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    Earnings Per Share

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    Babu babu
    Peerless Products purchased 80% of Special Foods and they filed a consolidated tax return for 19X1. Basic EPS is calculated based on Peerless' 100,000 common shares and Special Foods' 20,000 common shares outstanding. Diluted EPS also includes the conversion of Peerless' 10,000 preferred shares and Special Foods' convertible bonds.

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    Earnings Per Share

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    Babu babu
    13 views1 page
    Peerless Products purchased 80% of Special Foods and they filed a consolidated tax return for 19X1. Basic EPS is calculated based on Peerless' 100,000 common shares and Special Foods' 20,000 common shares outstanding. Diluted EPS also includes the conversion of Peerless' 10,000 preferred shares and Special Foods' convertible bonds.

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    Peerless Products purchased 80% of Special Foods and they filed a consolidated tax return for 19X1. Basic EPS is calculated based on Peerless' 100,000 common shares and Special Foods' 20,000 common shares outstanding. Diluted EPS also includes the conversion of Peerless' 10,000 preferred shares and Special Foods' convertible bonds.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    13 views1 page

    Earnings Per Share

    Uploaded by

    Babu babu
    Peerless Products purchased 80% of Special Foods and they filed a consolidated tax return for 19X1. Basic EPS is calculated based on Peerless' 100,000 common shares and Special Foods' 20,000 common shares outstanding. Diluted EPS also includes the conversion of Peerless' 10,000 preferred shares and Special Foods' convertible bonds.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 1

    Earnings per Share

    As an illustration computation of consolidated earnings per share peerless Products and


    Special Foods. Assume the following:

    1) Peerless products purchases 80 percent of the stock of Special Foods on December


    31.19x1, at book value.
    2) Both Special Foods and Peerless products have effective income tax rates of 40 percent
    and file a consolidated tax return.
    3) Special Foods has 19X1 income before taxes of $50,000, an allocated share of
    consolidated income taxes of $20,000, and net income of $30,000.
    4) Consolidated net income for 19X1 is $108,000, computed as follows:

    Peerless’s separate operating income $140,000

    Special Foods’ income before taxes 50,000

    Total entity income taxes $190,000

    Consolidated income taxes (40%) (76,000)

    Total entity income after taxes $114,000

    Less: income to no controlling shareholders ($30,000X.20) (6,000)

    Consolidated net income $108,000

    5) Peerless‘s capital structure consists of 100,000 shares of $5 par value common stock and
    10,000 shares of $10 par.10 percent convertible preferred stock. The preferred stock is
    convertible into 25,000 shares of peerless’s common.
    6) Special Foods has 20,000 shares of $10 par value common stock and $100,000 of 6
    percent convertible bonds outstanding .The bonds, issued at par, are convertible into
    4,000 shares of Special Foods ‘common stock.
    7) On January 1,19X1, Special Foods grants its officers options to purchase 9,000 shares of
    common stock of Peerless products at $26 per share at any time during the five years
    following the grant. None are exercised during 19X1.The average market price of
    peerless’s common stock during 19X1 is $29 per share.

    Required:

    Computation of consolidated Earnings per Share (EPS):

    a) Basic EPS
    b) Diluted EPS

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