A firm has 10,000 common shares outstanding on January 1 of the current year.The following events take place during the current year: May 1 issued 3,000 new common shares
June 30 purchased 4,000 shares for the treasury
October 31 distributed a 20% stock dividend
December 1 reissued the June 30 treasury stock
What is the weighted-average number of shares to be used for computing EPS? (Do not round intermediate calculations.Round your final answer to nearest whole number.)

Question

Quizplus · Accepted Answer

To calculate the weighted-average number of shares, we need to take into account the number of shares outstanding during each period, adjusted for any stock issuances, repurchases or dividends.

January 1 to April 30: 10,000 shares outstanding
May 1 to June 30: 13,000 shares outstanding (10,000 + 3,000 issued)
July 1 to October 30: 13,000 shares outstanding
October 31 to November 30: 15,600 shares outstanding (13,000 + 2,600 from stock dividend)
December 1 to December 31: 14,000 shares outstanding (15,600 - 4,000 repurchased)

The weighted-average number of shares is calculated as follows:

[(10,000 x 4/12) + (13,000 x 2/12) + (13,000 x 4/12) + (15,600 x 1/12) + (14,000 x 1/12)] = 12,033

Therefore, the correct answer is D, 12,033 shares.

A Firm Has 10,000 Common Shares Outstanding on January 1