Reference: 13-13
Marcial Company
Balance Sheet
December 31, 20X6 and 20X5

Reference: 13-13
Marcial Company
Balance Sheet
December 31, 20X6 and 20X5 (dollars in thousands) $\begin{array}{|l|l|l|}\hline & 20 X 6 & 20 X 5 \\\hline \text { Current assets: } & & \\\hline \text { Cash and marketable securities } & \$ 140 & \$ 140 \\\hline \text { Accounts receivable, net } & 110 & 110 \\\hline \text { Inventory } & 140 & 130 \\\hline \text { Prepaid expenses } & {50} & {50} \\\hline \text { Total current assets } & 440 & 430 \\\hline \text { Noncurrent assets: } & & \\\hline \text { Plant \& equipment, net } & 1,550 & 1,480 \\\hline \text { Total assets } & \$ 1,990 & \$ 1,910 \\\hline\\\hline \text { Current liabilities: } & & \\\hline \text { Accounts payable } & \$ 120 & \$ 170 \\\hline \text { Accrued liabilities } & 10 & 40 \\\hline \text { Notes payable, short term } & 110 & 100 \\\hline \text { Total current liabilities } & 240 & 310 \\\hline \text { Noncurrent liabilities: } & & \\\hline \text { Bonds payable } & 390 & 400 \\\hline \text { Total liabilities } & 630 & 710 \\\hline \text { Shareholders' equity: } & & \\\hline \text { Preferred shares, \$10 par, 8\% } & 120 & 120 \\\hline \text { Common shares, \$5 par } & 200 & 200 \\\hline \text { Additional paid-in capital--common shares } & 250 & 250 \\\hline \text { Retained earnings } & 790 & 630 \\\hline \text { Total shareholders' equity } & \underline{1.360} & \underline{1.200} \\\hline\end{array}$ $$2$$ $$\begin{array} { | c | c | c | } \hline \text { Total shareholders' equity } & { 1,360 }& { 1,200 } \\\hline \text { Total liabilities \& shareholders' equity } & \underline { \$ 1,990 } & \underline { \$ 1,910 } \\\hline\end{array}$$ Marcial Company
Income Statement
For the Year Ended December 31, 20X6 (dollars in thousands) $$\begin{array} { | l | c | } \hline \text { Sales (all on account) } & \$ 1,630 \\\hline \text { Cost of goods sold } & 1,140 \\\hline \text { Gross margin } & 490 \\\hline \text { Operating expenses } & 190 \\\hline \text { Net operating income } & 300 \\\hline \text { Interest expense } & 40 \\\hline \text { Net income before taxes } & 260 \\\hline \text { Income taxes (30\%) } & 78 \\\hline \text { Net income } & \$ 182 \\\hline\end{array}$$
-Arquandt Company's net income last year was $550,000. shares of common stock and 50,000 shares of preferred stock outstanding. There was no change in the number of common or preferred shares outstanding during the year. The company declared and paid dividends last year of $1.20 per share on the common stock and $1.70 per share on the preferred stock. The earnings per share of common stock are closest to:

A) $3.10.
B) $4.23.
C) $6.67.
D) $2.47.