Question

On January 1, Year 2, the Feather Company had 50,000 shares of common stock issued and outstanding. On May 1, Year 2, the company sold 12,000 additional shares for cash. On August 1, a 10% stock dividend was distributed. On November 1, 12,000 shares were reacquired as treasury stock. What is the weighted-average number of common shares outstanding during Year 2 and included as the denominator of the earnings per shares calculation?

Answer 1

61,800 shares

Step-by-step explanation:

The computation of the weighted-average number of common shares outstanding shares is shown below:

On Jan 1

= 50,000 shares + 50,000 shares × 10%

= 50,000 shares + 5,000 shares

= 55,000 shares

For 12 months, it would be

= 55,000 shares × 12 months

= 660,000 shares

On May 1

= 12,000 shares + 12,000 shares × 10%

= 12,000 shares + 1,200 shares

= 13,200 shares

For 8 months, it would be

= 13,200 shares × 8 months

= 105,600 shares

On November 1

= -12,000 shares × 2 months

= -24,000 shares

Now sum up these shares, so the total shares would be

= 660,000 shares + 105,600 shares - 24,000 shares

= 741,600 shares

For 1 month, it would be

= 741,600 shares ÷ 12 months

= 61,800 shares

The period is from January 1 to December 31