Question

Following are separate income statements for Austin, Inc., and its 90 percent owned subsidiary, Rio Grande Corporation as well as a consolidated statement for the business combination as a whole. Consolidated (1,250,000) Austin Rio Grande $ (718,000) Revenues (532,000) 316,000 Cost of goods sold Operating expenses Equity in earnings of Rio Grande 416,000 732,000 218,000 106,000 77,000 (89,000) (285,000) (139,000) Individual company net income (300,000) Consolidated net income Noncontrolling interest in consolidated net income (15,000) (285,000) Consolidated net income attributable to Austin Additional Information Annual excess fair over book value amortization of $35,000 resulted from the acquisition. The parent applies the equity method to this investment. Austin has 63,000 shares of common stock and 9,000 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 five shares of common stock Rio Grande has 46,000 shares of common stock outstanding. The company also has 15,000 stock warrants outstanding. For $20 each warrant can be converted into a share of Rio Grande's common stock. Austin holds half of these warrants. The price of Rio Grande's common stock was $25 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 $38,000. These bonds can be exchanged for 30,000 shares of the subsidiary's common stock. Determine Austin's basic and diluted EPS. (Round your final answers to 2 decimal places.) Earnings Per Share S Basic 3.89 Diluted

Answer 1

Page lo Basfc arningPen Sharc (Eps):- $a85000 Aui Company neb income Ausfin company Preberned dividend aufie'bas EPS = 285000 -40,000 Faunin gs applicable 4845000 Aufin outhanding enabres 63000haes Common 245000 Easfc carnings per hane 630co 3.89 3.89 Basic EPS Diluteod Farnings Ten hae CEPS -35000 Affer amestigation , Rio Grande nef încome 139000- Qoot or $ Afton danten erf cxpenc 438000

NO 104000 t38000 -fo1 diluted EPS, Nt ?ncome 14000 Skares eutarandigba'dliong 46000 15000K &0 of hanescd Foo aoaant, No 25 62000 bonds, No hs ued 30,000 Foo Nohae out handfing 46000l000 30,000 O0088 Total ases ouened by ponent (46000 x90y)+(50% x noo) OUoned 41400 6000 44400 4400to0 haeheld by parent 88000 53.9/

Fege NO 23 poert Net Pncome - 89000 85000 4196000 rent hane ineb ome of ubaidliany 53.9 142000 6538 Total nes income or dluted EPS 196000 + 6 538 242538 Nohaescaandgent 63000 prdenenke harchofdep No. nanes ed 9000 x 5 shams 45000 Tofal 6300045000 08000 chanes piluded comings per hare 242538 J08000 . piluted EPS -