Question

On December 31, 2017, Beta Company had 320,000 shares of common stock issued and outstanding. Beta issued a 7% stock dividend on June 30, 2018. On September 30, 2018, 30,000 shares of common stock were reacquired as treasury stock. What is the appropriate number of shares to be used in the basic earnings per share computation for 2018?

Answer 1

Answer:

334,900  shares

Explanation:

The appropriate number of shares to be used in basic earnings per share computation is the opening balance of common stock issued and outstanding adjusted for stock dividend since stock dividend is meant to be treated as if it has always been part of the issued and outstanding shares.

The shares reacquired appropriately adjusted for timing of reacquisition should be deducted from the figure gotten from the above computation.

Issued and outstanding shares(adjusted for stock dividend) 320000*1.07=342400

minus the reacquired shares=30000*3/12=7500

weighted average number of shares=342,400-7500=334900