[Nobuhiko]

Hi,

My name is Nobu

I’m stuck with this question here. Can somebody help me understand?

(Sorry for my bad English)

The following information pertains to company Z., a company whose common stock trades in a public market

a) Shares outstanding at 1/1 100,000

b) Stock dividend at 3/31 24,000

c) Stock issuance at 6/30 5,000

What is the weighted-average number of shares Z should use to calculate its basic EPS for the year ended Dec.31

The answer is 126,500

The explanation for this answer is,,,

124,000 shares * 6/12 = $ 62,000

129,000 shares * 6/12 = $ 64,500

weighted-average is $ 126,500

I know the stock dividends must be added to the beginning balance to calculate the weighted-average

but my question is why is a) multiplied by 6/12 not 12/12? and why are the stock dividends also added to c)

I have feeling that I missed something very basic here. This should be a simple question but is very different from what I have learnt.

Thank you!

[Biff-1955-Tannen]

They use 6/12 because for the first 6 months of the year there was 124,000 outstanding (100,000 beginning balance and 24,000 stock dividend applied retroactively). And then 6/12 again because for the second half of the year there was 129,000 shares outstanding (124,000 from the first six months and 5,000 from new stock issuance).

It sounds like maybe you're used to doing EPS questions how I do them. The way that I do EPS questions, is I treat each new event as it's own calculation. So the way I do EPS questions is like this:

124,000 x 12/12 = 124,000
5,000 x 6/12 = 2,500

2,500 + 124,000 = 126,500.

I used 12/12 for the first event because this event was outstanding for 12 months out of the year.
I used 6/12 for the second event because this event was outstanding for only 6 months out of the year

So where I treat each event as its own calculation, the example seems to use a running total of outstanding shares for the calculation.

AUD - 93
BEC - 83
FAR - 83
REG - 84

Nobody calls me chicken

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[Nobuhiko]

wow it helped me a ton.
I finally understand.
Thank you so much for giving me an input!!!

[se7en.14]

I understand how to calculate these, except I don't understand how you know if the months are jan to june or july to dec? How can you tell which way its going?

Thanks.

.

[MaLoTu]

se7en- if it says 6/1 – 12/31, you have to count all of june so it is 7/12, rather than six. They almost always state that they are acquired at the beginning of the month. I am not sure if this is exactly what you are asking or not. The dates are always given if they are asking you to calculate WASCO.

Almost always from my phone... please excuse my typos!

All 4 passed - 2016

CA CPA

[se7en.14]

oh thanks. I think I got the hang of those now.

.

[Author]

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