At the beginning of 2014, Hardin Company had 220,000 shares of $10 par common stock outstanding....

At the beginning of 2014, Hardin Company had 220,000 shares of $10 par common stock outstanding. During the year, it engaged in the following transactions related to its common stock:

March	1	Issued 43,000 shares of stock at $20 per share.
June	1	Issued a 10% stock dividend.
July	1	Issued 16,000 shares of stock at $25 per share.
Aug.	31	Issued a 2-for-1 stock split on outstanding shares, reducing the par value to $5 per share.
Oct.	31	Reacquired 88,000 shares as treasury stock at a cost of $28 per share.
Nov.	30	Reissued 54,000 treasury shares at a price of $31 per share.

Required:

1. Determine the weighted average number of shares outstanding for computing the current earnings per share. Round your interim computations and final answer for the number of shares to nearest whole number.
_____ shares

2. Determine the number of common shares outstanding at December 31, 2014.
_____ shares

Expert Solution

Solution.

Since there was a 2 for 1 split in September you have to calculate an "as if" the split occurred at the beginning of the year.
Also, your results will depend on whether you use a 360 day (12 30-day months) or a 365 day year. For simplicity's sake, I'll use a 360 day year.
Begin outstanding: 20k * 2 = 40,000
This # of shares was outstanding from Jan 1 thru the day before the # changed on April 2. I'll call this time outstanding "t". "OS" means OutStanding.
40,000 * (91/360) = 10,111.11
At April 2, add 5,000 * 2 = 10,000 for total of 50,000
t = 29 + 30 + 3 = 62 days thru June 3
50,000 * 62/360 = 8611.11
At June 4 add 4,000 * 2 = 8,000 for total of 58,000
t = 27 days thru June 30
58,000 * 27/360 = 4350
At July 1 10% stock dividend...
58,000 * 1.10 = 63,800 shares total OS
t = 30 + 30 + 30 + 2 = 92 days thru Oct 2
63800 * 92/360 = 16304.44
At Oct 3, repurchase 1k shares, total OS 62,800
t = 28 + 26 = 54 days thru Nov 26
62,800 * 54/360 = 9420
At Nov 27 reissue 1k shares, total OS 63,800
t = 3 + 30 = 33
63,800 * 33/360 = 5848.33
Add them all together = WASO (weighted average shares outstanding)
= 54,645 WASO

ekkarill92 answered 9 months ago

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