Question :
On 1st January, 2012, Peanut Corporation acquires an 80 percent interest in Sunny Corporation. Information regarding the equity and income structure of the two companies as of the year ended 31st December, 2014, is as follows:
Peanut Corp. Sunny Corp.
Internally generated net income $55,000 $56,000
Common shares outstanding during the year 20,000 12,000
Warrants to acquire Peanut stock, outstanding during the year 2,000 1,000
5% convertible (into Sunny's shares) $100 par preferred shares
Outstanding during the year 800
Nonconvertible preferred shares outstanding 1,000
a) The warrants to acquire Peanut stock are issued in 2013. Each warrant will be exchanged for one share of Peanut common stock at an exercise price of $12 per share.
b) Each share of convertible preferred stock can be converted into two shares of Sunny common stock. The preferred stock pays an annual dividend totaling $4,000. Peanut owns 60 percent of the convertible preferred stock.
c) The nonconvertible preferred stock is issued on 1st July, 2014, and pays a 6-month dividend totaling $500.
d) Relevant market prices per share of Peanut common stock during 2014 are as given:
Average
First quarter $10
Second quarter 12
Third quarter 13
Fourth quarter 16
Evaluate the basic and diluted consolidated EPS for the year ended 31st December, 2014. Use quarterly share averaging.