Calculation Amount Amount Punch Manufacturing Income from Operation $ 125,000.00 Short Retail Stores Net income $53,400.00 $ 12,000.00 $ 65,400.00 Assumed conversion of bonds Earning available Short Share outstanding 20,000.00 Assume conversion of bonds 8,000.00 Assume conversion of preferred shares 14,000.00 Divide by total shares 42,000.00 |Compute EPS for Short Multiply by shares held by Punch Contribution to Punch Earnings $ 1.56 22,000*80% 17600 $ 27,405.71 $ 152,405.71 Total earning of Punch Manufacturing Less-preferred dividend (22,000.00) $ 130,405.71 Earnings to Punch Common Shareholders Divide by Punch Shares outstanding 15,000.00 $ Diluted EPS 8.69 Punch Manufacturing Corporation Short Retail Stores Assets $ 51,000 102,000 260,000 100,000 490,000 (235,000) 124,000 $ 892,000 $ 31,000 82,000 130,000 70,000 350,000 (130,000) Cash Accounts Receivable Inventory Land Buildings and Equipment Less: Accumulated Depreciation Investment in Short Retail Stores Total Assets $ 533,000 Liabilities and Equity Accounts Payable Bonds Payable Preferred Stock ($10 par value) Common Stock: $ 52,000 280,000 200,000 $ 88,000 200,000 90,000 $10 par value $5 par value Retained Earnings 150,000 210,000 $ 892,000 100,000 55,000 $ 533,000 Total Liabilities and Equity
Punch Manufacturing Corporation owns 80 percent of the common shares of Short Retail Stores. The companies’ balance sheets as of December 31, 20X4, were as follows:
Short Retail’s 8 percent
Punch Manufacturing has 11 percent preferred stock and 12 percent bonds outstanding, neither of which is convertible. Punch reported after-tax income, excluding investment income from Short, of $125,000 in 20X4 and paid dividends of $68,000. The companies file separate tax returns and are subject to a 40 percent income tax.
Required:
Compute basic and diluted EPS for the consolidated entity. (Round your intermediate calculations and final answers to two decimal places.)
*Basic EPS was calculated at $9.33, which is correct. I am having difficulty calculating Diluted EPS.
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