What effect do stock dividends or stock splits have on the computation of the weighted-average number of shares outstanding?

Short Answer

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The computation of the weighted-average number of offers outstanding requires repetition of the shares outstanding before the stock split or dividend.

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01

The concept of weighted average no of share outstanding

Different factors impact the weighted average no. of shares outstanding, for example, the shares given during the year, shares outstanding during the start of the current financial period, treasury stock, stock split, stock profit, and so forth. Various perspectives influence the weighted extraordinary offers in various ways.

02

Effect of stock dividends or stock splits effect on calculation of the weighted-average number of shares outstanding

The calculation of the weighted-average number of shares outstanding requires repetition of the shares outstanding before the stock profit or split. The extra shares outstanding because of a stock dividend or split are expected to have been outstanding since the start of the year. Shares outstanding preceding the stock dividend or split are changed, so these offers are expressed similarly to offers given after the stock dividend/split.

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Most popular questions from this chapter

On January 1, 2017, Barwood Corporation granted 5,000 options to executives. Each option entitles the holder to purchase one share ofBarwood’s \(5 par value common stock at \)50 per share at any time during the next 5 years. The market price of the stock is \(65 per share on the date of grant. The fair value of the options at the grant date is \)150,000. The period of benefit is 2 years. Prepare Barwood’s journal entries for January 1, 2017, and December 31, 2017 and 2018.

What are the advantages of using restricted stock to compensate employees?

Question: . Mae Jong Corp. issues \(1,000,000 of 10% bonds payable which may be converted into 10,000 shares of \)2 par value ordinary shares. The market rate of interest on similar bonds is 12%. Interest is payable annually on December 31, and the bonds were issued for total proceeds of $1,000,000. In accounting for these bonds, Mae Jong Corp. will:

(a) first assign a value to the equity component, then determine the liability component.

(b) assign no value to the equity component since the conversion privilege is not separable from the bond.

(c) first assign a value to the liability component based on the face amount of the bond.

(d) use the “with-and-without” method to value the compound instrument.

Question: Archer Company issued \(4,000,000 par value, 7% convertible bonds at 99 for cash. The net present value of the debt without the conversion feature is \)3,800,000. Prepare the journal entry to record the issuance of the convertible bonds.

Rockland Corporation earned net income of \(300,000 in 2017 and had 100,000 shares of common stock outstanding throughout the year. Also outstanding all year was \)800,000 of 9% bonds, which are convertible into 16,000 shares of common. Rockland’s tax rate is 40%. Compute Rockland’s 2017 diluted earnings per share.

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