Question 29:
Knight Co. owned 80% of the common stock of Stoop Co. Stoop had50,000 shares of $5 par value common stock and 2,000 shares ofpreferred stock outstanding. Each preferred share received anannual per share dividend of $2 and is convertible into four sharesof common stock. Knight did not own any of Stoop's preferred stock.Stoop also had 600 bonds outstanding, each of which is convertibleinto ten shares of common stock. Stoop's annual after-tax interestexpense for the bonds was $2,000. Knight did not own any of Stoop'sbonds. There are no excess amortizations or intra-entitytransactions associated with this consolidation. Stoop reported netincome of $300,000 for 2018. Knight has 100,000 shares of commonstock outstanding and reported net income of $400,000 for2018.
What would Knight Co. report as consolidated basic earnings pershare (rounded)?
$7.00
$6.40
$5.68
$6.37
$6.00
