For purposes of computing the weighted-average number of shares outstanding during the year,a midyear event that must be treated as occurring at the beginning of the year is the
A) declaration and issuance of a stock dividend.
B) purchase of treasury stock.
C) sale of additional common stock.
D) issuance of stock warrants.

Question

Quizplus · Accepted Answer

A stock dividend affects the number of shares outstanding, and is treated as if it occurred at the beginning of the year for the purpose of computing the weighted-average number of shares outstanding. This is because a stock dividend is considered a distribution of additional shares to existing shareholders, which increases the number of shares outstanding without changing the overall value of the company.

For Purposes of Computing the Weighted-Average Number of Shares Outstanding