Question

Howard Corporation had 10,000 shares of common stock outstanding at the beginning of the year. On July 1, it issued 5,000 shares, and on September 1, it reacquired 600 shares as treasury stock. What is the weighted average number of common shares Howard will use in computing its earnings per share

Answer 1

12,300 shares

Step-by-step explanation:

The computation of the weighted average number of common shares is shown below:

= Number of shares + issued shares × number of months ÷ total number of months - treasury stock shares reacquired × number of months ÷ total number of months

= 10,000 shares + 5,000 shares × 6 months ÷ 12 months - 600 shares × 4 months ÷ 12 months

= 10,000 shares + 2,500 shares - 200 shares

= 12,300 shares

We deduct the treasury stock shares and added the issued shared to the beginning shares

Plus we assume the books are closed on December 31 so according to that we considered the number of months i.e to be taken while computing the weighted number of shares