Question

Dayron Co. had 8,000 ordinary shares outstanding in January 2009. The company distributed a 15% share dividend in March and a 10% share dividend in June 2009. After acquiring 1,000 treasury shares in July 1, the company split its shares 4 for 1 in December 2009. How many ordinary shares are outstanding as of December 31, 2009?

35,480

36,480

48,800

49,800

Answer 1

Number of outstanding shares in January = 8,000

Stock dividend in March = 15%

Number of shares issued in March as stock dividend = 8,000 x 15%

= 1,200

Number of outstanding shares after stock dividend in March = Number of outstanding shares in January + Number of shares issued in March as stock dividend

= 8,000+1,200

= 9,200

Stock dividend in June = 10%

Number of shares issued in June as stock dividend = 9,200 x 10%

= 920

Number of outstanding shares after stock dividend = Number of outstanding shares after stock dividend in March + Number of shares issued in June as stock dividend

= 9,200+920

= 10,120

Treasury shares acquired on July 1 = 1,000

Number of outstanding shares on July 1 = Number of outstanding shares after stock dividend - Treasury shares acquired on July 1

= 10,120-1,000

= 9,120

Stock split in December = 4 for 1

Number of outstanding shares on December 31, 2009 = Number of outstanding shares on July 1 x Stock split in December

= 9,120 x 4

= 36,480

Second option is correct option.