Question

# Allen Lumber Company had earnings after taxes of \$530,000 in the year 2015 with 430,000 shares...

Allen Lumber Company had earnings after taxes of \$530,000 in the year 2015 with 430,000 shares outstanding on December 31, 2015. On January 1, 2016, the firm issued 40,000 new shares. The company took the proceeds from these new shares as well as other operating improvements and earned \$651,900 earnings after taxes in 2016. Earning per share for the year 2016 were (round your answer to 2 decimal places

Earnings after tax in year 2015 = \$530,000

Number of shares outstanding on December 31, 2015 = 430,000

Earnings per share in year 2015 = 530,000 / 430,000 = \$1.23

(Formula for Earnings per Share = Earnings after tax / Outstanding Shares)

Earnings after tax in year 2016 = \$651,900

Number of shares outstanding on December 31, 2016 = 430,000 + 40,000 = 470,000

Thus earnings per share in year 2016 = 651,900 / 470,000 = \$1.39

Hence, earnings per share in 2016 is \$1.39

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