Bates Ltd has 6,000,000 ordinary shares on issue at the beginning of the year,1 July 2003.These shares were issued at $4.00 each and have a current market value of $6.25.On 1 February 2004,Bates Ltd bought back 300,000 ordinary shares originally issued at $4.50 for $5.60 each.On 1 May 2004,1,000,000 fully paid-up shares were issued at the current market value.What is the weighted average number of shares calculated in accordance with AASB 1027?

Question

Quizplus · Accepted Answer

Weighted average number of shares is calculated by taking the weighted average of the number of shares outstanding during the year.

At the beginning of the year (1 July 2003), there were 6,000,000 ordinary shares on issue.

From 1 July 2003 to 1 February 2004 (214 days), there were 6,000,000 shares outstanding.

From 1 February 2004 to 1 May 2004 (90 days), there were only 5,700,000 shares outstanding (300,000 shares bought back by Bates Ltd).

From 1 May 2004 to 30 June 2004 (61 days), there were 6,700,000 shares outstanding (1,000,000 shares issued on 1 May 2004 plus 5,700,000 shares outstanding from 1 February 2004).

Therefore, the weighted average number of shares for the year is calculated as follows:

[(6,000,000 x 214) + (5,700,000 x 90) + (6,700,000 x 61)] / 365 = 6,059,452.

Hence, the answer is A) 6,059,452.

Bates Ltd Has 6,000,000 Ordinary Shares on Issue at the Beginning