Exam 10: Subsidiary Preferred Stock, consolidated Earnings Per Share, and Consolidated Income Taxation

In computing consolidated diluted EPS,the replacement calculation replaces the parent's equity in subsidiary earnings with the

Peter Corporation owns 90% of the common stock of Subsidiary Subway.The following data is available: The preferred stock is cumulative and convertible.The annual preferred dividends are $10,000. Required: 1.Subway's preferred stock is convertible into 12,000 shares of Subway's common stock.Peter and Subway do not have any other potentially dilutive securities outstanding. a.What is Subway's basic EPS and diluted EPS? b.What is consolidated basic EPS and diluted EPS? 2.Subway's preferred stock is convertible into 12,000 shares of Peter's common stock.Peter and Subway do not have any other potentially dilutive securities outstanding.What is consolidated basic EPS and diluted EPS?

Parker Corporation owns an 80% interest in Sample Corporation's common stock.Throughout 2010,Sample had 10,000 shares of common stock outstanding and Parker had 100,000 shares of common stock outstanding.Sample's only dilutive security consists of $50,000 face amount of 8% bonds payable.Each $1,000 bond is convertible into 20 shares of Sample stock.Parker and Sample's separate incomes for the year are $100,000 and $75,000,respectively.Assume a 34% flat income tax rate. Required: Compute the amount of basic and diluted earnings per share for Parker (Consolidated)and Sample Corporations.

Peyton Corporation owns an 80% interest in Sampe Corporation's common stock.Throughout 2011,Sampe had 10,000 shares of common stock outstanding and Peyton had 100,000 shares of common stock outstanding.Sampe's only dilutive security consists of $100,000 face amount of 8% bonds payable.Each $1,000 bond is convertible into 20 shares of Sampe stock.Peyton and Sampe's separate net incomes for the year are $200,000 and $150,000,respectively.Assume a 34% flat income tax rate. Required: Compute the amount of basic and diluted earnings per share for Peyton (consolidated)and Sampe Corporations.

Samford Corporation's stockholders' equity on December 31,2010 was as follows: 8% cumulative preferred stock,$100 par value, callable at $109,with two years of dividends On January 1,2011,Panera Corporation purchased a 70% interest in Samford's common stock for $1,400,000.On this date the book values of Samford's assets and liabilities are equal to their fair values. Required: 1.Determine the book value of the common stockholders' equity for Samford Corporation on January 1,2011. 2.What is the amount of goodwill reported on the consolidated balance sheet for Panera Corporation and Subsidiary at January 2,2011? 3.What is the noncontrolling interest that appeared on a consolidated balance sheet for Panera Corporation and Subsidiary on January 2,2011?

Palmquist Corporation and its 80%-owned subsidiary,Sadler Corporation,are members of an affiliated group.They do not file consolidated tax returns.Sadler had $3,000,000 of income and paid $1,000,000 dividends in 2010.Palmquist and Sadler had 35% income tax rates.What amount of Sadler's dividends is taxable to Palmquist in 2010?

Sally Corporation's stockholders' equity on December 31,2010 was as follows: On January 1,2011,Panera Corporation paid $500,000 for a 70% interest in Sally's common stock.On January 1,2011,the book values of Sally's assets and liabilities were equal to fair values. Required: 1.Determine the book value of the common stockholders' equity for Sally Corporation on January 1,2011. 2.What is the amount of goodwill reported on the consolidated balance sheet for Panera Corporation and Subsidiary at January 2,2011? 3.On January 2,2011,Panera purchased 70% of Sally's preferred stock for $5,000.Prepare the journal entry(ies)for Panera for this purchase on January 2,2011. 4.Prepare the elimination entry on the consolidating work papers for the Investment in Sally,Preferred Stock and Sally's Preferred Stock on January 2,2011.

Saito Corporation's stockholders' equity on December 31,2010 was as follows: On January 1,2011,Panata Corporation paid $300,000 for a 70% interest in Saito's common stock.On January 1,2011,the book values of Saito's assets and liabilities were equal to fair values. Required: 1.Determine the book value of the common stockholders' equity for Saito Corporation on January 1,2011. 2.What is the amount of goodwill reported on the consolidated balance sheet for Panata Corporation (and Subsidiary)at January 2,2011? 3.What is the noncontrolling interest that appeared on a consolidated balance sheet for Panata Corporation (and Subsidiary)on January 2,2011?

Stello Corporation's stockholders' equity on December 31,2010 was as follows: 10% cumulative preferred stock,$100 par value, On January 1,2011,Kaprelian Corporation paid $300,000 for a 90% interest in Stello's common stock.On January 1,2011,the book values of Stello's assets and liabilities were equal to fair values.On January 2,2011,Kaprelian Corporation paid $100,000 for a 90% interest in Stello's preferred stock. Required: 1.Determine the book value of the common stockholders' equity for Stello Corporation on January 1,2011. 2.Prepare the journal entry(ies)on January 1,2011 for Kaprelian Corporation. 3.Prepare the journal entry(ies)on January 2,2011 for Kaprelian Corporation. 4.For the year ending December 31,2011,Stello Corporation reported net income of $50,000.Stello Corporation declared and paid dividends of $10,000 to preferred stockholders and $10,000 to common stockholders.Prepare the journal entries for Kaprelian Corporation relating to this information.

