Question

On January 1, 2018, Jay Corp. had 479,000 shares of common stock outstanding. During 2018, it had the following transactions that affected the Common Stock account.

February 1                Issued 117,000 shares

March 1                     Issued a 10% stock dividend

May 1                         Acquired 103,000 shares of treasury stock

June 1                        Issued a 3-for-1 stock split

October 1                  Reissued 59,000 shares of treasury stock

Question :

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

The weighted-average number of shares outstanding = _________

Answer 1

Weighted average number of shares means how many shares outstanding for the year on an average basis. e.g. if there are 1000 shares at the year beginning and company has issued another 500 shares after 6 months then to calculated the weighted average = 500/12*6 = 250 shares evenly distributed throughout the year. hence the total weighted average shares would be 1000*12/12 + 500/12*6 = 1250 shares. we are simply multiplying the holding period and dividing by total months i.e. 12 monts.

Keeping the above in mind, the solution to the question is as follows -

Note 1 : stock divided issued on March 1 will be adjusted from the beginning of the year as this is not a new issue but the additional shares for existing holdings

Note 2 : Split of shares will be adjusted from the beginning as there is not any new issue but this has been given for the existing holdings.

Note 3 : Buy back of 103,000 has been done on May 1 hence the calculation is 655,600-103,000 = 552,600 shares

Note 4 : these 552,600 will be splited in 3 for 1 hence total share will become 552,600x3 = 1,657,800 shares

Note 5 : On oct 1, 59,000 shares were issued hence 1,657,800+59,000 = 1,716,800 shares will be outstanding at the end of the year.

Let me know if you have any questions.

thanks