The following information is available for Bellone Corporation: January 1, 2015

Question

The following information is available for Bellone Corporation:
January 1, 2015       Shares outstanding                                                       2,000
April 1, 2015             Shares issued                                                               1,000
July 1, 2015             Treasury shares purchased                                            500
October 1, 2015       Shares issued in a 100% stock dividend                      2,200
The number of shares to be used in computing earnings per common share for 2015 is

Explanation / Answer

Solution: Calculation of the number of shares to be used for earnings per common share for 2015:

Weighted average number of shares outstanding;

From Jan 1 to April 1 : 2000*3/12 = 500 shares

From April 1 to July 1: (2000+1000)*3/12= 750 shares

From July 1 to Oct 1: (2000+1000-500)*3/12 = 625 shares.

At October 1, 2015, they issue a stock dividend, doubling the outstanding shares. So all the previous (above) shares number must be doubled.

Therefore, no. of shares required for earnings per common share = (500*2)+(750*2)+(625*2)+[(2500+2200)*3/12] = 4,925 shares.

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