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    Weighted-Average of Outstanding Shares

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    I don't understand the effect of the Share Dividend Column ... {please see attachment}

    I don't understand the effect of the Share Dividend Column - how do they get 1.10? And how come in December they only have it 1, not 1.10?

    Time Period Outstanding Shares Effect of Share Dividend Fraction of year Weighted Average
    Jan-March 500,000 x 1.10 x 3/12 137,500
    Apr-October 540,000 x 1.10 x 7/12 346,500
    Nov 510,000 x 1.10 x 1/12 46,750
    Dec 561,000 x 1 x 1/12 46.750
    Weighted-average outstanding shares 577.500

    Earnings per share under the assumption of the 10% stock dividend would be:

    Basic earnings per share = 880,000 net income - 250,000 preferred dividends declared

    = 1.09

    This is where I got my information:

    Lescon Inc.
    Shareholders Equity
    December 31,2002
    Contributed Capital:
    Preferred shares, $5 cumulative, unlimited shares authorized,
    50,000 shares issued & outstanding $1,000,000
    Common Shares, unlimited shares authorized,
    540,000 shares issued and 510,000 shares outstanding* 7,200,000
    Total contributed capital $8,200,000
    Retained Earnings 1,110,000
    Total Shareholders equity $9,310,000

    *40,000 common shares issued on April 1,2002
    30,000 common shares were repurchased and retired on November 1,2002

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    Solution Preview

    The additional shares which are created by a stock dividend or a stock split are not weighted for the time period they were outstanding. Instead , the shares outstanding prior to the stock distribution are retroactively restated to reflect the increase in shares - that is, treated as ...

    Solution Summary

    The solution calculates the Weighted-Average of Outstanding Shares.