Hmm.... Will you make the same mistake I did?

CFA Level I
#1

A company has the following sequence of events regarding its stock: 1) The company had 1,000,000 share outstanding at the beginning of the year 2) On June 30, the company declared and issued a 10% stock dividend 3) On September 30, the company sold 400,00 shares of common stock at par The number of shares that should be used to compute basic earnings per share at year end is: A. 1,000,000 B. 1,100,000 C. 1,200,000 D. 1,600,000 Anyone know how to work this badboy out?

#2

B

#3

C. 1,200,000

#4

rlange - How sure are you?

#5

Sharpshooter - how did you get C? My gosh - you are sicko.

#6

Well, if I understand the wording correctly, they are “selling” not “issuing” shares. Probably from their treasury stock.

#7

(1,100,000*12 + 400,000*3)/12

#8

1000*12 + 100*12 + 400*3 = 14400 / 12 = 1200 Get C.

#9

1,000,000 shares outstanding all year. Adjust those shares for the stock dividend (1,000,000 * 1.10) = 1,100,000 Company issued more shares… 400,000 1,100,000 * 12 months=13,200,000 400,000 * 3 months=1,200,000 =14,400,000 / 12 = 1,200,000 C

#10

Sharpshooter - That is correct. And I am such an idiot. Can’t believe i -400,000!!!

#11

400,00 shares missing a zero…lol

#12

C it is.

#13

fa#k it… I too missed it… Read carrrrrrrrrrefully

#14

C

#15

If it is issued on Sept 30 do you include September or start with October?

#16

Start of Oct. basically u will have 3 months remaining… ans: C

#17

i hate these, assume stock dividends accounted as if they were done at BEG of year.