Following are separate income statements for Amarillo, Incorporated, and its 80 percent-owned subsidiary, Saltillo Corporation as well as a consolidated statement for the business combination as a whole (credit balances indicated by parentheses). Accounts Revenues Cost of goods sold Operating expenses Equity in earnings of Saltillo Individual company net income Consolidated net income Noncontrolling interest in consolidated net income Consolidated net income attributable to Amarillo Amarillo $ (742,000) 442,000 142,000 (117,600) $ (275,600) $ (172,000) Saltillo $ (542,000) 258,000 112,000 Required: Determine Amarillo's basic and diluted EPS. Consolidated $ (1,284,000) 700,000 279,000 $ (305,000) (29,400) $ (275,600) 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. • Amarillo has 50,000 shares of common stock and 13,000 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 two shares of common stock. • Saltillo has 50,000 shares of common stock outstanding. • Saltillo has convertible bonds outstanding, none of which Amarillo owned. During the current year, total interest expense (net of taxes) was $43,000. These bonds can be exchanged for 10,000 shares of the subsidiary's common stock.
Following are separate income statements for Amarillo, Incorporated, and its 80 percent-owned subsidiary, Saltillo Corporation as well as a consolidated statement for the business combination as a whole (credit balances indicated by parentheses). Accounts Revenues Cost of goods sold Operating expenses Equity in earnings of Saltillo Individual company net income Consolidated net income Noncontrolling interest in consolidated net income Consolidated net income attributable to Amarillo Amarillo $ (742,000) 442,000 142,000 (117,600) $ (275,600) $ (172,000) Saltillo $ (542,000) 258,000 112,000 Required: Determine Amarillo's basic and diluted EPS. Consolidated $ (1,284,000) 700,000 279,000 $ (305,000) (29,400) $ (275,600) 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. • Amarillo has 50,000 shares of common stock and 13,000 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 two shares of common stock. • Saltillo has 50,000 shares of common stock outstanding. • Saltillo has convertible bonds outstanding, none of which Amarillo owned. During the current year, total interest expense (net of taxes) was $43,000. These bonds can be exchanged for 10,000 shares of the subsidiary's common stock.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Following are separate income statements for Amarillo, Incorporated, and its 80 percent-owned subsidiary, Saltillo 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 Saltillo
Individual company net income
Consolidated net income
Noncontrolling interest in consolidated net income
Consolidated net income attributable to Amarillo
Accounts
Answer is complete but not entirely correct.
Earnings
Per Share
Basic
Diluted
$
$
Amarillo
$ (742,000)
442,000
142,000
(117,600)
$ (275,600) $ (172,000)
Saltillo
$ (542,000)
258,000
112,000
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.
• Amarillo has 50,000 shares of common stock and 13,000 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 two shares of common stock.
• Saltillo has 50,000 shares of common stock outstanding.
• Saltillo has convertible bonds outstanding, none of which Amarillo owned. During the current year, total interest expense (net of
taxes) was $43,000. These bonds can be exchanged for 10,000 shares of the subsidiary's common stock.
Required:
Determine Amarillo's basic and diluted EPS.
Note: Round your intermediate percentage value to 1 decimal place. Round your final answers to 2 decimal places.
4.51
2.95
Consolidated
$ (1,284,000)
700,000
279,000
$ (305,000)
(29,400)
$ (275,600)
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