ABC Ltd has 21 000 ordinary shares on issue at 1 January 2016 which is the beginning of its reporting period. On 30 June 2016, it issued a further 2000 ordinary shares for cash. On 1 November 2016, ABC Ltd repurchased 600 shares at fair value in a market transaction. The weighted average number of shares for use in the earnings per share calculation is:
A) 21 000 shares
B) 21 700 shares
C) 21 900 shares
D) 22 400 shares

Question

Quizplus · Accepted Answer

The weighted average number of shares is calculated by multiplying the number of shares outstanding by the fraction of the year that they were outstanding. In this case, the shares were outstanding for the following periods:* 21,000 shares for 6 months (January 1 to June 30)* 23,000 shares (21,000 + 2,000) for 5 months (July 1 to November 1)* 22,400 shares (23,000 - 600) for 1 month (November 1 to December 31)The weighted average number of shares is therefore:(21,000 x 6/12) + (23,000 x 5/12) + (22,400 x 1/12) = 21,900 shares

ABC Ltd Has 21 000 Ordinary Shares on Issue at 1