CMA Study Group

X Co. had the following stock transactions during the fiscal year ended June 30, Year 2:
Beginning stock balance, July 1, Year 1
100,000 shares
2:1 stock split, September 30, Year 1
Issuance of additional shares, January 1, Year 2 50,000 shares
Repurchase of shares, June 23, Year 2
1,040 shares
What was X Co.'s weighted average number of shares outstanding at June 30, Year 2:

CAN ANYONE WALK ME THROUGH THIS

Hey! See, there are two methods to calculate the weighted average no. Of equity shares (WANES)

In this question you can see that one of the shares were repurchased on June 23 which is on a day count. 

So, now we calculate the WANES using each transaction wise. 

100,000 * 12/12 = 100,000 (this shares were present for the whole year)

100,000 * 12/12 = 100,000 sh ( as we know stock spits has no transaction wise effect it's to effect the EPS. Here we see, stock split is 2:1, so for every one share we have 2 shares given. In total we have 200,000 shares now. 100,000shares we already recorded it for all 12 months, now balance 100,000 shares for the 12 months again. Stock split should be considered for the entire year is because it's for the same shares)

50,000 * 6/12 = 25,000 sh

1040 * 1/52 = (20) sh ( here we can see that we repurchased the shares on June 23, so to June 30 it's exactly 7 days, i.e 1 week. So we take 1/52) 

WANES = 100,000 + 100,000 + 25,000 - 20 = 224,980 shares