Question

Allen Lumber Company had earnings after taxes of $630,000 in the year 2009 with 370,000 shares outstanding on December 31, 2009. On January 1, 2010, the firm issued 39,000 new shares. Because of the proceeds from these new shares and other operating improvements, 2010 earnings after taxes were 30 percent higher than in 2009. Earnings per share for the year 2010 were (R

Answer 1

$2.00

Step-by-step explanation:

Since there was an increase of 30% from 2009, Allen Lumber Company's earnings after taxes for 2010 were:

`E= 1.30*\$630,000\\E=\$819,000`

The total number of shares in 2010 was:

`n=370,000+39,000\\n=409,000`

Earnings per share for 2010 are determined by dividing total earnings by the number of shares:

`E_S=(\$819,000)/(409,000)\\E_S=\$2.00`

Earnings per share for the year 2010 were $2.00.