Asked by Madison Forte on Jul 15, 2024
Verified
On January 1, a corporation had 20, 000 shares of common stock outstanding.An additional 4, 000 shares were issued on July 1, and on November 1, the company declared a 3-for-1 stock split.The denominator in the earnings per share calculation would be
A) 36, 000
B) 56, 000
C) 66, 000
D) 72, 000
Stock Split
A decision by a company to increase the number of its outstanding shares by issuing more shares to current shareholders.
Common Stock
An equity ownership interest in a corporation, typically entitling the owner to vote on corporate governance matters and receive dividends.
Earnings Per Share
A company's profit divided by the number of outstanding shares of its common stock, indicating the company's profitability.
- Evaluate the effects of business activities (including dividends, stock splits, and buybacks) on the Earnings Per Share.
- Derive the weighted average quantity of common stocks in existence.
Verified Answer
LO
Luisa OlivaJul 21, 2024
Final Answer :
C
Explanation :
First, we need to calculate the total number of shares after the stock split. The stock split increased the number of shares by a factor of 3. So, the total number of shares after the split is:
20,000 + 4,000 = 24,000 (after July 1)
24,000 x 3 = 72,000 (after November 1)
Therefore, the denominator in the earnings per share calculation would be 72,000.
20,000 + 4,000 = 24,000 (after July 1)
24,000 x 3 = 72,000 (after November 1)
Therefore, the denominator in the earnings per share calculation would be 72,000.
Learning Objectives
- Evaluate the effects of business activities (including dividends, stock splits, and buybacks) on the Earnings Per Share.
- Derive the weighted average quantity of common stocks in existence.