how was the shares outstanding calculated.
A company had 150,000 shares outstanding on January 1. On March 1, 75,000 additional shares were issued through a stock dividend. Then on November 1, the company issued 60,000 shares for cash. The number of shares to be used in the denominator of the EPS calculation for the year is
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Answer (C) is correct.
The weighted average number of common shares outstanding during the year is the EPS denominator. Shares issued in a stock dividend are assumed to have been outstanding as of the beginning of the earliest accounting period presented. Thus, the 75,000 shares issued on March 1 are deemed to have been outstanding on January 1. The EPS denominator equals 235,000 shares {[150,000 × (12 months ÷ 12 months)] + [75,000 × (12 months ÷ 12 months)] + [60,000 × (2 months ÷ 12 months)]}. |
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Tayba Al-Mehdar
Analyst
Khobar
Saudi Arabia
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