Final answer:
The weighted average number of common shares outstanding for SWAT Corporation in 2023, used for calculating earnings per share, is 350,000 shares. This is calculated based on the initial number of shares, the new shares issued, the effect of a stock split, and the retirement of some shares later in the year.
Step-by-step explanation:
To calculate the weighted average number of common shares outstanding for SWAT Corporation in 2023, we will take into account the common shares outstanding at the beginning of the year, the issuance of new shares, the stock split, and the retirement of shares:
- Start with 300,000 shares on January 1.
- Add 45,000 shares issued on March 1. Since this is 2 months into the year, these shares are weighted for 10 months.
- A 2 for 1 stock split on July 1 doubles the shares to 690,000 [(345,000*2)]. Since this is 6 months into the year, we will count the additional shares for 6 months.
- Subtract 180,000 shares purchased and retired on October 1. Since this is 9 months into the year, these shares will have a weight of 3 months.
The weighted average is calculated as follows:
- 300,000 shares for 12 months = 3,600,000 share-months
- 45,000 shares for 10 months = 450,000 share-months
- ((345,000 x 2) - 345,000) shares for 6 months = 690,000 share-months
- (-180,000 shares) for 3 months = -540,000 share-months
Add these together to get the total share-months: 3,600,000 + 450,000 + 690,000 - 540,000 = 4,200,000 share-months.
To find the weighted average number of shares, we divide the total share-months by 12 months in a year: 4,200,000 / 12 = 350,000 shares.
Therefore, the weighted average number of shares outstanding in 2023 for the purpose of calculating earnings per share is 350,000 shares.