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Following are separate income statements for Austin, Inc., and its 80 percentowned subsidiary, Rio Grande Corporation as well as a consolidated statement for the business

Following are separate income statements for Austin, Inc., and its 80 percentowned subsidiary, Rio Grande Corporation as well as a consolidated statement for the business combination as a whole (credit balances indicated by parentheses).

Austin Rio Grande Consolidated
Revenues $ (708,000 ) $ (508,000 ) $ (1,216,000 )
Cost of goods sold 408,000 292,000 700,000
Operating expenses 108,000 78,000 211,000
Equity in earnings of Rio Grande (90,400 )
Individual company net income $ (282,400 ) $ (138,000 )
Consolidated net income $ (305,000 )
Noncontrolling interest in consolidated net income (22,600 )
Consolidated net income attributable to Austin $ (282,400 )

Additional Information

  • Annual excess fair over book value amortization of $25,000 resulted from the acquisition.
  • The parent applies the equity method to this investment.
  • Austin has 60,000 shares of common stock and 8,000 shares of preferred stock outstanding. Owners of the preferred stock are paid an annual dividend of $50,000, and each share can be exchanged for five shares of common stock.
  • Rio Grande has 39,000 shares of common stock outstanding. The company also has 12,000 stock warrants outstanding. For $10, 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 $26,000. These bonds can be exchanged for 12,000 shares of the subsidiarys common stock.

Determine Austins basic and diluted EPS

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