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 $ (734,000) 434,000 134,000 (111,200) $ (277,200) Rio Grande $ (534,000) 266,000 104,000 $ (164,000) Consolidated $ (1,268,000) 700,000 263,000 $ (305,000) (27,800) $ (277,200) 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 50,000 shares of common stock and 10,000 shares of preferred stock outstanding. Owners of the preferred stock are paid an annual dividend of $60,000, and each share can be exchanged for two shares of common stock. • Rio Grande has 48,000 shares of common stock outstanding. The company also has 14,000 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 $39,000. These bonds can be exchanged for 15,000 shares of the subsidiary's common stock. swers Determine Austin's basic and diluted EPS. (Round your intermediate percentage value to 1 decimal place. Round your final answe o 2 decimal places.
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 $ (734,000) 434,000 134,000 (111,200) $ (277,200) Rio Grande $ (534,000) 266,000 104,000 $ (164,000) Consolidated $ (1,268,000) 700,000 263,000 $ (305,000) (27,800) $ (277,200) 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 50,000 shares of common stock and 10,000 shares of preferred stock outstanding. Owners of the preferred stock are paid an annual dividend of $60,000, and each share can be exchanged for two shares of common stock. • Rio Grande has 48,000 shares of common stock outstanding. The company also has 14,000 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 $39,000. These bonds can be exchanged for 15,000 shares of the subsidiary's common stock. swers Determine Austin's basic and diluted EPS. (Round your intermediate percentage value to 1 decimal place. Round your final answe o 2 decimal places.
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter14: Intercorporate Investments In Common Stock
Section: Chapter Questions
Problem 20E
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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
Answer is complete but not entirely correct.
Earnings
Per Share
Austin
$ (734,000)
434,000
134,000
(111,200)
$ (277,200)
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 50,000 shares of common stock and 10,000 shares of preferred stock outstanding. Owners of the preferred stock are
paid an annual dividend of $60,000, and each share can be exchanged for two shares of common stock.
Basic
Diluted
Rio Grande
$ (534,000)
266,000
104,000
$ (164,000)
• Rio Grande has 48,000 shares of common stock outstanding. The company also has 14,000 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 $39,000. These bonds can be exchanged for 15,000 shares of the subsidiary's common stock.
$
Consolidated
$ (1,268,000)
700,000
263,000
Determine Austin's basic and diluted EPS. (Round your intermediate percentage value to 1 decimal place. Round your final answers
to 2 decimal places.)
5.54
3.01
(305,000)
(27,800)
$ (277,200)
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