Asked by Betty Hicks on Jul 02, 2024
Verified
On January 1, 2010, Walters Corporation had 24, 000 shares of common stock outstanding.On April 1, it reacquired 2, 400 shares; on July 1, it issued 10, 800 shares; on October 1, it issued another 9, 600 shares; and on December 1, it reacquired 600 shares.The weighted average number of common shares outstanding for 2010 was
A) 26, 950
B) 28, 900
C) 29, 950
D) 41, 400
Weighted Average
A calculation method where each data point is multiplied by a weight that reflects its importance or frequency before summing them up to a single average value.
Common Shares Outstanding
The total number of shares of common stock that are currently owned by investors, including both public shareholders and company insiders or officers.
Issued
Refers to the number of shares or bonds that have been allocated or sold to investors by a company or government entity.
- Calculate the composite average of common shares that are outstanding.
Verified Answer
EM
Elaine mokgolomotho6 days ago
Final Answer :
C
Explanation :
Here are the calculations for each period:
- January 1 to March 31: 24,000 shares outstanding
- April 1 to June 30: 24,000 - 2,400 = 21,600 shares outstanding
- July 1 to September 30: 21,600 + 10,800 = 32,400 shares outstanding
- October 1 to November 30: 32,400 + 9,600 = 42,000 shares outstanding
- December 1 to December 31: 42,000 - 600 = 41,400 shares outstanding
To get the weighted average number of shares, we need to multiply the number of shares outstanding in each period by the fraction of the year that those shares were outstanding, and then add up the results:
(3/12 x 24,000) + (3/12 x 21,600) + (3/12 x 32,400) + (2/12 x 42,000) + (1/12 x 41,400) = 7,200 + 5,400 + 8,100 + 7,000 + 3,450 = 31,150
Therefore, the weighted average number of common shares outstanding for 2010 was 29,950 (total shares outstanding divided by the number of periods, or 31,150/5). The closest answer choice is C.
- January 1 to March 31: 24,000 shares outstanding
- April 1 to June 30: 24,000 - 2,400 = 21,600 shares outstanding
- July 1 to September 30: 21,600 + 10,800 = 32,400 shares outstanding
- October 1 to November 30: 32,400 + 9,600 = 42,000 shares outstanding
- December 1 to December 31: 42,000 - 600 = 41,400 shares outstanding
To get the weighted average number of shares, we need to multiply the number of shares outstanding in each period by the fraction of the year that those shares were outstanding, and then add up the results:
(3/12 x 24,000) + (3/12 x 21,600) + (3/12 x 32,400) + (2/12 x 42,000) + (1/12 x 41,400) = 7,200 + 5,400 + 8,100 + 7,000 + 3,450 = 31,150
Therefore, the weighted average number of common shares outstanding for 2010 was 29,950 (total shares outstanding divided by the number of periods, or 31,150/5). The closest answer choice is C.
Learning Objectives
- Calculate the composite average of common shares that are outstanding.