 40% tax rate.	N.I.A.T.		60,000
Push Corporation has 400,000 shares at $10.00 par value common stock and
30,000 shares of $5.00 par 6% percent convertible preferred stock. The preferred stock is convertible into 20,000 of Parent's common stock.
	20x7 Financial information:		Consolidated Net Income
	Push Corporation			1,000,000
	Summer Corp income before taxes			100,000
	Consolidate Net Income			1,100,000
	Income Tax at 40%			440,000
	Consolidated Net Income after taxes			660,000

Part 2
Calculation of Basic and Diluted E.P.S. for Summer Corp. (Subsidiary)
Information for Calculation:
	Summer Corp has 200,000 shares at $5.00 par common stock and $150,000 of 6% preferred convertible bonds outstanding.
	The bonds, issued at par, are convertible into 40,000 common shares of Summer Corp, subsidiary.
					Basic		Diluted
	Summer Corp Net Income after taxes				xxx		xxx
	Interest Impact of conversion of bonds,
	net of taxes (xxx Times 0.xx) times
	(1 - .xx) =				0		xxx
	Income accruing to Common Shares				xxx		xxx
	Weighted average shares				xxx		xxx
	Additional shares from conversion						xxx
	Weighted average shares and equivalents				xxx		xxx
	Earnings per share:
	xxx/ xxx=				xxx
	xxx/ xxx=						xxx

Part 3
Computation of Push Corporation Consolidated Earnings per Share
	Numerator					Basic		Diluted
		Consolidated net income to parent				xxx		xxx
		Less: Summer Corp net income				0		xxx
		Add: Parents share of Summer Corp
		Income based on separate diluted EPS
		[0.xxx	times	xxx,000]=		0		xxx
		Less: Preferred Dividend
		[xxx,000 times 0.xx%]				xxx		0
	Total					xxx		xxx
	Denominator
		Weighted average Shares outstanding				xxx		xxx
		Preferred Stock Conversion						xxx
	Total					xxx		xxx
	Earnings Per Share
	[xxx/ xxx,000] =					xxx
	[$xxx00/ xxx,000]=							xxx

Answer 1