Hello everyone,
Particularly for anyone who doesn't have the exam support package, I found this question very interesting in Part-2 section A. It is about the calculation of
Weighted Average of Common Shares Outstanding. Unfortunately, this subject was not explained so well by Wiley review course, even the dilution topic, therefore I thought it would be very helpful to raise this point for discussion.
(Same question was mentioned in this group during 2012, but the answers were not so clear)
At the beginning of the year, Lewis Corporation had 100,000 shares of common stock outstanding. During the year, the following transactions occurred:
April 1 Issued 10,000 shares in exchange for land
July 1 Declared and distributed a 10% stock dividend
October 1 Purchased 5,000 shares of treasury stock
The number of shares that Lewis should use when computing earnings per share at the end of the year is:
a. 117,000.
b. 116,000.
c. 111,750.
d. 106,250.
Notes:
- The key interesting point is: How should we treat the impact of 10% stock dividend "Retrospectively"
- To maximize the benefit of discussion, I didn't include the answer & calculation.
- I'v attached a very useful handbook from KPMG related to Earnings Per Share topic (IAS 33).
Wish you best of luck, success, safe & healthy condition
Kind regards
------------------------------
Samer Ahmad, FMVA, SCA
Kuwait
------------------------------