Question

On January 1, 2015, a company had 250,000 shares of its $2 par value common stock outstanding. On March 1, the company sold an additional 500,000 shares on the open market at $20 per share. the company issued a 20% stock dividend on May 1. On August 1, the company purchased 280,000 shares and immediately retired the stock. On November 1, 400,000 shares were sold for $25 per share. What is the weighted-average number of shares outstanding for 2015?

a. 477,777
b. 344,444
c. 750,000
d. 1,020,000
e. none of these answers are correct

Answer 1

Answer:

Answer is Option C: 750,000.

Explanation:

A stock dividend is a payment that is made to the shareholders in shares and not in cash. It increases the number of common shares that are representing the shareholder's investment.  When this occur, a company needs to restate the shares that were outstanding before the stock dividend.

When we calculate the weighted-average number of shares outstanding for 2015, we sum it for the whole year for all quarters.

Total for the whole year will come as 750,000.