Romax Company had net income of $147,000.The balance sheet showed beginning and ending balance in shareholders' equity of $750,000 and $790,000,respectively.There were no preferred shares and 69,000 common shares outstanding throughout the year.Calculate earnings per share.

Question

Quizplus · Accepted Answer

Earnings per share (EPS) is calculated by dividing net income by the number of common shares outstanding.
EPS = (Net Income - Preferred Dividends) / Average Common Shares Outstanding
Since there are no preferred shares, we can use the simpler formula.
EPS = Net Income / Average Common Shares Outstanding
Average common shares outstanding = (Beginning common shares + Ending common shares) / 2
= (69,000 + 69,000) / 2 = 69,000

EPS = $147,000 / 69,000 = $2.13, rounded to the nearest penny.
Therefore, the correct answer is B.

Romax Company Had Net Income of $147,000