P 10-6

[EPS] Compute basic and diluted EPS (options; preferred stock)

Pop Corporation owns an 80 percent interest in Son Corporation. Throughout 2016, Pop had 20,000 shares of common stock outstanding. Son had the following securities outstanding:

■ 10,000 shares of common stock

■ Options to purchase 2,000 shares of Son Corporation common at $15 per share

■ 1,000 shares of 10%, $100 par, convertible, preferred stock that are convertible into 3,000 shares of Son common stock Income data for the affiliates for 2016 are as follows:

Pop Son Separate incomes $120,000 $ 55,000 Income from Son ($45,000 income to common * 80%) - $6,000 patent amortization 30,000 —

$150,000 $ 55,000 REQuIRED: Compute basic and diluted earnings per share for Pop Corporation and Subsidiary for 2016, assuming an average market price for Son Corporation common stock of $30 per share.