E 10-7

[EPS] General questions 1. A parent company and its 100 percent–owned subsidiary have only common stock outstanding (10,000 shares for the parent and 3,000 shares for the subsidiary), and neither company has issued other potentially dilutive securities.

The equation to compute consolidated EPS for the parent company and its subsidiary is:

a (Net income of parent 1 Net income of subsidiary) 4 13,000 shares b (Net income of parent 1 Net income of subsidiary) 4 10,000 shares c Net income of parent 4 13,000 shares d Net income of parent 4 10,000 shares Subsidiary Preferred Stock, Consolidated Earnings per Share, and Consolidated Income Taxation 371