On January 1,2018,Ole Corporation had 75,000 shares of $8 par value common stock outstanding.On July 31,2018,Ole issued an additional 10,000 shares in exchange for a building.What number of shares will be used in the computation of earnings per share for the year 2018?

Question

Quizplus · Accepted Answer

The weighted average number of shares outstanding for the computation of earnings per share is used when there are changes in the number of shares outstanding during the period.

To calculate the weighted average number of shares outstanding for Ole Corporation for the year 2018, we need to take into account the number of shares outstanding as of January 1 and the number of shares issued on July 31.

For the first 7 months (January 1 to July 31), the number of shares outstanding was 75,000.

For the remaining 5 months (August 1 to December 31), the number of shares outstanding was 75,000 + 10,000 = 85,000.

Using the weighted average formula, we get:

Weighted average shares = [(75,000 shares x 7/12) + (85,000 shares x 5/12)] = 79,167 shares

Therefore, the correct answer is C) 79,167.

On January 1,2018,Ole Corporation Had 75,000 Shares of $8 Par