Question

Following are separate income statements for Austin, Inc., and its 90 percent owned subsidiary, Rio Grande Corporation as well as a consolidated statement for the business combination as a whole.

	Austin				Rio Grande				Consolidated
Revenues	$	(721,000	)		$	(514,000	)		$	(1,235,000	)
Cost of goods sold		407,000				307,000				714,000
Operating expenses		108,000				77,000				202,000
Equity in earnings of Rio Grande		(91,000	)
Individual company net income	$	(297,000	)		$	(130,000	)
Consolidated net income									$	(319,000	)
Noncontrolling interest in consolidated net income										(22,000	)
Consolidated net income attributable to Austin									$	(297,000	)

Additional Information

• Annual excess fair over book value amortization of $20,000 resulted from the acquisition.
• The parent applies the equity method to this investment.
• Austin has 52,000 shares of common stock and 9,000 shares of preferred stock outstanding. Owners of the preferred stock are paid an annual dividend of $50,000, and each share can be exchanged for five shares of common stock.
• Rio Grande has 34,000 shares of common stock outstanding. The company also has 16,000 stock warrants outstanding. For $15, 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 $29,000. These bonds can be exchanged for 22,000 shares of the subsidiary’s common stock.

Determine Austin’s basic and diluted EPS. (Round your final answers to 2 decimal places.)

Earnings Per Share

Basic:

Diluted:

Answer 1