On January 1, James corporation had 60,000 shares of common stock outstanding. On March 1, the company reacquired 12,000 shares, and it declared a 10% stock dividend on October 1. The denominator in the earnings per share calculation would be

Question

Quizplus · Accepted Answer

The year started with 60,000 shares outstanding. But on March 1, the company reacquired 12,000 shares. Therefore, the number of shares outstanding on March 1 was 60,000 - 12,000 = 48,000 shares.

Later, on October 1, the company declared a 10% stock dividend. This means that the number of shares outstanding increased by 10% of the pre-dividend shares.

10% of 60,000 = 6,000 shares

So, after the stock dividend, the number of shares outstanding would be:

48,000 + 6,000 = 54,000 shares

Therefore, the denominator in the earnings per share calculation would be 54,000 shares, and the best choice is C (55,000 is the closest option, since the number of shares is unlikely to be exact).

On January 1, James Corporation Had 60,000 Shares of Common