Question
Following are separate income statements for Austin, Inc., and its 80 percent owned subsidiary, Rio Grande Corporation as well as a consolidated statement for the
Following are separate income statements for Austin, Inc., and its 80 percent owned subsidiary, Rio Grande Corporation as well as a consolidated statement for the business combination as a whole. |
Austin | Rio Grande | Consolidated | ||||
Revenues | $ | (715,000) | $ | (510,000) | $ | (1,225,000) |
Cost of goods sold | 405,000 | 305,000 | 710,000 | |||
Operating expenses | 107,000 | 75,000 | 200,000 | |||
Equity in earnings of Rio Grande | (89,000) | |||||
Individual company net income | $ | (292,000) | $ | (130,000) | ||
Consolidated net income | $ | (315,000) | ||||
Noncontrolling interest in consolidated net income | (23,000) | |||||
Consolidated net income attributable | ||||||
to Austin | $ | (292,000) | ||||
Additional Information | |
Annual excess fair over book value amortization of $30,000 resulted from the acquisition. | |
The parent applies the equity method to this investment. | |
Austin has 60,000 shares of common stock and 7,000 shares of preferred stock outstanding. Owners of the preferred stock are paid an annual dividend of $40,000, and each share can be exchanged for four shares of common stock. | |
Rio Grande has 30,000 shares of common stock outstanding. The company also has 5,000 stock warrants outstanding. For $16, each warrant can be converted into a share of Rio Grandes common stock. Austin holds half of these warrants. The price of Rio Grandes common stock was $20 per share throughout the year. | |
Rio Grande also has convertible bonds, none of which Austin owned. During the current year, total interest expense (net of taxes) was $27,000. These bonds can be exchanged for 19,000 shares of the subsidiarys common stock. |
Determine Austins basic and diluted EPS. (Round your final answers to 2 decimal places.) |
Basic EPS = Diluted EPS = |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started