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Chapter 16: Q11BE. (page 875)

Tomba Corporation had 300,000 shares of common stock outstanding on January 1, 2017. On May 1, Tomba issued 30,000 shares. (a) Compute the weighted-average number of shares outstanding if the 30,000 shares were issued for cash. (b) Compute the weighted-average number of shares outstanding if the 30,000 shares were issued in a stock dividend.

Short Answer

Expert verified

a. The weighted-average number of shares outstanding is $320,000.

b. The 30,000 shares issued in the stock dividend are assumed outstanding from the beginning of the year. Therefore, the weighted-average number of shares outstanding is 330,000.

Step by step solution

01

Computation of the weighted-average number of shares outstanding if the 30,000 shares were issued for cash 

(a).

weighted-averagenumberofsharesoutstanding=(ExistingSharesOutstanding脳Periodcovered)+(ExistingandCurrentoutstandingshare脳Periodcovered)=(300000脳412)+(330000脳812)=$100,000+$220,000=$320,000

02

Computation of the weighted-average number of shares outstanding if the 30,000 shares were issued in a stock dividend

weighted-averagenumberofsharesoutstanding=Existingoutstandingshares+sharesissuedinstockdividend=300,000+30,000=330,000

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