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On January 1, 2018, Patrick Corporation had 1,100,000 shares of common stock outstanding. On...

Question:

On January 1, 2018, Patrick Corporation had 1,100,000 shares of common stock outstanding. On March 1, the corporation issued 175,000 new shares to raise additional capital. On July 1, the corporation declared and issued a 2-for-1 stock split. On October 1, the corporation purchased on the market 600,000 of its own outstanding shares and retired them.

Compute the weighted average number of shares to be used in computing earnings per share for 2018.

Earnings Per Share:

Earnings per share are required for companies that have publicly traded common stock or in the process of issuing common stock to the public. It is calculated for both income from continuing operations and for net income attributable to parent entity.

Answer and Explanation:

Determine the weighted-average number of shares outstanding as of December 31, 2018.

Weighted Average Number of Shares
January 1 1,100,000 shares x 2 2,200,000 shares
March 1 175,000 shares x 2 x (9 / 12) 262,500 shares
October 1 600,000 shares x (3 / 12) (150,000 shares)
Total 2,312,500 shares

When the company issues a stock dividend or stock split, it is treated retrospectively.

The shares are multiplied by portion of the reporting period that they are covered.


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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