January 1, 2018 Shares outstanding 4,040,000 April 1, 2018 Shares issued 633,000 July 1,...

Question:

January 1, 2018 Shares outstanding 4,040,000
April 1, 2018 Shares issued 633,000
July 1, 2018 Treasury shares purchased 235,000
October 1, 2018 Shares issued in a 100% stock dividend 4,438,000

The number of shares to be used in computing earnings per common share for 2018 is?

What Is Earnings Per Share:

A company's Earnings Per Share is reported on the final line of the income statement and is very relevant to investors. This is because the Earnings Per Share reflects the net income attributable to every single common share outstanding.

Answer and Explanation:

We need to pro-rate the number of shares outstanding based on the amount of months relevant to each event.

See below.

=4,040,000 *3/12 + (4,040,000+633,000)*3/12+(4,040,000+633,000-235,000 )*3/12+(4,040,000+633,000-235,000 )*2*3/12

=5,506,750 shares

The number used will thus be 5,506,750 shares.


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
111K

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