At the beginning of this year Aristotle Co. had 400,000 shares of common stock outstanding. During the year, Aristotle paid a 10 percent stock dividend on May 31, issued 90,000 new common shares on June 30, and repurchased 12,000 shares on December 1. The number of shares Aristotle should use in computing earnings per share at the end of the year is:
Stock dividends and stock splits are considered effective as of the beginning of the year: 400k*1.1 outstanding for 6 months (Jan1-June30) Existing 400k*1.1 plus new issue 90k, outstanding for 5 months (July1-Dec1) Existing 400k*1.1 + 90k, minus 12k, outstanding for 1 month (Dec1-Dec31) 400,000*1.1*6/12 + (400,000*1.1+90,000)*5/12 + (400,000*1.1+90,000 - 12,000)*1/12 = 484,400 Alternatively: 400*1.1+90*5/12+(90-12)/12=484.4
map1 -GET OFF THIS FORUM AND ENJOY YOURSELF! I hope to see you on the level 2 in a couple months!
gameday0, did I just stole your thunder?:)) I have Schweser for level II, I think i’ll start one of these days:))
boilermaker Wrote: ------------------------------------------------------- > At the beginning of this year Aristotle Co. had > 400,000 shares of common stock outstanding. During > the year, Aristotle paid a 10 percent stock > dividend on May 31, issued 90,000 new common > shares on June 30, and repurchased 12,000 shares > on December 1. The number of shares Aristotle > should use in computing earnings per share at the > end of the year is: I believe its (400,000*1.1) *6/12 + (400000*1.1+90000)*5/12 + (490000-12,000)*1/12 (1.1 b/c 1+.1). So 220,000+ 224583 + 39833 484417.
CFABLACKBELT, correct, except for your third term, which is not (490,000-12,000)*1/12, but (400,000*1.1+90,000-12,000)*1/12
why not this: 400000*5/12 + 440000*1/12+ (440000+90000)*5/12 + (440000+90000-12000) *1/12= 467333
I’m getting just 484,000. 400,000(1.1)(12/12) + 90,000(6/12) - 12,000(1/12) = 484,000 map1: you must be punching in something incorrectly on your calculator 400,000*1.1*6/12 + (400,000*1.1+90,000)*5/12 + (400,000*1.1+90,000 - 12,000)*1/12 = 484,400 Alternatively: 400*1.1+90*5/12+(90-12)/12=484.4 Both of the above expressions equal 484,000.
Even I am getting 484, 000 Ssdnola: a stock split or stock dividend is applied to all the shares outstanding prior to the split or dividend and to the beginning of period weighted average shares. It’s not applied to any shares issued or repurchased after the split or dividend date.
I’ve tried it three different ways and keep getting 484,040
Thank you spirit, i got it now
topher you’re right, it is 484,000
why not this: 400000*5/12 + 440000*1/12+ (440000+90000)*5/12 + (440000+90000-12000) *1/12= 467333 I think this is true, however, still not sure
I would do this question as 400000x1= 400000 ( Beginning Balance) 40000x(7/12)= 23333.33 ( Stock Div @ 10% for 7 months from june 1st to Dec 31st) 90000x(6/12)=45000 ( Issued new shares 90000 for 6 months july 1st to dec 31st) -12000x(1/12)= (1000) (Repurchased) Ending Balance= 400000+23333.33+45000-1000= 467333
another way of doing it 400 * 1.1 * 12/12 = 440 (for full year incl. stock dividend) 90 * 6/12 (for 6 months) = 45 (12) * 1/12 (for 1 month) = (1) total = 440 + 45 - 1 = 484K CP
Can some body explain why not 467333? IMO for first 5 months we have only 400000 shares then for only one month we have 400000(1.1) shares rest of the terms are fine but i am confused about why we take 400000(1.1) shares for 6 months Please clarify
A stock dividend is to be accounted for as though it is for the whole period.