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

question 57

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 $10 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 $22,000. Knight did not own any of Stoop's bonds. Stoop reported income of $300,000 for 2011.
-What was the amount of Stoop's earnings that should be included in calculating consolidated diluted earnings per share?

• A) $300,000.
• B) $240,000.
• C) $257,600.
• D) $322,000.
• E) $201,250.

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Definitions:

Market Labor

The supply of available workers in relation to employment opportunities within a given market or industry.

Equilibrium Wage

The wage rate at which the quantity of labor demanded by employers equals the quantity of labor supplied by employees, leading to a stable employment situation.

Freight Hauling

The process of transporting goods and materials by land, sea, or air.

Equilibrium Wage

The wage rate at which the quantity of labor demanded equals the quantity of labor supplied.