The following separate income statements are for Burks Company and its 80 percent–owned subsidiary, Foreman Company: Burks ForemanRevenues . . . . $(430,000) $(330,000)Expenses . . . . . 280,000 240,000Gain on sale –0– (30,000) of equipment Equity earnings of (64,000) -0-subsidiaryNet income . . $(214,000) $(120,000)Outstanding . . . 65000 40000 Common stock Additional Information∙ Amortization expense resulting from Foreman’s excess acquisition-date fair value is $40,000 per year.∙ Burks has convertible preferred stock outstanding. Each of these 8,000 shares is paid a dividend of $4 per year. Each share can be converted into four shares of common stock.∙ Stock warrants to buy 20,000 shares of Foreman are also outstanding. For $15, each warrant can be converted into a share of Foreman’s common stock. The fair value of this stock is $20 throughout the year. Burks owns none of these warrants.∙ Foreman has convertible bonds payable that paid interest of $45,000 (after taxes) during the year. These bonds can be exchanged for 10,000 shares of common stock. Burks holds 10 percent of these bonds, which it bought at book value directly from Foreman.Compute basic and diluted EPS for Burks Company
The following separate income statements are for Burks Company and its 80 percent–owned subsidiary, Foreman Company:
Burks Foreman
Revenues . . . . $(430,000) $(330,000)
Expenses . . . . . 280,000 240,000
Gain on sale –0– (30,000) of equipment
Equity earnings of (64,000) -0-subsidiary
Net income . . $(214,000) $(120,000)
Outstanding . . . 65000 40000 Common stock
Additional Information
∙ Amortization expense resulting from Foreman’s excess acquisition-date fair value is $40,000 per year.
∙ Burks has convertible
∙ Stock warrants to buy 20,000 shares of Foreman are also outstanding. For $15, each warrant can be converted into a share of Foreman’s common stock. The fair value of this stock is $20 throughout the year. Burks owns none of these warrants.
∙ Foreman has convertible bonds payable that paid interest of $45,000 (after taxes) during the year.
These bonds can be exchanged for 10,000 shares of common stock. Burks holds 10 percent of these bonds, which it bought at book value directly from Foreman.
Compute basic and diluted EPS for Burks Company
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