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. What is the denominator in the earnings per share calculation?

Question

Quizplus · Accepted Answer

The weighted average number of shares is calculated as follows: 60,000 shares were outstanding for 2 months, 48,000 shares (60,000 - 12,000) were outstanding for 10 months, and a 10% stock dividend increases the shares by 4,800 (10% of 48,000) for the last 3 months. The weighted average is (60,000 * 2/12) + (48,000 * 10/12) + (4,800 * 3/12) = 55,000.

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