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).AccountsAmarilloSaltilloConsolidatedRevenues$ (718,000)$ (518,000)$ (1,236,000)Cost of goods sold418,000282,000700,000Operating expenses118,00088,000231,000Equity in earnings of Saltillo(98,400)00Individual company net income$ (280,400)$ (148,000)0Consolidated net income $ (305,000)Noncontrolling interest in consolidated net income (24,600)Consolidated net income attributable to Amarillo $ (280,400)Additional InformationAnnual excess fair over book value amortization of $25,000 resulted from the acquisition.The parent applies the equity method to this investment.Amarillo has 55,000 shares of common stock and 7,000 shares of preferred stock outstanding. Owners of the preferred stock are paid an annual dividend of $30,000, and each share can be exchanged for three shares of common stock.Saltillo has 36,000 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 $31,000. These bonds can be exchanged for 15,000 shares of the subsidiary’s common stock.Required:Determine Amarillo’s diluted EPS.

It represents the portion of a company's profit allocated to each outstanding share of common stock.…

Answered: Following are separate income…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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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	Amarillo	Saltillo	Consolidated
Revenues	$ (718,000)	$ (518,000)	$ (1,236,000)
Cost of goods sold	418,000	282,000	700,000
Operating expenses	118,000	88,000	231,000
Equity in earnings of Saltillo	(98,400)	0	0
Individual company net income	$ (280,400)	$ (148,000)	0
Consolidated net income			$ (305,000)
Noncontrolling interest in consolidated net income			(24,600)
Consolidated net income attributable to Amarillo			$ (280,400)

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.
Amarillo has 55,000 shares of common stock and 7,000 shares of preferred stock outstanding. Owners of the preferred stock are paid an annual dividend of $30,000, and each share can be exchanged for three shares of common stock.
Saltillo has 36,000 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 $31,000. These bonds can be exchanged for 15,000 shares of the subsidiary’s common stock.

Required:

Determine Amarillo’s diluted EPS.

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