The balance sheets at the end of each of the first two years of operations indicate the following: Year 2 Year 1 Total current assets $600,000 $560,000 Total investments 60,000 40,000 Total property, plant, and equipment 900,000 700,000 Total current liabilities 150,000 80,000 Total long-term liabilities 350,000 250,000 Preferred 9% stock, $100 par 100,000 100,000 Common stock, $10 par 600,000 600,000 Paid-in capital in excess of par-common stock 60,000 60,000 Retained earnings 325,000 210,000 If net income is $125,000 and preferred dividends are $9,000 for Year 2, what is the earnings per share on common stock for Year 2? O a. $1.93 O b. $2.08 O c. $1.75 O d. $0.19
The balance sheets at the end of each of the first two years of operations indicate the following: Year 2 Year 1 Total current assets $600,000 $560,000 Total investments 60,000 40,000 Total property, plant, and equipment 900,000 700,000 Total current liabilities 150,000 80,000 Total long-term liabilities 350,000 250,000 Preferred 9% stock, $100 par 100,000 100,000 Common stock, $10 par 600,000 600,000 Paid-in capital in excess of par-common stock 60,000 60,000 Retained earnings 325,000 210,000 If net income is $125,000 and preferred dividends are $9,000 for Year 2, what is the earnings per share on common stock for Year 2? O a. $1.93 O b. $2.08 O c. $1.75 O d. $0.19
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![### Balance Sheet Analysis for the First Two Years of Operations
The table below indicates the following values for the balance sheet at the end of each of the first two years of operations:
| Item | Year 2 | Year 1 |
|-----------------------------------------|------------|------------|
| Total current assets | $600,000 | $560,000 |
| Total investments | $60,000 | $40,000 |
| Total property, plant, and equipment | $900,000 | $700,000 |
| Total current liabilities | $150,000 | $80,000 |
| Total long-term liabilities | $350,000 | $250,000 |
| Preferred 9% stock, $100 par | $100,000 | $100,000 |
| Common stock, $10 par | $600,000 | $600,000 |
| Paid-in capital in excess of par—common stock | $60,000 | $60,000 |
| Retained earnings | $325,000 | $210,000 |
#### Question:
If net income is $125,000 and preferred dividends are $9,000 for Year 2, what is the earnings per share on common stock for Year 2?
**Options:**
a. $1.93
b. $2.08
c. $1.75
d. $0.19
To determine the earnings per share (EPS) on common stock for Year 2, follow these steps:
1. **Calculate the earnings available to common shareholders:**
Earnings available to common shareholders = Net income - Preferred dividends
\[
\text{Earnings available to common shareholders} = \$125,000 - \$9,000 = \$116,000
\]
2. **Determine the number of common shares outstanding:**
Since the par value of common stock is $10 and the total common stock is $600,000, the number of shares is:
\[
\text{Number of common shares} = \frac{\$600,000}{\$10} = 60,000 \text{ shares}
\]
3. **Calculate the earnings per share:**
\[
\text{Earnings per share} = \frac{\text{Earnings available to common shareholders}}](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fea00f92e-96e7-4f41-be23-6fd3c54ea7f1%2F8a17a5f6-1caa-435b-8d7e-895df3d1b17f%2F7leqxad_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Balance Sheet Analysis for the First Two Years of Operations
The table below indicates the following values for the balance sheet at the end of each of the first two years of operations:
| Item | Year 2 | Year 1 |
|-----------------------------------------|------------|------------|
| Total current assets | $600,000 | $560,000 |
| Total investments | $60,000 | $40,000 |
| Total property, plant, and equipment | $900,000 | $700,000 |
| Total current liabilities | $150,000 | $80,000 |
| Total long-term liabilities | $350,000 | $250,000 |
| Preferred 9% stock, $100 par | $100,000 | $100,000 |
| Common stock, $10 par | $600,000 | $600,000 |
| Paid-in capital in excess of par—common stock | $60,000 | $60,000 |
| Retained earnings | $325,000 | $210,000 |
#### Question:
If net income is $125,000 and preferred dividends are $9,000 for Year 2, what is the earnings per share on common stock for Year 2?
**Options:**
a. $1.93
b. $2.08
c. $1.75
d. $0.19
To determine the earnings per share (EPS) on common stock for Year 2, follow these steps:
1. **Calculate the earnings available to common shareholders:**
Earnings available to common shareholders = Net income - Preferred dividends
\[
\text{Earnings available to common shareholders} = \$125,000 - \$9,000 = \$116,000
\]
2. **Determine the number of common shares outstanding:**
Since the par value of common stock is $10 and the total common stock is $600,000, the number of shares is:
\[
\text{Number of common shares} = \frac{\$600,000}{\$10} = 60,000 \text{ shares}
\]
3. **Calculate the earnings per share:**
\[
\text{Earnings per share} = \frac{\text{Earnings available to common shareholders}}
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