On December 31, 2015, Dow Steel Corporation had 620,000 shares of common stock a

Question

On December 31, 2015, Dow Steel Corporation had 620,000 shares of common stock and 32,000 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 $420,000 and $71,000 to common and preferred shareholders, respectively, on December 15, 2016.

     On February 28, 2016, Dow sold 64,000 common shares. In keeping with its long-term share repurchase plan, 4,000 shares were retired on July 1. Dow's net income for the year ended December 31, 2016, was $2,200,000. The income tax rate is 40%.

Compute Dow's earnings per share for the year ended December 31, 2016.

Numerator($2,129,000)/Denominator = EPS

Find the Denominator (Weighted Average Oustanding shares) and EPS.

On December 31, 2015, Dow Steel Corporation had 620,000 shares of common stock and 32,000 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 $420,000 and $71,000 to common and preferred shareholders, respectively, on December 15, 2016.

     On February 28, 2016, Dow sold 64,000 common shares. In keeping with its long-term share repurchase plan, 4,000 shares were retired on July 1. Dow's net income for the year ended December 31, 2016, was $2,200,000. The income tax rate is 40%.

Explanation / Answer

Common Stock no of days (A) (B) (C ) = A*B 12/31/2015 620000 59 36580000 2/28/2016 64000 124 7936000 7/1/2016 -4000 167 -668000 12/15/2016 31000 16 496000 12/31/2016 711000 366 44344000 Weighted Average no of shares 121158 Earnings 2200000 Less Income Tax -880000 PAT 1320000 Less Preference Dividend -71000 Available for Equity shareholders 1249000 EPS 1249000/121158 10.31

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