On December 31, 2015 Dow Steel Corporation had 600,000 shares of common stock and 300,000 shares of 8% noncumulative, nonconvertible preferred stock issues 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 Jul 1. Dows net income for the year ended December 31, 2016, was $2,100,000. The income tax rate was 40%

Required: Compute Dows Earnings per share for the years ended December 31, 2016.

2,100,000 75,000 2,025,000

-------------------------------------------------------------------- = -------------------- = $3/share

600,000(1.04) + 60,000(10/12)(1.04) 2,000(6/12) 675,000

Assume the same information as above: and as part of an incentive compensations 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, 2014	8,000	$24
December 31, 2015	3,000	$33
December 31, 2016	6,500	$32

The market price of the common stock averaged $32 per share during 2016.

Required: Compute Dows basic and diluted earnings per share for the year ended December 31, 2016.

(note: Consider the dates)