Pal Corporation has $108,000 income from its own operations for 2011, and $42,000 income from Sir Corporation,
Question:
Pal Corporation has $108,000 income from its own operations for 2011, and $42,000 income from Sir Corporation, its 70 percent-owned subsidiary. Sir’s net income of $60,000 consists of $66,000 operating income less $6,000 net-of-tax interest on its outstanding 10 percent convertible debentures. Throughout 2011, Pal has 100,000 shares of common stock outstanding, and Sir has 50,000 outstanding common shares.
REQUIRED
1. Compute Pal’s diluted earnings per share for 2011, assuming that Sir’s bonds are convertible into 10,000 shares of Sir’s common stock.
2. Compute Pal’s diluted earnings per share for 2011, assuming that Sir’s bonds are convertible into 10,000 shares of Pal’s common stock.
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Requirement 1 Requirement 2 Diluted Diluted Sirs EPS Sirs net income equal to income to common stockholders 60 60 Add Netoftax interest on convertible bonds 6 NA Sirs earnings a 66 60 Sirs outstanding common shares 50 50 Add Shares from assumed conversion of bonds 10 NA Common shares and common share equivalents b 60 50 Sirs EPS ab 110 120 Pals EPS Pals net income equal to income to common stockholders 150 150 Add Netoftax interest on convertible bonds of Sir 6 Replacement of Pals equity in Sirs income with Pals equity in Sirs diluted 42 42a EPS 35000 shares 110 and convertible 385 to Pal securities 35000 shares 120 42 a Pals earnings a 1465 156 Pals outstanding common shares 100 100 Add Shares from assumed conversion of bonds 10 Common shares and common share equivalents b 100 110 Pals EPS ab 147 142 a When subsidiary securities are convertible into parent common stock ...View the full answer
Advanced Accounting
ISBN: 9780132568968
11th Edition
Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith
