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Power Corporation owns 75 percent of Transmitter Company's common stock. At the date of acquisition the fair value of the noncontrolling interest was equal to
the book value of Transmitter Company's common stock. The following balance sheet data are presented for December 31, 20X8:
Cash
Power Corporation Transmitter Company
$ 90,000
$ 60,000
Accounts Receivable
70,000
85,000
Inventory
140,000
105,000
Land
100,000
80,000
Buildings and Equipment
1,000,000
700,000
Less: Accumulated Depreciation
(500,000)
(280,000)
Investment in Transmitter Company Stock 300,000
Total Assets
$ 1,200,000
$ 750,000
Accounts Payable
$ 150,000
$ 50,000
Bonds Payable
300,000
200,000
Preferred Stock ($100 par value)
100,000
Common Stock ($ 10 par value)
500,000
200,000
Retained Earnings
250,000
200,000
Total Liabilities and Equities
$ 1,200,000
$ 750,000
Transmitter reported net income of $90,000 in 20X8 and paid dividends of $30,000. Its bonds have an annual interest rate of 10 percent and are convertible into
12,000 common shares. Its preferred shares pay a 12 percent annual dividend and convert into 5,000 shares of common stock. In addition, Transmitter has warrants
outstanding for 12,000 shares of common stock at $15 per share. The 20X8 average price of Transmitter common shares was $25.
Power reported income of $180,000 from its own operations for 20X8 and paid dividends of $40,000. Its 9 percent bonds convert into 8,000 shares of its common
stock. The companies file separate tax returns and are subject to income taxes of 40 percent.
Compute basic earnings per share for the consolidated entity for 20X8.
