Question

Plexis Corporation holds 70 percent of Solar Company's voting common shares, acquired at book value, but none of its preferred shares. At the date of acquisition, the fair value of the noncontrolling interest was equal to 30 percent of the book value of Solar Company. Summary balance sheets for the companies on December 31, 20X5, are as follows:

	Plexis Corp.					Solar Company
Cash and Receivables		$	70,000					$	55,000
Inventory			60,000						35,000
Buildings and Equipment (net)			180,000						160,000
Investment in Solar Company			112,000						0
Total Assets		$	422,000					$	250,000
Accounts Payable		$	40,000					$	40,000
Preferred Stock			30,000						50,000
Common Stock ($15 par value)			90,000						75,000
Retained Earnings			262,000						85,000
Total Liabilities and Owners' Equity		$	422,000					$	250,000

Neither of the preferred issues is convertible. Plexis's preferred pays a 9 percent annual dividend, and Solar's preferred pays a 10 percent dividend. Solar reported net income of $40,000 and paid a total of $15,000 of dividends in 20X5. Plexis reported income from its separate operations of $80,000 and paid total dividends of $45,000 in 20X5.

50) Based on the preceding information, what is the consolidated earnings per share for 20X5?

A) $16.97

B) $17.42

C) $18.72

D) $19.17

Answer: A

Please explain how to get this number!!!

Answer 1

Net income of Solar	$              40,000
Less: preferred dividend (50000*10%)	$                5,000
Net income of Solar available for common shareholders	$              35,000
Multiply: controlling interest in Solar Company	70%
Solar's net income allocated to parent company	$              24,500
Solar's net income allocated to parent company	$              24,500
Net income of Plexis	$              80,000
Total	$            104,500
Less: preferred dividend (30000*9%)	$                2,700
Net income of Solar available for common shareholders	$            101,800
Divided by: Number of Plexis common shares outstanding (90000/15)	6,000
Basic Earning per share	$                16.97
Option A is correct.	$                16.97