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, 2011, was $2,100,000. 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:
The market price of the common stock averaged $32 per share during 2011.
On July 12, 2009, Dow issued $800,000 of convertible 10% bonds at face value. Each $1,000 bond is convertible into 30 common shares (adjusted for the stock dividend).
Required:
Compute Dow's basic and diluted earnings per share for the year ended December 31, 2011.
Click here for the solution: In keeping with its long-term share repurchase plan, 2,000 shares were retired on July 1
