ABC experienced the following changes in its capital structure during 2014: Outstanding on January 1, 2014, 90 common stock shares Sold 120 common shares on February 1, 2014
Sold 60 common shares on April 1, 2014
Issued a 2 for 1 split on August 1, 2014
ABC's weighted average number of common shares outstanding for 2014 would be:

Question

Quizplus · Accepted Answer

The weighted average number of shares outstanding is calculated by multiplying the number of shares outstanding at the beginning of each period by the fraction of the year that the shares were outstanding. In this case, the shares outstanding at the beginning of the year were 90. The shares were outstanding for the entire year, so the fraction of the year that the shares were outstanding is 1. The shares were sold on February 1, so the number of shares outstanding decreased by 120 on that date. The shares were outstanding for 10/12 of the year, so the fraction of the year that the shares were outstanding is 10/12. The shares were sold on April 1, so the number of shares outstanding decreased by 60 on that date. The shares were outstanding for 9/12 of the year, so the fraction of the year that the shares were outstanding is 9/12. The shares were split 2 for 1 on August 1, so the number of shares outstanding increased by 180 on that date. The shares were outstanding for 5/12 of the year, so the fraction of the year that the shares were outstanding is 5/12. The weighted average number of shares outstanding is calculated as follows: (90 * 1) + (120 * 10/12) + (60 * 9/12) + (180 * 5/12) = 490.

ABC Experienced the Following Changes in Its Capital Structure During