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

question 33

Multiple Choice

Reference: 13-13
Marcial Company
Balance Sheet
December 31, 20X6 and 20X5 (dollars in thousands) 20X620X5 Current assets:  Cash and marketable securities $140$140 Accounts receivable, net 110110 Inventory 140130 Prepaid expenses 5050 Total current assets 440430 Noncurrent assets:  Plant & equipment, net 1,5501,480 Total assets $1,990$1,910 Current liabilities:  Accounts payable $120$170 Accrued liabilities 1040 Notes payable, short term 110100 Total current liabilities 240310 Noncurrent liabilities:  Bonds payable 390400 Total liabilities 630710 Shareholders’ equity:  Preferred shares, $10 par, 8% 120120 Common shares, $5 par 200200 Additional paid-in capital–common shares 250250 Retained earnings 790630 Total shareholders’ equity 1.3601.200\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} 22  Total shareholders’ equity 1,3601,200 Total liabilities & shareholders’ equity $1,990$1,910\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)  Sales (all on account)  $1,630 Cost of goods sold 1,140 Gross margin 490 Operating expenses 190 Net operating income 300 Interest expense 40 Net income before taxes 260 Income taxes (30%)  78 Net income $182\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:


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