I’m having difficulty figuring out how to do this b/c schweser keeps showing the answers to these problems using different methods each time… Here is the question: Oregon Corp.’s stock transactions during the year were as follows: January 1: 320,000 shares outstanding. April 1: 1-for-2 reverse stock split occurred. July 1: Acquisition of Smith, Inc. in exchange for issuance of 60,000 shares. October 1: 30,000 shares issued for cash. What is Oregon’s weighted average number of shares outstanding? A) 167,500. B) 197,500. (Correct Answer) C) 250,000 From what I understand, this is how it should be calculated: 160,000 + (60,000 x 3/12) + (30,000 x 3/12) but this gives me 182,500… Can someone explain why this isn’t the correct method but from what I recall this is the method they have been using for some problems and the correct answer is given…Frustrating! Thanks!
320 000 were for 12/12 months 1 for 2 means that the shares decreased in half = therefore 320 000 is now 160 000 for 12/12 months = 160 000 July 1 Acqu for 60 000, these shares were 6 months… therefore 6/12 = 30 000 October: 30 000 shares were outstanding for 3 months… 3/12 = 7,500 Add them up 160 000 + 30 000 + 7 500 = 197 500
because you’re doing 60000 * 3/12 instead of 6/12… they were issued on july 1
Okay I see…my mistake was that I thought the 60,000 shares only went 3 months until the next transaction but it really carries through until the end of the year which makes sense. So it should be 6 months instead of 3. Got it Thanks!
it’s like when they repurchase some shares, you reduces the outstanding oly for the prorata period after