Compute Weighted-Average Number of shares outstanding: Torres consultants began the current year with 60,000 common shares...

Compute Weighted-Average Number of shares outstanding:

Torres consultants began the current year with 60,000 common shares outstanding. On May 1 it issued 25,000 shares. On August 1 the company issued 10,000 more shares. The company implemented a 10% stock Dividend on October 31. On November 1 the company also purchased 3,000 shares of treasury stock. The firm’s year-end is December 31.

Expert Solution

The Weighted Average number of shares outstanding for Torres consultants can be calculated as follows:-

Time	No.of Shares	Duration of year	Weighted Average	*Effect of Stock Dividend( 2)**
Opening	60000	12/12	60,000.00	66,000.00
May 1st	25000	8/12	16,666.67	18,333.33
August 1st	10000	5/12	4,166.67	4,583.33
October 31st	3000	2/12	(500.00)	(500.00)
		Weighted Average No.of shares outstanding		88,416.67

Please note that when a stock dividend is issued, all the shares issued before the dividend would have to be adjusted accordingly to the percentage of stock dividend issued by the company.

For example :- The stock dividend issued on the 60,000 shares outstanding at the beginning of the year for the comapny is calculated as follows:

60,000 shares * 1.1 = 66,000 shares.

Treasury stock are stock purchased back by the company . As such, we would reduce the number of such share purchases to arrive at the Weighted Average number of shares outstanding.

Based on the above calculations, the weighted average number of shares outstanding = 88,416.67 / 88,417(Rounded)

ekkarill92 answered 2 years ago

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