Use This Information for Kellman Company to Answer the Questions $\text { Kellman Company }$

question 10

Multiple Choice

Use this information for Kellman Company to answer the questions that follow.
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The balance sheets at the end of each of the first two years of operations indicate the following:
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$\text { Kellman Company }$
$\begin{array}{lrr}&\text { Year } 2&\text { Year } 1\\\text { Total current assets } & \$ 600,000 & \$ 560,000 \\\text { Total investments } & 60,000 & 40,000 \\\text { Total property, plant, and equipment } & 900,000 & 700,000 \\\text { Total current liabilities } & 125,000 & 65,000 \\\text { Total long-term liabilities } & 350,000 & 250,000 \\\text { Preferred } 9 \% \text { stock, } \$ 100 \text { par } & 100,000 & 100,000 \\\text { Common stock, } \$ 10 \text { par } & 600,000 & 600,000 \\\text { Paid-in capital in excess of par-Common stock } & 75,000 & 75,000 \\\text { Retained earnings } & 310,000 & 210,000\end{array}$
-Using the balance sheets for Kellman Company, if net income is $250,000 and interest expense is $30,000 for Year 2, what are the earnings per share on common stock for Year 2?

• A) $4.16
• B) $4.32
• C) $4.02
• D) $2.49

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Definitions:

Net Income

The total profit of a company after subtracting all expenses from revenue.

Assets

Resources owned or controlled by a business, expected to bring future economic benefits.

Liabilities

Financial obligations or debts owed by a business to external parties, which must be settled over time through the transfer of economic benefits.

Insurance Premium

A periodic payment made by an individual or company to an insurance company in exchange for coverage against specified risks.