Problem 19-11 EPS; nonconvertible preferred stock; treasury shares; shares sold;
ID: 2412774 • Letter: P
Question
Problem 19-11 EPS; nonconvertible preferred stock; treasury shares; shares sold; stock dividend [LO19-4, 19-5, 19-6, 19-7] On December 31, 2017, Dow Steel Corporation had 730,000 shares of common stock and 43,000 shares of 9%, noncumulative. nonconvertible preferred stock issued and outstanding. Dow issued a 5% common stock dividend on May 15 and paid cash dividends of $530,000 and $82,000 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 $2,750,000. 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.) NumeratorDenominatorEarnings per shaExplanation / Answer
Answer
the weighted average number of shares outstanding
= 730000 * 1.04 = 759200
= 60000 * 1.04 = 62400
= 2000 * 6/12 = -1000
= 821500
WPS = 2750000 - 82000 / 821500
= 3.25