Punch Manufacturing Corporation owns 80 percent of the common shares of Short Retail Stores. The companies’ balance sheets as of December 31, 20X4, were as follows: Punch Manufacturing Corporation Short Retail Stores Assets Cash $ 57,000 $ 37,000 Accounts Receivable 106,000 86,000 Inventory 250,000 140,000 Land 105,000 75,000 Buildings and Equipment 520,000 350,000 Less: Accumulated Depreciation (250,000 ) (140,000 ) Investment in Short Retail Stores 128,000 Total Assets $ 916,000 $ 548,000 Liabilities and Equity Accounts Payable $ 86,000 $ 88,000 Bonds Payable 270,000 200,000 Preferred Stock ($10 par value) 200,000 100,000 Common Stock: $10 par value 150,000 $5 par value 100,000 Retained Earnings 210,000 60,000 Total Liabilities and Equity $ 916,000 $ 548,000 Short Retail’s 8 percent preferred stock is convertible into 13,000 shares of common stock, and its 10 percent bonds are convertible into 8,000 shares of common stock. Short reported net income of $54,200 for 20X4 and paid dividends of $30,000. Punch Manufacturing has 11 percent preferred stock and 12 percent bonds outstanding, neither of which is convertible. Punch reported after-tax income, excluding investment income from Short, of $110,000 in 20X4 and paid dividends of $64,000. The companies file separate tax returns and are subject to a 40 percent income tax. Required: Compute basic and diluted EPS for the consolidated entity. (Round your intermediate calculations and final answers to two decimal places.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Punch Manufacturing Corporation owns 80 percent of the common shares of Short Retail Stores. The companies’ balance sheets as of December 31, 20X4, were as follows:

	Punch Manufacturing Corporation	Short Retail Stores
Assets
Cash		$	57,000		$	37,000
Accounts Receivable			106,000			86,000
Inventory			250,000			140,000
Land			105,000			75,000
Buildings and Equipment			520,000			350,000
Less: Accumulated Depreciation			(250,000	)		(140,000	)
Investment in Short Retail Stores			128,000
Total Assets		$	916,000		$	548,000
Liabilities and Equity
Accounts Payable		$	86,000		$	88,000
Bonds Payable			270,000			200,000
Preferred Stock ($10 par value)			200,000			100,000
Common Stock:
$10 par value			150,000
$5 par value						100,000
Retained Earnings			210,000			60,000
Total Liabilities and Equity		$	916,000		$	548,000

Short Retail’s 8 percent preferred stock is convertible into 13,000 shares of common stock, and its 10 percent bonds are convertible into 8,000 shares of common stock. Short reported net income of $54,200 for 20X4 and paid dividends of $30,000.

Punch Manufacturing has 11 percent preferred stock and 12 percent bonds outstanding, neither of which is convertible. Punch reported after-tax income, excluding investment income from Short, of $110,000 in 20X4 and paid dividends of $64,000. The companies file separate tax returns and are subject to a 40 percent income tax.

Required:
Compute basic and diluted EPS for the consolidated entity. (Round your intermediate calculations and final answers to two decimal places.)

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