FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Knight Company owned 80% of the common stock of Stoop Company. Stoop had 50,000 shares of $5 par value common stock and 2,000 shares
of preferred stock outstanding. Each preferred share received an annual per share dividend of $2 and is convertible into four shares of common
stock. Knight did not own any of Stoop's preferred stock. Stoop also had 600 bonds outstanding, each of which is convertible into ten shares of
common stock. Stoop's annual after-tax interest expense for the bonds was $2,000. Knight did not own any of Stoop's bonds. There are no excess
amortizations or intra-entity transactions associated with this consolidation. Stoop reported net income of $300,000 for 2024. Knight has 100,000
shares of common stock outstanding and reported net income of $400,000 for 2024.
What would Knight report as consolidated basic earnings per share?
Note: Round your answer to two decimal places.
Multiple Choice
O $5.68
$6.37
O
M
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Transcribed Image Text:Knight Company owned 80% of the common stock of Stoop Company. Stoop had 50,000 shares of $5 par value common stock and 2,000 shares of preferred stock outstanding. Each preferred share received an annual per share dividend of $2 and is convertible into four shares of common stock. Knight did not own any of Stoop's preferred stock. Stoop also had 600 bonds outstanding, each of which is convertible into ten shares of common stock. Stoop's annual after-tax interest expense for the bonds was $2,000. Knight did not own any of Stoop's bonds. There are no excess amortizations or intra-entity transactions associated with this consolidation. Stoop reported net income of $300,000 for 2024. Knight has 100,000 shares of common stock outstanding and reported net income of $400,000 for 2024. What would Knight report as consolidated basic earnings per share? Note: Round your answer to two decimal places. Multiple Choice O $5.68 $6.37 O M Saved < Prev 31 19 of 20 Messages 14 Next > 12+ Sep 16 5:02
O
$5.68
$6.37
$6.00
$6.40
$7.00
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Transcribed Image Text:O $5.68 $6.37 $6.00 $6.40 $7.00 < Prev Saved 15 of 20 www Next >
Expert Solution
Check Mark
Step 1: Introduction:-

Basic earning per share :- Basic earnings per share is the amount of a company's profit that can be attributable to each share of common stock.

Basic earnings per

= (Net income - preferred dividends) ÷ weighted average of common shares outstanding

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