Question

The following information pertains to J Company's outstanding stock for 2018: Common stock, $1 par Shares...

The following information pertains to J Company's outstanding stock for 2018:

Common stock, $1 par

Shares outstanding, 1/1/2018

10,000

2 for 1 stock split, 4/1/2018

10,000

Shares issued, 7/1/2018

5,000

Preferred stock, $100 par, 7% cumulative

Shares outstanding, 1/1/2018

4,000

What is the number of shares J should use to calculate 2018 basic earnings per share?

a.

20,000.
b.

22,500.
c.

25,000 .
d.

27,000.
Business   Accounting   
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Homework Answers

Answer #1

Number of Shares outstanding as on 1st April = 10,000

Due to Stock Split the number of shares outstanding as on date of stock split should be changed to give impact of Stock Split.

Hence in our case 2 shares for 1 held is issued hence revised opening shares would be 20,000 (10,000*2)

Hence 20,000 is outstanding for the entire year.

Again on 1st July additional 5000 shares are issued and this shares remain outstanding for a period of 6 months i.e. from July to December

Hence Weighted Average Number of Shares Outstanding = ((20,000*12)+(5000*6))/12 = 22,500 Shares.

Hence option B is correct

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