- This topic has 4 replies, 4 voices, and was last updated 10 years, 9 months ago by .
-
Topic
-
Balm Co. had 100,000 shares of common stock outstanding as of January 1. The following events occurred during the year:
4/1 Issued 30,000 shares of common stock.
6/1 Issued 30,000 shares of common stock.
7/1 Declared a 5% stock dividend.
9/1 Purchased as treasury stock 35,000 shares of its common stock. Balm used the cost method to account for the treasury stock.
What is Balm’s weighted-average of common stock outstanding at December 31?
131,000
139,008
150,675
162,633
This answer is incorrect because the weighted-average common stock outstanding on December 31, is calculated as follows:
Date and Total
Shares Time Stock
Dividend Weighted
average
1/1 100,000 shares
(given) × 3/12 × 1.05 = 26,250
4/1 130,000 shares
(100,000 + 30,000) × 2/12 × 1.05 = 22,750
6/1 166,000 shares
(130,000 + 36,000) × 1/12 × 1.05 = 14,525
7/1 174,300 shares
(166,000 + 8,300) × 2/12 × = 29,050
9/1 139,300 shares
(174,300 − 35,000) × 4/12 × = 46,433
12/12 = 139,008
So just a question as to why at 7/1 they multiply 166,000 by the stock dividends. On page 588 in the Wiley book it goes over an example similar to this and they do not multiply the 5% on the date of the stock dividends. I thought it made sense since to calculate the WTG AVG of CS outstanding you apply stock dividend as if they happened at the beginning of the year so there would be no need to multiply the stock spit again at the date the stock split was issued.
Hence they should of applied 166,000 shares outstanding for 3 months and not accounted for the extra 5% stock dividend in 7/1. Could someone please confirm this? Dont know if I should be trusting the Wiley Book or WTB.
FAR 81
AUD 65, 84 (Used Ninja MCQ which I say contributed to my huge increase in score I love you Jeff)
REG 87 (CPA excel Wiley Self Study Book, Ninja 10 point combo)
BEC 86! I Must Pass or I lose my FAR Credit, Pray for me(Becker, Wiley, WTB, Ninja MCQ, Ninja Notes)DONE!!!!!!
Using : Wiley CPA Exam Review Textbook, Wiley TB, Ninja Notes, Ninja MCQ
- The topic ‘FAR – WTG AVG CS with Stock dividend’ is closed to new replies.