On January 1, 2009, Carleton Corporation had 55,000 shares of $6 par value common stock outstanding. On March 31, 2009, Carleton issued an additional 10,000 shares in exchange for a building. What number of shares will be used in the computation of basic earnings per share for the year 2009?

Question

Quizplus · Accepted Answer

The basic earnings per share is calculated by dividing the net income available to common shareholders by the weighted-average number of shares outstanding during the period. Since the additional 10,000 shares were issued on March 31, 2009, they would be included in the weighted-average number of shares outstanding calculation for the last nine months of the year. Therefore, the weighted-average number of shares outstanding for the year 2009 would be:

[(55,000 shares x 3 months) + (65,000 shares x 9 months)] / 12 months = 62,500 shares

Thus, the number of shares used in the computation of basic earnings per share for the year 2009 is 62,500.

On January 1, 2009, Carleton Corporation Had 55,000 Shares of $6