On December 31, 2017, Dow Steel Corporation had 630,000 shares of common stock and 33,000 shares...
On December 31, 2017, Dow Steel Corporation had 630,000 shares of common stock and 33,000 shares of 7%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 4% common stock dividend on May 15 and paid cash dividends of $430,000 and $72,000 to common and preferred shareholders, respectively, on December 15, 2018. On February 28, 2018, Dow sold 54,000 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 $2,250,000. 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.)
Homework Answers
| Calculation of EPS for 2018:- | |||||
| Basic EPS | = | Net Income - Preferred Dividends | |||
| Weighted Average Number of Common Shares outstanding | |||||
| = | 2250000 - 72000 | ||||
| 701,000 | |||||
| = | $2,178,000 | ||||
| 701,000 | |||||
| Basic EPS | = | $3.107 | in $ | ||
| Basic EPS | = | $0.003107 | in thousands | ||
| Calculation of Weighted Number of Common Shares outstanding as of Dec 31, 2018 for computing EPS :- | |||||
| Share Transaction | Calculation | Shares | |||
| Beginning Balance | 630000*1.04*12/12 | 655200 | |||
| 28-Feb-18 | Sold Shares | 54000*1.04*10/12 | 46800 | ||
| 1-Jul-18 | Shares Retired | -2000*6/12 | -1000 | ||
| Weighted Number of Common Shares outstanding as of Dec 31, 2018 | 701000 | ||||
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