Question

On January 1, 2011, Gridley Corporation had 125,000 shares of its $2 par value common stock outstanding. On March 1, Gridley sold an additional 250,000 shares on the open market at $20 per share. Gridley issued a 20% stock dividend on May 1. On August 1, Gridley purchased 140,000 shares and immediately retired the stock. On November 1, 200,000 shares were sold for $25 per share. What is the weighted-average number of shares outstanding for 2011?

a. 510,000
b. 375,000
c. 358,333
d. 258,333

Answer 1

The weighted-average number of shares outstanding for 2011 is 450,000.

Step-by-step explanation:

To calculate the weighted-average number of shares outstanding, we need to consider the shares outstanding at different points during the year and the length of time each share was outstanding.

1. On January 1, 2011, Gridley Corporation had 125,000 shares outstanding, which were outstanding for the entire year.
2. On March 1, Gridley sold an additional 250,000 shares, which were outstanding for 10 months (from March to December).
3. On May 1, Gridley issued a 20% stock dividend, increasing the number of shares by 20%.
4. On August 1, Gridley purchased 140,000 shares and immediately retired them, decreasing the number of shares by 140,000.
5. Finally, on November 1, Gridley sold 200,000 shares, which were outstanding for 2 months (from November to December).

To calculate the weighted-average number of shares outstanding, we need to multiply the number of shares by the time they were outstanding and sum the results. Then, we divide by the total number of months in the year (12) to get the weighted-average number of shares outstanding.

(125,000 shares imes 12 months) + (250,000 shares imes 10 months) + (125,000 shares imes 8 months) + (200,000 shares imes 2 months) = 1,500,000 + 2,500,000 + 1,000,000 + 400,000 = 5,400,000.

5,400,000 / 12 = 450,000.

The weighted-average number of shares outstanding for 2011 is 450,000.