Savy Corporation's stockholders' equity on December 31,2010 was as follows: 8% cumulative preferred stock,$100 par value, callable at $109,with two years of dividends On January 1,2011,Paul Corporation purchased a 70% interest in Savy's common stock for $2,100,000.On this date the book values of Savy's assets and liabilities are equal to their fair values. Required: 1.Determine the book value of the common stockholders' equity for Savy Corporation on January 1,2011. 2.What is the amount of goodwill reported on the consolidated balance sheet for Paul Corporation and Subsidiary at January 2,2011? 3.On January 2,2011,Paul purchased 70% of Savy's preferred stock for $50,000.Prepare the journal entry(ies)for Paul for this purchase on January 2,2011. 4.Prepare the elimination entry on the consolidating work papers for the Investment in Savy,Preferred Stock and Savy's Preferred Stock on January 2,2011.

Palmer Company owns a 25% interest in Sad,Incorporated,a domestic company.Sad had net income of $60,000 and paid dividends of $20,000.Palmer's tax rate is 35%.For simplicity,assume that Sad's undistributed earnings are Palmer's only temporary timing difference.Assume Sad qualifies for the 80% dividend received deduction.Which of the following statements is correct?

Pane Corporation owns 100% of Alder Corporation,85% of Ball Corporation,70% of Cake Corporation,40% of Dash Corporation,and 10% of Eager Corporation.All of these corporations are domestic corporations.Pane,Alder and Ball belong to an affiliated group.Pane's marginal income tax rate is 35%.All investees have paid out all their net income in the form of dividends.During 2011,Pane Corporation received the following cash dividends: Required: 1.Compute the amount of the dividend income that would be excluded from taxation under the current Internal Revenue Code. 2.Compute Pane's current income tax liability for the dividend income received in 2011.

What should be the noncontrolling interest share,preferred in the consolidated financial statements of Parminter for the year ending December 31,2011?

If a parent company has controlling interest in a subsidiary which has no potentially dilutive securities outstanding,then in the calculation of consolidated diluted EPS,it will be necessary to

Use the following information to answer the question(s)below. On January 1,2011,Pamplin Corporation stockholders' equity consisted of $1,000,000 of $10 par value Common Stock,$750,000 of Additional Paid-in Capital,and $3,000,000 of Retained Earnings.On January 1,2011,Pamplin purchased 90% of the outstanding common stock of Sage Corporation for $1,500,000 with all excess purchase cost assigned to goodwill.The stockholders' equity of Sage on this date consisted of $800,000 of $100 par value,8% cumulative,preferred stock callable at $105,$900,000 of $10 par value common stock and $500,000 of Retained Earnings.Sage's net income for 2011 was $100,000. On January 1,2011,no preferred dividends are in arrears.No dividends are declared or paid in 2011.In a separate transaction on January 1,2011,Pamplin purchased 70% of Sage's preferred stock for $600,000. -Pan Corporation has total stockholders' equity of $5,000,000 consisting of $1,000,000 of $10 par value Common Stock,$1,000,000 of Additional Paid-in Capital,and $3,000,000 of Retained Earnings.Pan owns 80% of Sailor Corporation's common stock purchased at book value,which equals fair value.Sailor has $900,000 of 10% cumulative preferred stock outstanding,with no preferred dividends in arrears.The preferred stock has no call price,redemption price or liquidation price.Pan acquired 60% of the preferred stock of Sailor for $500,000.After this transaction the balances in Pan's Retained Earnings and Additional Paid-in Capital accounts,respectively,are

Use the following information to answer the question(s)below. On January 1,2011,Pardy Corporation acquired a 70% interest in the common stock of Salter Corporation for $7,000,000 when Salter's stockholders' equity was as follows: There were no preferred dividends in arrears on January 1,2011.There are no book value/fair value differentials. -Assume Salter's net income for 2011 is $220,000.No dividends are declared or paid in 2011.What is the change in Pardy's Investment in Salter for the year ending December 31,2011?

What should be the noncontrolling interest share,common in the consolidated financial statements of Parminter for the year ending December 31,2011?

Use the following information to answer the question(s)below. On January 1,2011,Pamplin Corporation stockholders' equity consisted of $1,000,000 of $10 par value Common Stock,$750,000 of Additional Paid-in Capital,and $3,000,000 of Retained Earnings.On January 1,2011,Pamplin purchased 90% of the outstanding common stock of Sage Corporation for $1,500,000 with all excess purchase cost assigned to goodwill.The stockholders' equity of Sage on this date consisted of $800,000 of $100 par value,8% cumulative,preferred stock callable at $105,$900,000 of $10 par value common stock and $500,000 of Retained Earnings.Sage's net income for 2011 was $100,000. On January 1,2011,no preferred dividends are in arrears.No dividends are declared or paid in 2011.In a separate transaction on January 1,2011,Pamplin purchased 70% of Sage's preferred stock for $600,000. -What is the goodwill on the consolidated balance sheet for Pamplin and Subsidiaries on December 31,2011 based on Pamplin's purchase of Sage's common stock?

When a parent acquires the preferred stock of a subsidiary,there will be a constructive retirement and

Jeff Corporation owns 90% of the common stock of Subsidiary Jordan.The following data is available: The preferred stock is cumulative and convertible.The annual preferred dividends are $20,000. Required: 1.Jordan's preferred stock is convertible into 20,000 shares of Jordan's common stock.Jeff and Jordan do not have any other potentially dilutive securities outstanding. a.What is Jordan's basic EPS and diluted EPS? b.What is consolidated basic EPS and diluted EPS? 2.Jordan's preferred stock is convertible into 20,000 shares of Jeff's common stock.Jeff and Jordan do not have any other potentially dilutive securities outstanding.What is consolidated basic EPS and diluted EPS?