Question

What are this company's earnings per share for 2017?

Income Statement ($000s)                                         Balance Sheet ($000s)

                                          2017      2016                                                                       2017     2016

Revenues                         $ 200     $175                     Cash                                          $   10 $150

Cost of Goods Sold              110        100                    Accounts Receivable                       30        40

Operating Expenses              30         28                     Inventory                                      20    40

Interest Expense                20         12                     Plant, Property, Equipment            180       200

Net Income                           40         35                     Total Assets                                $ 240     $430

Dividends                              20        20                    Accounts Payable                       $   15 $ 25

                                                                                  Bank Debt Due in 6 Months       15   50

                                                                                Long term Debt                            80      245

                                                                                Common Stock                                60      60

                                                                                Retained Earnings                         70       50

                                                                                  Total Liabilities & Equity          $ 240      $430

The company has 1,000,000 shares of common stock authorized, 500,000 shares issued, and 200,000 outstanding as of both 12/31/2017 and 12/31/2016.

$0.10

$0.12

$0.20

$0.30

$0.08

Answer 1

Solution:

Calculation of Earnings Per Share for Year 2017

Earnings Per Share
Net Income for Year 2017	$40,000
Less: Preferred Stock Dividend (No Preferred Stock in the question)	$0
Net Income attributable to common stockholders before common dividend (A)	$40,000
Number of Common Shares Outstanding on 12/31/2017 (B)	200000
Earnings Per Share (A/B) (Net Income attributable to common stockholders before common dividend $40,000 /200,000 Number of Common Shares Outstanding on 12/31/2017)	$0.20

The correct option is $0.20

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