Question

Branch Manufacturing Corporation owns 80 percent of the common shares of Short Retail Stores. The companies’ balance sheets as of December 31, 20X4, were as follows:


Short Retail's 8 percent preferred stock is convertible into 12,000 shares of common stock, and its 10 percent bonds are convertible into 8,000 shares of common stock. Short reported net income of $49,200 for 20X4 and paid dividends of $30,000.
Branch Manufacturing has 11 percent preferred stock and 12 percent bonds outstanding, neither of which is convertible. Branch reported after-tax income, excluding investment income from Short, of $100,000 in 20X4 and paid dividends of $60,000. The companies file separate tax returns and are subject to a 40 percent income tax.

Required
Compute basic and diluted EPS for the consolidatedentity.


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  • CreatedMay 23, 2014
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