Pop Corporation's net income for 2016 is $316,000, including $160,000 income from Son Corporation, its 80 percent-owned subsidiary. The income from Son consists of $176,000 equity in income less $16,000 patent amortization. Pop has 300,000 shares of $10 par common stock outstanding, and Son has 50,000 shares of $10 par common stock outstanding throughout 2016. In addition, Son has 10,000 outstanding warrants to acquire 10,000 shares of Son common stock at $10 per share. The average market price of Son's common stock was $20 per share during 2016.
1. For purposes of calculating Pop Corporation's (and consolidated) diluted earnings per share, Son's diluted earnings are:
a. $220,000
b. $200,000
c. $176,000
d. $160,000
2. For purposes of calculating Pop Corporation's (and consolidated) diluted earnings per share, Son's outstanding common shares and common share equivalents are:
a. 60,000 shares
b. 56,000 shares
c. 55,000 shares
d. 50,000 shares
3. For purposes of calculating Pop Corporation's (and consolidated) earnings per share, assume that Son's diluted EPS is $4 per share. Pop Corporation's (and consolidated) diluted earnings will be:
a. $316,000
b. $300,000
c. $156,000
d. $140,000
4. If Son's diluted earnings for 2016 are $4 per share, Pop Corporation's (and consolidated) diluted earnings per share will be:
a. $1.64
b. $1.59
c. $1.04
d. $1.00