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) $\begin{array}{|l|l|l|}\hline & 20 X 6 & 20 X 5 \\\hline \text { Current assets: } & & \\\hline \text { Cash and marketable securities } & \$ 140 & \$ 140 \\\hline \text { Accounts receivable, net } & 110 & 110 \\\hline \text { Inventory } & 140 & 130 \\\hline \text { Prepaid expenses } & {50} & {50} \\\hline \text { Total current assets } & 440 & 430 \\\hline \text { Noncurrent assets: } & & \\\hline \text { Plant \& equipment, net } & 1,550 & 1,480 \\\hline \text { Total assets } & \$ 1,990 & \$ 1,910 \\\hline\\\hline \text { Current liabilities: } & & \\\hline \text { Accounts payable } & \$ 120 & \$ 170 \\\hline \text { Accrued liabilities } & 10 & 40 \\\hline \text { Notes payable, short term } & 110 & 100 \\\hline \text { Total current liabilities } & 240 & 310 \\\hline \text { Noncurrent liabilities: } & & \\\hline \text { Bonds payable } & 390 & 400 \\\hline \text { Total liabilities } & 630 & 710 \\\hline \text { Shareholders' equity: } & & \\\hline \text { Preferred shares, \$10 par, 8\% } & 120 & 120 \\\hline \text { Common shares, \$5 par } & 200 & 200 \\\hline \text { Additional paid-in capital--common shares } & 250 & 250 \\\hline \text { Retained earnings } & 790 & 630 \\\hline \text { Total shareholders' equity } & \underline{1.360} & \underline{1.200} \\\hline\end{array}$ $$2$$ $$\begin{array} { | c | c | c | } \hline \text { Total shareholders' equity } & { 1,360 }& { 1,200 } \\\hline \text { Total liabilities \& shareholders' equity } & \underline { \$ 1,990 } & \underline { \$ 1,910 } \\\hline\end{array}$$ 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.

---

Definitions:

Rudolph Valentino

An Italian-American silent film actor who became a pop culture icon in the early 20th century, known for his roles in films like "The Sheik."

Clara Bow

An iconic American actress and leading sex symbol of the 1920s, known for her vivacious personality and roles in silent and early sound films.

Southern Democrats

A political faction that represented the interests of the southern United States before the Civil War, advocating for states' rights and the extension of slavery.

Civil Rights

The rights of citizens to political and social freedom and equality, often protected by law against discrimination and other injustices.