How to calculate the basic and diluted EPS

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L M Punch Manufacturing Corporation owns 80 percent of the common shares of Short Retail Stores. The companies' balance sheets as of December 31, 20X4, were as follows: Punch Manufacturing Corporation Short Retail Stores Assets Cash Accounts Receivable Inventory Land Buildings and Equipment Less: Accumulated Depreciation Investment in Short Retail Stores Total Assets Liabilities and Equity Accounts Payable Bonds Payable Preferred Stock (510 par value) Common Stock: $10 par value 55 par value Retained Earnings Total Liabilities and Equity $ 52 000 107 000 270 000 95 000 510 000 235 000 132 000 $ 981.000 $ 32,800 87 000 130, 65 000 310 000 (140,000) $ 484,000 3 91 000 290,000 200 000 9,000 200 000 110 009 150 000 7 100,000 65 000 $ 484.000 200 000 $ 921,000 8 9 21 Short Retail's 8 percent preferred stock is convertible into 15.000 shares of common stock, and its 10 percent bonds are convertible into 8,000 shares of common stock. Short reported net income of $49.800 for 20x4 and paid dividends of $30.200. 22 23 Punch Manufacturing has 11 percent preferred stock and 2 percent bonds outstanding, neither of which is convertible. Punch reported 24 after-tax income, excluding investment income from short of $100.000 in 20x4 and paid dividends of $69.000. The companies file 25 separate tax returns and are subject to a 40 percent income tax. 26 27 28 Basic earnings per share Diluted earnings per share 29