Answered

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On December 31, 2020, Dow Steel Corporation had 770,000 shares of common stock and 47,000 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 $570,000 and $86,000 to common and preferred shareholders, respectively, on December 15, 2021. On February 28, 2021, Dow sold 68,000 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, 2021, was $2,950,000. The income tax rate is 25%.
Required:
Compute Dow's earnings per share for the year ended December 31, 2021. (Do not round intermediate calculations. Enter your answers in thousands. Round "Earnings per share" answer to 2 decimal places.)

Numerator/Denominator= Earnings per share
Numerator?
Denominator?
Earnings per share?

Sagot :

Cricetus

The earning per share will be "$3.30". A further solution is provided below.

Given:

Common stock,

= 770,000

Paid cash dividends,

= $570,000

Income tax rate,

= 25%

Common and preferred shareholders,

= $86,000

For the year ended, Dow's net income,

= $2,950,000

According to the question,

→ The weighted average number of shares outstanding will be:

= [tex]770000\times \frac{12}{12}[/tex]

= [tex]770000\times 1.05[/tex]

= [tex]808,500[/tex]

or,

= [tex]68,000\times \frac{10}{12}[/tex]

= [tex]56667\times 1.05[/tex]

= [tex]59,500[/tex]

or,

= [tex]4000\times \frac{6}{12}[/tex]

= [tex]\frac{4000}{2}[/tex]

= [tex]2000[/tex]

The total weighted average will be:

= [tex]808,500+59,500+2000[/tex]

= [tex]870,000[/tex]

hence,

The Earning per share will be:

= [tex]\frac{2,950,000-86,000}{870,000}[/tex]

= [tex]\frac{2,864,000}{870,000}[/tex]

= [tex]3.30[/tex] ($)

Thus the above is the right answer.

Learn more about EPS here:

https://brainly.com/question/2144395

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