Based on the stock transactions below, what is the weighted-average number of shares outstanding as of December 31, year 1, that should be used in the calculation of basic earnings per share in financial statements issued on March 1, year 2?
Date Transactions
January 1, year 1 Beginning balance 100,000
April 1, year 1 Issued 30,000 shares for cash
June 1, year 1 50% stock dividend
February 15, year 2 2-for-1 stock split
March 15, year 2 Issued 40,000 shares for cash
A.147,500
B.183,750
C.295,000
D. 367,500
Answer is D
Here is the explanation:
Earnings per share (EPS) is a comparison of the earnings applicable to common stock with the number of shares of common stock of that enterprise. Basic EPS is based on the weighted-average number of actual common shares (WACS) outstanding during the period. In computing WACS, retroactive application is given to stock splits and stock dividends. WACS is computed as follows:
1/1 100,000 × 1.5 × 12/12 = 150,000
4/1 30,000 × 1.5 × 9/12 = 33,750
183,750 x 2 = 367,500
Effect of retroactive split
Can somebody tell me where the 1.50 came from?
B | 62, 78
A | 73, 67, 79
R | 82
F | 59, 59, Waiting
Ethics | 93
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