EPS; nonconvertible preferred stock; treasury shares; shares sold; stock dividend
Response to the following problem:
On December 31, 2015, 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, 2016.
On February 28, 2016, 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, 2016, was $2,100,000. The income tax rate is 40%.
Required:
Compute Dow's earnings per share for the year ended December 31, 2016.