Question
In: Accounting
Porter Corporation owns all 30,000 shares of the common stock of Street, Inc. Porter has 65,000...
Porter Corporation owns all 30,000 shares of the common stock of Street, Inc. Porter has 65,000 shares of its own common stock outstanding. During the current year, Porter earns net income (without any consideration of its investment in Street) of $253,000 while Street reports $201,000. Annual amortization of $12,000 is recognized each year on the consolidation worksheet based on acquisition-date fair-value allocations. Both companies have convertible bonds outstanding. During the current year, bond-related interest expense (net of taxes) is $55,000 for Porter and $51,000 for Street. Porter’s bonds can be converted into 8,000 shares of common stock; Street’s bonds can be converted into 10,000 shares. Porter owns none of these bonds.
What are the earnings per share amounts that Porter should report in its current year consolidated income statement? (Round your answers to 2 decimal places.)
Basic EPS:
Diluted EPS:
Solutions
Expert Solution
Answer :
Basic EPS = $ 6.8
Diluted EPS = $ 6.68
Working :
Computation of basic EPS
| Particular | Amount($) |
| Porter's reported Income | 253000 |
| Street's reported Income | 201000 |
| Amortization expense | -12000 |
| Consolidated Net Income (A) | 442000 |
| Porter's shares outstanding (B) | 65000 |
| Basic earning per share (A/B) | 6.8 |
Computation of diluated EPS Street company
| Particular | Amount($) |
| Street's Reported Income | 201000 |
| less : Amortization expense | -12000 |
| Income after amortization | 189000 |
| Shares outstanding in street | 30000 |
| Basic EPS (189000 / 30000 ) | 6.3 |
Street's earning assuming conersion of its bonds : 189000 + 51000 ( Interest saving after tax )
= 240000
Street share assuming conversion of its bond : 30000 + 10000
= 40000
Diluted EPS = 240000 / 40000
= $ 6
Since diluted EPS ( $ 6 ) is less than basic EPS ( 6.3 ) the convertible bonds are dilutive therefore should be included
Porter's share in street's diluted earnings -
| Total shares assuming bond conversion | 40000 |
| Shares held by porter | 30000 |
| Porter's ownership percent | 75% |
| Street's earnings for diluted EPS | 240000 |
| Porter's ownership share ( 240000 * 75% ) | 180000 |
Porter's earning and number of shares for diluted EPS :
| Porter's reported income | 253000 |
| Porter's income in street | 180000 |
| Interest saved after tax ( assumed conversion) | 55000 |
| Porter's diluted earnings | 4880000 |
| Porter's outstanding shares | 65000 |
| Add : shares from assumed conversion | 8000 |
| Diluted shares | 73000 |
| Diluted earning per share ( 488000 / 73000 ) | 6.68 |
ekkarill92 answered 1 year agoRelated Solutions
Porter Corporation owns all 30,000 shares of the common stock of Street, Inc. Porter has 65,000...
Porter Corporation owns all 30,000 shares of the common stock of
Street, Inc. Porter has 65,000 shares of its own common stock
outstanding. During the current year, Porter earns net income
(without any consideration of its investment in Street) of $197,000
while Street reports $157,000. Annual amortization of $16,000 is
recognized each year on the consolidation worksheet based on
acquisition-date fair-value allocations. Both companies have
convertible bonds outstanding. During the current year,
bond-related interest expense (net of taxes) is $39,000...
Porter Corporation owns all 30,000 shares of the common stock of Street, Inc. Porter has 65,000...
Porter Corporation owns all 30,000 shares of the common stock of
Street, Inc. Porter has 65,000 shares of its own common stock
outstanding. During the current year, Porter earns net income
(without any consideration of its investment in Street) of $253,000
while Street reports $201,000. Annual amortization of $12,000 is
recognized each year on the consolidation worksheet based on
acquisition-date fair-value allocations. Both companies have
convertible bonds outstanding. During the current year,
bond-related interest expense (net of taxes) is $55,000...
Porter Corporation owns all 30,000 shares of the common stock of Street, Inc. Porter has 65,000...
Porter Corporation owns all 30,000 shares of the common stock of
Street, Inc. Porter has 65,000 shares of its own common stock
outstanding. During the current year, Porter earns net income
(without any consideration of its investment in Street) of $232,000
while Street reports $186,000. Annual amortization of $15,000 is
recognized each year on the consolidation worksheet based on
acquisition-date fair-value allocations. Both companies have
convertible bonds outstanding. During the current year,
bond-related interest expense (net of taxes) is $49,000...
