Question

Poppy Corporation owns 60 percent of Seed Company’s common shares. Balance sheet data for the companies on December 31, 20X2, are as follows:

	Poppy Corporation					Seed Company
Assets
Cash		$	90,000				$	32,000
Accounts Receivable			83,000					57,000
Inventory			118,000					99,000
Buildings and Equipment			660,000					350,000
Less: Accumulated Depreciation			(235,000	)				(74,000	)
Investment in Seed Company Stock			135,000
Total Assets		$	851,000				$	464,000
Liabilities and Owners’ Equity
Accounts Payable		$	71,000				$	39,000
Bonds Payable			250,000					200,000
Common Stock ($10 par value)			300,000					100,000
Retained Earnings			230,000					125,000
Total Liabilities and Owners’ Equity		$	851,000				$	464,000

The bonds of Poppy Corporation and Seed Company pay annual interest of 8 percent and 10 percent, respectively. Poppy’s bonds are not convertible. Seed’s bonds can be converted into 10,000 shares of its company stock any time after January 1, 20X1. An income tax rate of 40 percent is applicable to both companies. Seed reports net income of $34,000 for 20X2 and pays dividends of $13,000. Poppy reports income from its separate operations of $54,000 and pays dividends of $21,000.

Required:
Compute basic and diluted EPS for the consolidated entity for 20X2. (Round your answers to 2 decimal places.)
  

Basic earnings per share
Diluted earnings per share

Answer 1