excel 48. 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 (credit balances indicated by parentheses). Revenues Cost of goods sold Operating expenses Equity in earnings of Rio Grande Individual company net income Consolidated net income Noncontrolling interest in consolidated net income Consolidated net income attributable to Austin Austin $(700,000) 400,000 100,000 (84,000) $(284,000) Rio Grande $(500,000) 300,000 70,000 $(130,000) Consolidated $(1,200,000) 700,000 195,000 $ (305,000) (21,000) $ (284,000) 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 50,000 shares of common stock and 10,000 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 two shares of common stock. • Rio Grande has 30,000 shares of common stock outstanding. The company also has 5,000 stock warrants outstanding. For $10, 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 $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 $22,000. These bonds can be exchanged for 10,000 shares of the subsidiary's common stock. Determine Austin's basic and diluted EPS.
excel 48. 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 (credit balances indicated by parentheses). Revenues Cost of goods sold Operating expenses Equity in earnings of Rio Grande Individual company net income Consolidated net income Noncontrolling interest in consolidated net income Consolidated net income attributable to Austin Austin $(700,000) 400,000 100,000 (84,000) $(284,000) Rio Grande $(500,000) 300,000 70,000 $(130,000) Consolidated $(1,200,000) 700,000 195,000 $ (305,000) (21,000) $ (284,000) 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 50,000 shares of common stock and 10,000 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 two shares of common stock. • Rio Grande has 30,000 shares of common stock outstanding. The company also has 5,000 stock warrants outstanding. For $10, 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 $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 $22,000. These bonds can be exchanged for 10,000 shares of the subsidiary's common stock. Determine Austin's basic and diluted EPS.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
This the second time that I ask this question and my only one question is how Variable Interest Entity applies under this case.
Transcribed Image Text:### Financial Analysis: Austin, Inc. and Rio Grande Corporation
**Income Statements Overview**
- **Revenues**:
- Austin: $(700,000)
- Rio Grande: $(500,000)
- Consolidated: $(1,200,000)
- **Cost of Goods Sold**:
- Austin: 400,000
- Rio Grande: 300,000
- Consolidated: 700,000
- **Operating Expenses**:
- Austin: 100,000
- Rio Grande: 70,000
- Consolidated: 195,000
- **Equity in Earnings of Rio Grande**:
- Austin: (84,000)
- **Individual Company Net Income**:
- Austin: $(284,000)
- Rio Grande: $(130,000)
- **Consolidated Net Income**: $(305,000)
- **Noncontrolling Interest in Consolidated Net Income**: (21,000)
- **Consolidated Net Income Attributable to Austin**: $(284,000)
---
**Additional Information**
- **Amortization**:
- Annual excess fair over book value amortization of $25,000 from the acquisition.
- **Equity Method**:
- The parent applies this method to the investment.
- **Austin Stock Details**:
- 50,000 common shares and 10,000 preferred shares outstanding.
- Preferred stockholders receive an annual $40,000 dividend.
- Each preferred share convertible to two common shares.
- **Rio Grande Stock and Bonds**:
- 30,000 common shares and 5,000 stock warrants outstanding.
- Warrants: $10 to convert to Rio Grande’s common stock.
- Shares prices: $20 each share throughout the year.
- **Convertible Bonds**:
- Total interest expense (net of taxes) was $22,000.
- Convertible to 10,000 shares of the subsidiary’s common stock.
**Objective**: Calculate Austin’s basic and diluted Earnings Per Share (EPS).
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education