A company had 90,000 shares of common stock outstanding throughout the year. Income before taxes was $166,000. The tax rate was 40 percent. EPS for net income is (rounded to the nearest cent):

Question

Quizplus · Accepted Answer

Net income can be calculated as follows:

Net income = Income before taxes * (1 - Tax rate)
Net income = $166,000 * (1 - 0.4)
Net income = $166,000 * 0.6
Net income = $99,600

EPS can be calculated as:

EPS = Net income / Average number of shares outstanding
EPS = $99,600 / 90,000
EPS = $1.107

Rounding to the nearest cent, EPS is $1.11, which is the closest answer choice. Therefore, the correct answer is B.

A Company Had 90,000 Shares of Common Stock Outstanding Throughout