Week 8 - Chapter 19 Homework On December 31, 2017 Dow Steel Corporation had 780 000 shares of common stock and 48 000 shares of 10%, noncumulative, nonconvertible preferred stock issued and outstanding Dow sued a 5% common stock dividend on May 15 and paid cash dividends of $580,000 and $87,000 to common and preferred shareholders respectively on December 15, 2018 On February 28, 2018 Dow sold 68,000 common shares Also, as a part of a 2017 agreement for the acquisition of Mer Cable Company, another 24 000 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 $680 000 in 2018 Merrill's net income was $810.000 In keeping with its long-term share repurchase plan, 5.000 shares were retired on July 1 Dow's net income for the year ended December 31, 2018, was $3,000,000. The income tax rate is 40% 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 (adjusted for the stock dividend) December 31, 2016 December 31, 2017 December 31, 2018 20.000 23.500 The market price of the common stock averaged $50 per share during 2018 On July 12, 2016. Dow issued $1,000,000 of convertible 10% bonds at face value. Each $1.000 bond is convertible into 25 common shares (adjusted for the stock dividend) Required: Compute Dow's basic and diluted earnings per share for the year ended December 31, 2018 (Enter your answers in thousands.) Numerator Denominator Earnings per share Dow's basic Dow's diluted