Pam Corporation has $108,000 income from its own operations for 2016, and $42,000 income from Sun Corporation,

Question:

Pam has $108,000 income from its own operations for 2016, and $42,000 income from Sun its 70 percent-owned subsidiary. Sun'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 2016, Pam has 100,000 shares of outstanding, and Sun has 50,000 outstanding common shares.
REQUIRED:
1. Compute Pam's diluted earnings per share for 2016, assuming that Sun's bonds are convertible into 10,000 shares of Sun's common stock.
2. Compute Pam's diluted earnings per share for 2016, assuming that Sun's bonds are convertible into 10,000 shares of Pam's common stock.
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...

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Requirement 1 Requirement 2 Diluted Diluted Suns EPS Suns net income equal to income to common stockholders 60 60 Add Netoftax interest on convertible bonds 6 NA Suns earnings a 66 60 Suns outstanding common shares 50 50 Add Shares from assumed conversion of bonds 10 NA Common shares and common share equivalents b 60 50 Suns EPS ab 110 120 Pams EPS Pams net income equal to income to common stockholders 150 150 Add Netoftax interest on convertible bonds of Sun 6 Replacement of Pams equity in Suns income with Pams equity in Suns diluted 42 42 a EPS 35000 shares 110 and convertible 385 to Pam securities 35000 shares 120 42 a Pams earnings a 1465 156 Pams outstanding common shares 100 100 Add Shares from assumed conversion of bonds 10 Common shares and common share equivalents b 100 110 Pams EPS ab 147 142 a When subsidiary securities are convertible into parent common stock ...View the full answer

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