In many cases, EPS is computed based on the parent’s portion of consolidated net income and parent company shares and convertibles. However, a different process must be used for some business combinations. When is this alternative approach required?
Answer to relevant QuestionsAssume the same information as in question 16 except that Metcalf issues a 10 percent stock dividend instead of selling new shares of stock. How does this transaction affect the business combination?One company purchases the outstanding debt instruments of an affiliated company on the open market. This transaction creates a gain that is appropriately recognized in the consolidated financial statements of that year. ...Arcola, Inc., acquires all 40,000 shares of Tuscola Company for $725,000. A year later, when Arcola’s equity adjusted balance in its investment in Tuscola equals $800,000, Tuscola issues an additional 10,000 shares to ...Aaron owns 100 percent of the 12,000 shares of Veritable, Inc. The Investment in Veritable account has a balance of $588,000, corresponding to the subsidiary’s unamortized acquisition-date fair value of $49 per share. ...Opus, Incorporated, owns 90 percent of Bloom Company. On December 31, 2010, Opus acquires half of Bloom’s $500,000 outstanding bonds. These bonds had been sold on the open market on January 1, 2008, at a 12 percent ...
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