Albatross Shipping had 100,000 shares of common stock outstanding on January 1. On August 31,...

Question:

Albatross Shipping had 100,000 shares of common stock outstanding on January 1. On August 31, Albatross issued an additional 30,000 common shares. Albatross had 10,000 shares of treasury stock that they held all year. The weighted average number of common shares outstanding for the year was

A. 112,500

B. 130,000

C. 100,000

D. 110,000

Outstanding Shares:

Outstanding number of shares is computed as the difference between the number of shares issued and those reacquired as part of treasury shares. Outstanding number of shares is also used in computing for the earnings per share and book value per share.

Answer and Explanation:

The correct answer is c. 100,000

Account Shares Outstanding Period Covered Weighted Shares
January 1 100,000 8/12 66,667
August 31 130,000 4/12 43,333
Treasury Shares -10,000
Weighted Average 100,000

The 120,000 outstanding shares used in August 31 is computed as:

January 1 100,000
August 31 30,000
Treasury Shares -10,000
Outstanding Shares 120,000


Although the outstanding common shares is 120,000, the weighted average common shares outstanding is 100,000.


Learn more about this topic:

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How to Calculate Earnings Per Share: Definition & Formula

from Introduction to Business: Homework Help Resource

Chapter 24 / Lesson 14
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