On December 31, 2010, Dow Steel Corporation had 800,000 shares of common stock a

Question

On December 31, 2010, Dow Steel Corporation had 800,000 shares of common stock and 300,000 shares of 8%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 5% common stock dividend on May 15 and paid cash dividends of $400,000 and $75,000 to common and preferred shareholders, respectively, on December 15, 2011.
On February 28, 2011, Dow sold 80,000 common shares. In keeping with its long-term share repurchase plan, 2,000 shares were retired on July 1. Dow's net income for the year ended December 31, 2011, was $1,850,000. The income tax rate is 40%.

Compute Dow's earnings per share for the year ended December 31, 2011

Explanation / Answer

Net income 1,850,000.00 Less: tax     740,000.00 Income after tax 1,110,000.00 Less: dividend for preferred shares       75,000.00 Profit available for common stock holders (a) 1,035,000.00 Weighted average number of shares Shares from 1.01.11 - 28.02.11     133,333.33 Shares from 28.02.11 - 15.05.11     183,333.33 Shares from 15.05.11 - 30.06.11     115,500.00 Shares from 01.07.11 -31.12.11     461,000.00 Weighted average number of shares (b)     893,166.67 Earnings per share (a/b)               1.16

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