Flyer Corporation holds 90 percent of Kite Company's common shares but none of its preferred shares.On the date of acquisition,the fair value of the noncontrolling interest was equal to 10 percent of the book value of Kite Company.Summary balance sheets for the companies on December 31,2008,are as follows:
Flyer's preferred pays a 8 percent annual dividend,and Kite's preferred pays a 10 percent dividend.Kite's preferred shares can be converted into 20,000 shares of common stock at any time.Kite reported net income of $35,000 and paid a total of $10,000 of dividends in 2008.Flyer reported income from its separate operations of $80,000 and paid total dividends of $25,000 in 2008.

-Based on the information provided,what is the basic earnings per share for the consolidated entity for 2008?

Question

Flyer Corporation holds 90 percent of Kite Company's common shares but none of its preferred shares.On the date of acquisition,the fair value of the noncontrolling interest was equal to 10 percent of the book value of Kite Company.Summary balance sheets for the companies on December 31,2008,are as follows:
Flyer's preferred pays a 8 percent annual dividend,and Kite's preferred pays a 10 percent dividend.Kite's preferred shares can be converted into 20,000 shares of common stock at any time.Kite reported net income of $35,000 and paid a total of $10,000 of dividends in 2008.Flyer reported income from its separate operations of $80,000 and paid total dividends of $25,000 in 2008.
 
-Based on the information provided,what is the basic earnings per share for the consolidated entity for 2008?

Quizplus · Accepted Answer

The basic earnings per share for the consolidated entity for 2008 is 5.04, as indicated in the provided options.

Flyer Corporation Holds 90 Percent of Kite Company's Common Shares