Porter Corporation owns all 30,000 shares of the common stock of Street, Inc. Porter has 70,000...
Porter Corporation owns all 30,000 shares of the common stock of
Street, Inc. Porter has 70,000 shares of its own common stock
outstanding. During the current year, Porter earns net income
(without any consideration of its investment in Street) of $243,000
while Street reports $170,000. Annual amortization of $14,000 is
recognized each year on the consolidation worksheet based on
acquisition-date fair-value allocations. Both companies have
convertible bonds outstanding. During the current year,
bond-related interest expense (net of taxes) is $44,000...
Porter Corporation owns all 30,000 shares of the common stock of Street, Inc. Porter has 70,000...
Porter Corporation owns all 30,000 shares of the common stock of
Street, Inc. Porter has 70,000 shares of its own common stock
outstanding. During the current year, Porter earns net income
(without any consideration of its investment in Street) of $243,000
while Street reports $170,000. Annual amortization of $14,000 is
recognized each year on the consolidation worksheet based on
acquisition-date fair-value allocations. Both companies have
convertible bonds outstanding. During the current year,
bond-related interest expense (net of taxes) is $44,000...
Porter Corporation owns all 34,000 shares of the common stock of Street, Inc. Porter has 73,000...
Porter Corporation owns all 34,000 shares of the common stock of
Street, Inc. Porter has 73,000 shares of its own common stock
outstanding. During the current year, Porter earns net income
(without any consideration of its investment in Street) of $290,000
while Street reports $236,000. Annual amortization of $15,000 is
recognized each year on the consolidation worksheet based on
acquisition-date fair-value allocations. Both companies have
convertible bonds outstanding. During the current year,
bond-related interest expense (net of taxes) is $57,000...
Porter Corporation owns all 24,000 shares of the common stock of Street, Inc. Porter has 55,000...
Porter Corporation owns all 24,000 shares of the common stock of
Street, Inc. Porter has 55,000 shares of its own common stock
outstanding. During the current year, Porter earns net income
(without any consideration of its investment in Street) of $187,000
while Street reports $149,000. Annual amortization of $17,000 is
recognized each year on the consolidation worksheet based on
acquisition-date fair-value allocations. Both companies have
convertible bonds outstanding. During the current year,
bond-related interest expense (net of taxes) is $30,000...
Porter Corporation owns all 26,000 shares of the common stock of Street, Inc. Porter has 60,000...
Porter Corporation owns all 26,000 shares of the common stock of
Street, Inc. Porter has 60,000 shares of its own common stock
outstanding. During the current year, Porter earns net income
(without any consideration of its investment in Street) of $211,000
while Street reports $161,000. Annual amortization of $18,000 is
recognized each year on the consolidation worksheet based on
acquisition-date fair-value allocations. Both companies have
convertible bonds outstanding. During the current year,
bond-related interest expense (net of taxes) is $46,000...
Porter Corporation owns all 28,000 shares of the common stock of Street, Inc. Porter has 58,000...
Porter Corporation owns all 28,000 shares of the common stock of
Street, Inc. Porter has 58,000 shares of its own common stock
outstanding. During the current year, Porter earns net income
(without any consideration of its investment in Street) of $209,000
while Street reports $181,000. Annual amortization of $13,000 is
recognized each year on the consolidation worksheet based on
acquisition-date fair-value allocations. Both companies have
convertible bonds outstanding. During the current year,
bond-related interest expense (net of taxes) is $41,000...
Reid owns all 30,000 shares of common stock of Barry. Reid has 60,000 shares of its...
Reid owns all 30,000 shares of common stock of Barry. Reid has
60,000 shares of its own common stock outstanding. During the year
Reid earns $200,000 none included from Barry, while Barry reports
$150,000. Annual amortization of $10,000 is recognized each year on
the consolidated worksheet based on acquisition date fair values.
Both companies have convertible bonds outstanding. During the
current year bond related interest expense (net of taxes) is
$32,000 for Reid and 24,000 for Barry. Reid’s bonds can...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- For Questions 1-3: consider the following code: public class A { private int number; protected String...
- You are tasked with assessing the health department’s intervention program in preventing recurrence of acute alcohol...
- Compare the MOSFET, JFET , and BJT and identify the reasons these devices behave differently. What...
- How would you use SAS Enterprise Miner to create a neural network model of your example?
- Explain the use of neural networking modeling in predictive analytics.
- Current Market Mix of Netflix, as detail as possible, please.
- This is all one question, thank you so much in advance! You must evaluate a proposal...
ADVERTISEMENT