Question

On December 31, 2017, Beta Company had 320,000 shares of common stock issued and outstanding. Beta issued a 4% stock dividend on June 30, 2018. On September 30, 2018, 35,000 shares of common stock were reacquired as treasury stock. What is the appropriate number of shares to be used in the basic earnings per share computation for 2018?

Answer 1

The answer is 324,050 shares

Step-by-step explanation:

Stock dividends adds to the total number of shares outstanding while treasury stock(buy-back) reduces the total number of outstanding shares.

Beta issued a stock dividend of 4percent. Meaning the outstanding shares will increase by 4percent.

1.04 x 320,000 shares

=332,800 shares is the total number of outstanding shares before treasury stock.

Treasury stock issued on September 30, 2018. This means we have 3months(October 1 - December 31st, 2018).

So we have 3/12 x 35,000 shares

= 8,750 shares

Therefore, the appropriate number of shares to be used in the basic earnings per share computation for 2018:

=332,000 shares - 8,750 shares

= 324,050 shares