Riverbed Inc. uses a calendar year for financial reporting. The company is autho

Question

Riverbed Inc. uses a calendar year for financial reporting. The company is authorized to issue 8,210,000 shares of $12 par common stock. At no time has Riverbed issued any potentially dilutive securities. Listed below is a summary of Riverbed's common stock activities. 1. Number of common shares issued and outstanding at December 31, 2015 2. Shares issued as a result of a 12% stock dividend on September 30, 2016 3. Shares issued for cash on March 31, 2017 1,890,000 226,800 2,100,000 4,216,800 Number of common shares issued and outstanding at December 31, 2017 4. A 2-for-1 stock split of Riverbed's common stock took place on March 31, 2018 Compute the weighted-average number of common shares used in computing earnings per common share for 2016 on the 2017 comparative income statement. shares Compute the weighted-average number of common shares used in computing earnings per common share for 2017 on the 2017 comparative income statement. shares Compute the weighted-average number of common shares to be used in computing earnings per common share for 2017 on the 2018 comparative income statement. shares Compute the weighted-average number of common shares to be used in computing earnings per common share for 2018 on the 2018 comparative income statement. shares

Explanation / Answer

No of shares outstanding during Jan 1, 2016 to Sep 30, 2016

( Outstanding for 9 months = 1,890,000*9/12)                                                                   : 1,417,500

12% stock dividend issued on September 2016. Therefore weighted average number of shares after adjustment of 12% stock dividend = 1,417,500 * 1.12 = 1,587,600

Weighted Average no of shares outstanding during Oct 16 to Dec 16 = (Outstanding as on Dec 15 + Stock Dividend)*3/12 = (1,890,000+226,800)*3/12 = 529,200

Therefore, weighted average no of shares outstanding in 2016 = 1,587,600+ 529,200 = 2,116,800

Weighted Average no of shares outstanding during Jan 2017 to Mar 2017

( Outstanding for 3 months) = 2,116,800*3/12= 529,200

Shares issued for cash in March 2017 = 2,100,000

Therefore total number of shares outstanding at March 2017= 4,216,800

Weighted Average no of shares outstanding during Apr 17 to Dec 17=4,216,800*9/12=3,162,600

Therefore, average no of shares outstanding in 2017 = 529,200+3,162,600 = 3,691,800

2 for 1 stock split took place on March 2018.

Therefore equivalent weighted average no of shares = 3,691,800*2 = 7,383,600

Number of shares outstanding during Jan 2018 to Mar 2018

( Outstanding for 3 months) = 4,216,800*3/12= 1,054,200

Weighted average number of shares after adjustment of stock split= 1,054,200 * 2 = 2,108,400

weighted average no of shares during Apr 18 to Dec 18 after stock split = 4,216,800*2*9/12 = 6,325,200

Therefore, weighted average no of shares outstanding in 2018 = 2,108,400+6,325,200 = 8,433,600

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