Question

Pfeffer Company reports net income of $360 million for 20X1; the company's tax rate is 40%. At the beginning of the year, 200,000 common shares were outstanding. On August 1, the company issued an additional 120,000 shares. Weighted-average shares will be:

Answer 1

250,000

Step-by-step explanation:

The shares that remainded the same for the year was 200,000 ordinary shares.

The shares that were added during the year were 120,000 ordinary share at the start of 8th month which means 120,000 ordinary shares remained for 5 months time. Weighting it at 5 months time will give 50,000 shares (120,000 * 5 months of the year/ 12).

This means

Weighted Average shares = 200,000 + 50,000 = 250,000