Gear Corporation had the following common stock record during the current calendar year: What is the number of shares to be used in computing basic EPS?
A)5,500,000.
B)5,557,500.
C)5,303,750.
D)5,050,000.

Question

Gear Corporation had the following common stock record during the current calendar year:  What is the number of shares to be used in computing basic EPS?
A)5,500,000. 
B)5,557,500. 
C)5,303,750. 
D)5,050,000.

Quizplus · Accepted Answer

The number of shares to be used in computing basic EPS is the weighted-average number of common shares outstanding during the period. Looking at the common stock record, we can see that there were 5,000,000 shares outstanding at the beginning of the year, and 600,000 shares were issued on July 1. Therefore, the weighted-average number of shares is:
(5,000,000 x 6/12) + (5,600,000 x 6/12) = 5,550,000
Rounding this to the nearest 1,000 gives us 5,557,500, which is the number of shares to be used in computing basic EPS.

Gear Corporation Had the Following Common Stock Record During the Current