Pow Corporation owns an 80 percent interest in Soy Corporation. Pow does not have common stock equivalents

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Pow Corporation owns an 80 percent interest in Soy Corporation. Pow does not have common stock equivalents or other potentially dilutive securities outstanding, so it calculated its EPS for 2011 as follows:

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An examination of Pow's income from Soy shows that it is determined correctly as 80 percent of Soy's $630,000 net income less $24,000 patent amortization. Pow's EPS computation is in error, however, because it fails to consider outstanding warrants of Soy that permit their holders to acquire 10,000 shares of Soy common stock at $24 per share and increase Soy's outstanding common stock to 60,000 shares. The average price of Soy common stock during 2011 was $40.REQUIRED1. Compute Soy Corporation's diluted EPS for use in determining consolidated EPS.2. Compute consolidated EPS for 2011 (both basic and diluted).

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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Advanced Accounting

ISBN: 9780132568968

11th Edition

Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith

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