Compute basic and diluted EPS (options; preferred stock)
Pen Corporation owns an 80 percent interest in She Company. Throughout 2011, Pen had 20,000 shares of common stock outstanding. She had the following securities outstanding:
¦ 10,000 shares of common stock
¦ Options to purchase 2,000 shares of She common at $15 per share
¦ 1,000 shares of 10%, $100 par, convertible, preferred stock that are convertible into 3,000 shares of She common stock
Income data for the affiliates for 2011 are as follows:
|
Pen |
She |
|
|
Separate incomes |
$120,000 |
$ 55,000 |
|
Income from She ($45,000 income to |
||
|
common * 80%) $6,000 patent |
30,000 |
— |
|
amortization |
$150,000 |
$ 55,000 |
REQUIRED: Compute basic and diluted earnings per share for Pen Corporation and Subsidiary for 2011, assuming an average market price for She common stock of $30 per share.