Question

On July 1, 20X2, Alan Enterprises merged with Cherry Corporation through an exchange of stock and the subsequent liquidation of Cherry. Alan issued 200,000 shares of its stock to effect the combination. The book values of Cherry’s assets and liabilities were equal to their fair values at the date of combination, and the value of the shares exchanged was equal to Cherry’s book value. Information relating to income for the companies is as follows:


Alan Enterprises had 1,000,000 shares of stock outstanding prior to the combination. Remember that when calculating earnings per share (EPS) for the year of the combination, the shares issued in the combination were not outstanding for the entire year.

Required
Compute the net income and earnings-per-share amounts that would be reported in Alan’s 20X2 comparative income statements for both 20X2 and20X1.


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  • CreatedMay 23, 2014
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