Question - On January 1, 2014 Homer Company purchased 800 of the 1000 shares of Bart Company at book value. Homer and Bart had no inter-company dealings in 2015. Additional information about Homer and Bart is as follows: Homer (unconsolidated using initial value method for investment in Bart) Income $200,000 Common shares outstanding 400,000 (no purchase or sale of stock this year) Bart income $50,000 On January 1, 2015 Bart issued 200 shares of 6% $100 par convertible preferred stock. Each share of preferred stock can be converted into 1 share of Bart Common stock. In 2015 no shares were converted and the only dividend Bart paid was to the preferred stockholders.
1. Determine Homer's EPS (earnings per share) if Bart's preferred stock is anti-dilutive
2. Determine Homer's EPS (earnings per share) if Bart's preferred stock is dilutive.