question on 1st january 2012 peanut corporation

Question

Question :

On 1^st 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 31^st 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 1^st 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 31^st December, 2014. Use quarterly share averaging.