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 $ (746,000) 446,000 146,000 (120,800) Rio Grande $ (546,000) 254,000 116,000 Consolidated $ (1,292,000) 700,000 287,000 $ (274,800) $ (176,000) (305,000) (30,200) $ (274,800) 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 60,000 shares of common stock and 15,000 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 41,000 shares of common stock outstanding. The company also has 10,000 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 $45,000. These bonds can be exchanged for 14,000 shares of the subsidiary's common stock. Determine Austin's basic and diluted EPS. (Round your intermediate percentage value to 1 decimal place. Round your final answers to 2 decimal places.) Earnings Per Share Basic $ 3.45 Diluted $ 2.55
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 $ (746,000) 446,000 146,000 (120,800) Rio Grande $ (546,000) 254,000 116,000 Consolidated $ (1,292,000) 700,000 287,000 $ (274,800) $ (176,000) (305,000) (30,200) $ (274,800) 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 60,000 shares of common stock and 15,000 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 41,000 shares of common stock outstanding. The company also has 10,000 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 $45,000. These bonds can be exchanged for 14,000 shares of the subsidiary's common stock. Determine Austin's basic and diluted EPS. (Round your intermediate percentage value to 1 decimal place. Round your final answers to 2 decimal places.) Earnings Per Share Basic $ 3.45 Diluted $ 2.55
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
$ (746,000)
446,000
146,000
(120,800)
Rio Grande
$ (546,000)
254,000
116,000
Consolidated
$ (1,292,000)
700,000
287,000
$ (274,800)
$ (176,000)
(305,000)
(30,200)
$
(274,800)
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 60,000 shares of common stock and 15,000 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 41,000 shares of common stock outstanding. The company also has 10,000 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 $45,000. These bonds can be exchanged for 14,000 shares of the subsidiary's common stock.
Determine Austin's basic and diluted EPS. (Round your intermediate percentage value to 1 decimal place. Round your final answers
to 2 decimal places.)
Earnings Per
Share
Basic
$
3.45
Diluted
$
2.55
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