2.99 See Answer

Question: Following are separate income statements for


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).



Following are separate income statements for Austin, Inc., and its -1

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 $40,000, and each share can be exchanged for two shares of common stock.
∙ Rio Grande has 30,000 shares of common stock outstanding. The company also has 5,000 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 $22,000. These bonds can be exchanged for 10,000 shares of the subsidiary’s common stock.
Determine Austin’s basic and diluted EPS.

2.99

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