On january 1, 2007 yarrow corp. had 1000000 shares of common stock outstanding. on march 1 the corp had issued 15000 new shares to raise additional capital. on july 1 the corp. declared and issued a 2 for 1 stock split. on october 1 the corp. purchased on the market 600000 of its outstanding shares and retired them.
compute the weighted average number of shares to be used in computing earnings per share for 2007.
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To compute the weighted average number of shares for computing earnings per share (EPS) in 2007, we need to consider the various share transactions that occurred throughout the year. Let's break down each transaction and calculate the weighted average accordingly:
1. January 1, 2007:
- Number of shares: 1,000,000
- Weighted average shares: (1,000,000) x (12/12) = 1,000,000
2. March 1, 2007:
- Additional shares issued: 15,000
- Weighted average shares: (15,000) x (9/12) = 11,250
3. July 1, 2007 (2-for-1 stock split):
- Before the split: 1,015,000 (1,000,000 + 15,000)
- After the split: 2,030,000 (1,015,000 x 2)
- Weighted average shares: (2,030,000) x (6/12) = 1,015,000
4. October 1, 2007 (share repurchase and retirement):
- Shares purchased and retired: 600,000
- Weighted average shares: (1,015,000 - 600,000) x (3/12) = 103,750
Now, let's calculate the total weighted average number of shares:
Total Weighted Average Number of Shares = 1,000,000 + 11,250 + 1,015,000 + 103,750 = 2,130,000
Therefore, the weighted average number of shares to be used in computing earnings per share for 2007 is 2,130,000.