1. Liza Industries purchases 75% of the stock of Nichols Enterprises on January 1, 2015, at...

 
 

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1. Liza Industries purchases 75% of the stock of Nichols Enterprises on January 1, 2015, at book value. On the date of acquisition, the fair value of Nichol's non-controlling interest is equal to its book value. 2. 3. 4. Both Liza Industries and Nichols Enterprises have effective income tax rates of 40%. Nichols Enterprises has 2017 income before taxes of $75,000, an allocated share of consolidated income taxes of $30,000, and net income of $45,000. Consolidated net income for 2017 is computed and allocated as follows: Liza Industries operating income $ 150,000 Nichols Enterprises income before taxes 75,000 Consolidated income before taxes Consolidated income taxes Consolidated net income Income to the non-controlling interest 225,000 90,000 135,000 11,250 Income to the controlling interest $ 123,750 5. Liza's capital structure consists of 100,000 shares of $10 par value common stock and 15,000 shares of $10 par 8 percent convertible preferred stock. The preferred stock is convertible into 20,000 shares of Liza's common stock. 6. Nichols Enterprises has 20,000 shares of $10 par value common stock and $200,000 of 5% convertible bonds outstanding. The bonds, issued at par, are convertible into 8,000 shares of Nichols Enterprises common stock. 7. On January 1, 2017, Liza Industries grants its officers options to purchase 10,000 shares of Liza Industries common stock at $25 per share. The average market price of Liza's common stock during 2017 is $50.00. Required: Compute consolidated basic earnings per share Compute consolidated diluted earnings per share 1. Liza Industries purchases 75% of the stock of Nichols Enterprises on January 1, 2015, at book value. On the date of acquisition, the fair value of Nichol's non-controlling interest is equal to its book value. 2. 3. 4. Both Liza Industries and Nichols Enterprises have effective income tax rates of 40%. Nichols Enterprises has 2017 income before taxes of $75,000, an allocated share of consolidated income taxes of $30,000, and net income of $45,000. Consolidated net income for 2017 is computed and allocated as follows: Liza Industries operating income $ 150,000 Nichols Enterprises income before taxes 75,000 Consolidated income before taxes Consolidated income taxes Consolidated net income Income to the non-controlling interest 225,000 90,000 135,000 11,250 Income to the controlling interest $ 123,750 5. Liza's capital structure consists of 100,000 shares of $10 par value common stock and 15,000 shares of $10 par 8 percent convertible preferred stock. The preferred stock is convertible into 20,000 shares of Liza's common stock. 6. Nichols Enterprises has 20,000 shares of $10 par value common stock and $200,000 of 5% convertible bonds outstanding. The bonds, issued at par, are convertible into 8,000 shares of Nichols Enterprises common stock. 7. On January 1, 2017, Liza Industries grants its officers options to purchase 10,000 shares of Liza Industries common stock at $25 per share. The average market price of Liza's common stock during 2017 is $50.00. Required: Compute consolidated basic earnings per share Compute consolidated diluted earnings per share

Answer rating: 100% (QA)

Basic EPS 123750 100000 124 Diluted EPS 123750 100000 10000 117 EXPLANATION Basic EPS is computed ... View the full answer