At January 1, 2012, Ming Limited’s outstanding shares included the following:
280,000 $50 par value, 7%, cumulative preferred shares
900,000 common shares
Net income for 2012 was $2,130,000. No cash dividends were declared or paid during 2012. On February 15, 2013, however, all preferred dividends in arrears were paid, together with a 5% stock dividend on common shares. There were no dividends in arrears before 2012.
On April 1, 2012, 550,000 common shares were sold for $10 per share and on October 1, 2012, 310,000 common shares were purchased for $20 per share.
The financial statements for 2012 were issued in March 2013.
(a) Calculate earnings per share for the year ended December 31, 2012.
(b) What is the significance of the declaration and payment date of February 15, 2013, for the dividend on preferred shares? What effect, if any, will this transaction have on the December 31, 2012 financial statements?
(c) Would your answer in part (b) change if the dividend arrears on preferred shares were for two years as at December 31, 2012?

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