XYZ Inc. incurred the following changes in the number of shares of common stock

ID: 2467872 • Letter: X

Question

XYZ Inc. incurred the following changes in the number of shares of common stock outstanding during 2008: January 1 Beginning balance 24,000 May 1 Issued for cash 3,000 June 30 Issued a 2-for-1 stock split — December 1 Purchased for treasury stock 3,000 Additional information: Net income was $120,000 for 2008. XYZ paid $3,000 in dividends to its common stockholders on April 30. 1. a) Compute the weighted-average number of shares of common stock of XYZ Inc. outstanding for 2008. 2. b) Compute the 2008 EPS for XYZ.

Explanation / Answer

Solution :

Dates outstanding

shares outstanding

fraction

Weighted number

Beginning balance

01/01 to 30/04

24000

0.333333333

8000

Issued for cash

01/05 to 30/06

27000

0.166666667

4500

Issued a 2-for-1 stock split

30/06 to 1/12

54000

0.416666667

22500

Purchased for treasury stock

01/12 to 31/12

51000

0.083333333

4250

weighted-average number of shares of common stock

39250

Net income

120000

EPS

3.06