Question

Benn, Incorporated, has 6,000,000 shares of common stock outstanding on December 31, 2017. An additional 1,000,000 shares of common stock were issued on April 1, 2018, and 500,000 more on July 1, 2018. On October 1, 2018, Benn declared a 10% stock dividend. On November 1, Benn purchased 120,000 of its own stock. What was the number of shares to be used in computing basic earnings per share?

SHOW ALL COMPUTATIONS.

Answer 1

Answer -

Computation of weighted average number of common shares

Dates outstanding	Shares outstanding	Fraction of period	Calculation	Weighted average shares
1/1/2018 - 3/31/2018	6000000	3/12	6000000 shares * 3/12	1500000
4/1/2018 - 6/30/2018	7000000 [6000000 + 1000000]	3/12	7000000 shares * 3/12	1750000
7/1/2018 - 9/30/2018	7500000 [7000000 + 500000]	3/12	7500000 shares * 3/12	1875000
10/1/2018 - 10/31/2018	8250000 [7500000 + (7500000*10%)]	1/12	8250000  shares * 1/12	687500
11/1/2018 - 12/31/2018	8130000 [8250000 - 120000]	2/12	8130000 shares * 2/12	1355000
Total	-	-	-	7167500

.

Therefore, the number of shares to be used in computing basic earnings per share = 7167500 shares.