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EPS; non convertible
• LO19–4 through LO19–11
(Note: This is a variation of P 19–12, modified to include convertible bonds and contingently issuable shares.)
On December 31, 2017, 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, 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 $2,100,000. The income tax rate is 40%. Also, as a part of a 2017 agreement for the acquisition of Merrill Cable Company, another 23,000 shares (already adjusted for the stock dividend) are to be issued to former Merrill shareholders on December 31, 2019, if Merrill’s 2019 net income is at least $500,000. In 2018, Merrill’s net income was $630,000.
As part of an incentive compensation plan, Dow granted incentive stock options to division managers at December 31 of the current and each of the previous two years. Each option permits its holder to buy one share of common stock at an exercise price equal to market value at the date of grant and can be exercised one year from that date. Information concerning the number of options granted and common share prices follows:
| Date Granted | Options Granted | Share Price |
| (adjusted for the stock dividend) | ||
| December 31, 2016 | 8,000 | $24 |
| December 31, 2017 | 3,000 | $33 |
| December 31, 2018 | 6,500 | $32 |
The market price of the common stock averaged $32 per share during 2018.
On July 12, 2016, Dow issued $800,000 of convertible 10%
Required:
Compute Dow’s basic and diluted earnings per share for the year ended December 31, 2018.
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Chapter 19 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
- C5.2arrow_forwardE16-16. Please show all workings clearly.arrow_forwardP13.3A LO 1, 2, 3) Financial Statement The stockholders' equity accounts of Castle Corporation on January 1, 2020, were as follows Journalize and post transactions, and prepare stockholders' equity section GLS Preferred Stock (8%, $50 par, 10,000 shares authorized) Common Stock ($1 stated value, 2,000,000 shares authorized) 1,000,000 Paid-in Capital in Excess of Par-Preferred Stock Paid-in Capital in Excess of Stated Value Common Stock1,450,000 Retained Earnings Treasury Stock (10,000 common shares) $400,000 100,000 1,816,000 50,000 During 2020, the corporation had the following transactions and events pertaining to its stockholders' equity Feb.1 Issued 25,000 shares of common stock for $120,000 Apr. 14 Sold 6,000 shares of treasury stock-common for $33,000 Sept. 3 lssued 5,000 shares of common stock for a patent valued at $35,000 Nov. 10 Purchased 1,000 shares of common stock for the treasury at a cost of $6,000 Dec. 31 Determined that net income for the year was $452,000 No dividends…arrow_forward
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