Bread Enterprises had a current ratio of 3.5 on December 31 of the current year.On that date, the company's assets were as follows: $$\begin{array} { l c c }
\text { CASH } & \$ 200,000 \
\text { ACCOUNTS RECEIVABLE, NET } & 600,000 \
\text { INVENTORY } & 960,000 \
\text { PREPAID EXPENSES } & 25,000 \
\text { EQUIPMENT, NET } & 2,200,000 \
\text { TOTAL ASSETS } & \underline { \$ 3,985,000 }
\end{array}$$ What impact will issuing common stock for cash have on the company's earnings per share?

Question

Bread Enterprises had a current ratio of 3.5 on December 31 of the current year.On that date, the company's assets were as follows: $$\begin{array} { l c c } 
\text { CASH } & \$ 200,000 \
\text { ACCOUNTS RECEIVABLE, NET } & 600,000 \
\text { INVENTORY } & 960,000 \
\text { PREPAID EXPENSES } & 25,000 \
\text { EQUIPMENT, NET } & 2,200,000 \
\text { TOTAL ASSETS } & \underline { \$ 3,985,000 }
\end{array}$$ What impact will issuing common stock for cash have on the company's earnings per share?

Quizplus · Accepted Answer

Issuing common stock for cash increases the number of shares outstanding without immediately affecting earnings, which dilutes earnings per share (EPS) since the same amount of earnings is spread over more shares.

Bread Enterprises Had a Current Ratio of 3 What Impact Will Issuing Common Stock for Cash Have on 31