Knight Co Owned 80% of the Common Stock of Stoop Co

question 104

Multiple Choice

Knight Co. owned 80% of the common stock of Stoop Co. 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 2021. Knight has 100,000 shares of common stock outstanding and reported net income of $400,000 for 2021.What would Knight Co. report as consolidated basic earnings per share (rounded) ?

• A) $6.37
• B) $6.40
• C) $7.00
• D) $5.68
• E) $6.00

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Definitions:

Sympathetic

Pertaining to the sympathetic nervous system, which activates the body’s fight or flight response under stress.

Parasympathetic

A division of the autonomic nervous system responsible for conserving energy and bringing the body to a state of rest.

Gray Matter

The part of the brain that contains most of the brain's neuronal cell bodies and is involved in sensory perception, emotion, speech, decision making, and self-control.

White Matter

A component of the central nervous system consisting of glial cells and myelinated axons that facilitates communication between different brain regions.