Question

Amber Corporation holds 70 percent of Newtop Company’s voting common shares but none of its preferred shares. Summary balance sheets for the companies on December 31, 20X1, are as follows:

	Amber Corporation				Newtop Company
Assets
Cash		$	14,000			$	21,000
Accounts Receivable			32,000				42,000
Inventory			115,000				73,000
Buildings and Equipment			290,000				205,000
Less: Accumulated Depreciation			(139,000	)			(66,000	)
Investment in Newtop Company			124,600
Total Assets		$	436,600			$	275,000
Liabilities and Owners’ Equity
Accounts Payable		$	59,600			$	39,000
Wages Payable			42,000
Preferred Stock			100,000				58,000
Common Stock ($10 par value)			120,000				100,000
Retained Earnings			115,000				78,000
Total Liabilities and Owners’ Equity		$	436,600			$	275,000

Neither of the preferred issues is convertible. Amber’s preferred pays a 9 percent annual dividend and Newtop’s preferred pays a 10 percent dividend. Newtop reported net income of $54,000 and paid a total of $22,000 of dividends in 20X1. Amber reported $63,000 of income from its separate operations and paid total dividends of $49,000 in 20X1.

Required:

Compute 20X1 consolidated EPS. Ignore any tax consequences. (Round your answer to 2 decimal places.)

Consolidated earnings per share _________.

Answer 1

Answer

The Consolidated Earnings Per Share for 20X1 is $7.31

Calculation of Consolidated Earnings Per Share(EPS)-- [Basic Earnings Per Share]

Operating Income of Amber Corporation Net Income of Newtop Company Less:Preferred dividends Earnings Available to Newtop Common Shareholders Consolidated Net Income Less:Income to Non-Controlling Interest(NCI) Income to Common Shareholders of Amber Corporation Less:Preferred dividends of Amber Corporation Earnings Available to common shareholders No.of Shares Basic EPS

$54,000 ($5,800)

$63,000 $48,200 $111,200 ($14,460) $96,740 ($9,000) $87,740 12,000 $7.31

Note

EPS = Earnings Available to Common Shareholders/No.of Shares

=$87,740/12,000

=$7.31166

=$7.31 (rounded to 2 decimal places)