On December 31,2017, Dow Steel Corporation had 600,000 shares of common stock an

Question

On December 31,2017, Dow Steel Corporation had 600,000 shares of common stock and 300,000 shares of 8%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 4% 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, 2018 On February 28, 2018, Dow sold 60,000 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, 2018, was $2,100,000. The income tax rate is 40%. Required: Compute Dow's earnings per share for the year ended December 31, 2018. (Do not round intermediate calculations. Enter your answers in thousands) Numerator Denominator Earnings per share

Explanation / Answer

Net income 2100000 Preferred dividends 75000 2025000 Weighted average shares of common stock outstanding. 1/1 - 12/31 600000*12/12 600000*1.04 624000 2/28-12/31 60000*10/12 50000*1.04 52000 7/1 -12/31 - 2000*6/12 -1000 Weighted average shares 675000 1 Basic EPS 2025000/675000 $                 3.00 Diluted EPS 2025000/(675000+2000) $                 2.99

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