In: Accounting
On December 31, 2017, Dow Steel Corporation had 660,000 shares
of common stock and 36,000 shares of 10%, noncumulative,
nonconvertible preferred stock issued and outstanding. Dow issued a
5% common stock dividend on May 15 and paid cash dividends of
$460,000 and $75,000 to common and preferred shareholders,
respectively, on December 15, 2018.
On February 28, 2018, Dow sold 56,000 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 $2,400,000. 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 (Basic
EPS): Net income = $2,400,000; Preferred dividends = $75,000 (because the preferred stock is noncumulative, only include the dividends that are actually paid). |
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Denominator (Basic EPS): Weighted average # shares of common stock outstanding. | |||||||||||||
Period | Weight | Weighted Avg no of shares | |||||||||||
01/01 - 12/31 | 660000 shares*12/12 | 660000 | |||||||||||
02/28 - 12/31 | 56000 shares *10/12 | 46666.66667 | |||||||||||
07/01-12/31 | -2000 shares sold*6/12 | -1000 | |||||||||||
Weighted average # shares | 705666.6667 | ||||||||||||
EPS = ($2400000-$75000)/7056670share | |||||||||||||
0.329475517 | |||||||||||||
Numerator (Basic
EPS): Net income = $2,400,000; Preferred dividends = $75,000 (because the preferred stock is noncumulative, only include the dividends that are actually paid). |
|||||||||||||
Denominator (Basic EPS): Weighted average # shares of common stock outstanding. | |||||||||||||
Period | Weight | Weighted Avg no of shares | |||||||||||
01/01 - 12/31 | 660000 shares*12/12 | 660000 | |||||||||||
02/28 - 12/31 | 56000 shares *10/12 | 46666.66667 | |||||||||||
07/01-12/31 | -2000 shares sold*6/12 | -1000 | |||||||||||
Weighted average # shares | 705666.6667 | ||||||||||||
EPS = ($2400000-$75000)/705667share | |||||||||||||
3.29475517 | |||||||||||||