Question

Milo Co. had 800,000 shares of common stock outstanding on January 1, issued 126,000 shares on May 1, purchased 63,000 shares of treasury stock on September 1, and issued 54,000 shares on November 1. The weighted average shares outstanding for the year isA. 851,000B. 872,000C. 893,000D. 914,000

Answer 1

Answer:

The answer is 872,000

Explanation:

The shares are bought on different dates, so we need to factor this in.

From January 1 to December 31:

800,000 shares(A full year)

From May 1 to December 31:

8/12 x 126,000 shares

=84,000 shares

From September 1 to December 31:

4/12 x 63,000 shares

= 21,000 shares

And from November to December 31;

2/12 x 54,000 shares

9,000 shares.

Therefore, the weighted average shares outstanding for the year is:

800,000 + 84,000 - 21,000 + 9,000 shares

= 872,000

The reason why 21,000 shares was substracted from the rest was because the 63,000 shares was a treasury stock i.e shares buy back and treasury stock reduces number of outstanding shares