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operations. Use the following to answer questions 10-11: Palmer Corporation owns 70 percent of the 80,000 shares of $5 par value shares of common stock of Cobalt Company. Cobalt also has $250,000 par value 8 percent noncumulative preferred stock outstanding; however, Palmer has not acquired any of the preferred stock. During 1998, Palmer earned $540,000 of operating income after taxes and paid dividends of $240,000 on its 200,000 shares of common stock outstanding. Cobalt Company reported net income of $360,000 and paid total dividends of $100,000 to its shareholders. Palmer Corporation also has bonds with a par value of $500,000 and a 12 percent annual interest rate outstanding. The bonds convert into 50,000 shares of Palmer Corporation common stock. The effective income tax rate is 40 percent. 10. Consider the information given above. What information should be reported in the consolidated income statement as basic and diluted earnings per share? Basic Diluted A) $3.96 $3.96 B) $3.96 $3.26 $3.89 $3.89 D) $3.89 $3.26 d 11. Consider the information given above. Assuming the preferred stock shares of Cobalt can be converted into 40,000 shares of Cobalt common stock, what information should be reported in the consolidated income statement at basic and diluted earnings per share? Basic Diluted $3.89 $3.11 $3.89 $2.98 $3.96 $3.11 $3.96 $3.71 b