Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 19-12 (Algo) EPS; nonconvertible preferred stock; treasury shares; shares sold; stock dividend; options [LO19-4, 19-5, 19-6, 19-7, 19-8, 19-10] On December 31, 2020, Dow

Problem 19-12 (Algo) EPS; nonconvertible preferred stock; treasury shares; shares sold; stock dividend; options [LO19-4, 19-5, 19-6, 19-7, 19-8, 19-10] On December 31, 2020, Dow Steel Corporation had 700,000 shares of common stock and 310,000 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 $500,000 and $79,000 to common and preferred shareholders, respectively, on December 15, 2021. On February 28, 2021, Dow sold 64,000 common shares. In keeping with its long-term share repurchase plan, 6,000 shares were retired on July 1. Dow's net income for the year ended December 31, 2021, was $2,600,000. The income tax rate is 25%. 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:

image text in transcribed

Problem 19-12 (Algo) EPS; nonconvertible preferred stock; treasury shares; shares sold; stock dividend; options (LO19-4, 19-5, 19-6, 19-7, 19-8, 19-10] On December 31, 2020, Dow Steel Corporation had 700,000 shares of common stock and 310,000 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 $500,000 and $79,000 to common and preferred shareholders, respectively, on December 15, 2021. On February 28, 2021, Dow sold 64,000 common shares. In keeping with its long-term share repurchase plan, 6,000 shares were retired on July 1. Dow's net income for the year ended December 31, 2021, was $2,600,000. The income tax rate is 25%. 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 December 31, 2019 December 31, 2020 December 31, 2021 Options Granted (adjusted for the stock dividend) 17,000 12,000 15,500 Share Price $26 $35 $34 The market price of the common stock averaged $34 per share during 2021. 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" answers to 2 decimal places.) Numerator / Denominator = Earnings per share Dow's basic Dow's diluted

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Management Accounting Evolution Not Revolution

Authors: Michael Bromwich, Al Bhimani

1st Edition

0908269137, 978-0908269136

More Books

Students also viewed these Accounting questions

Question

=+ how might this lead to faster growth in productivity?

Answered: 1 week ago