Gear Corporation had the following common stock record during the current calendar year:

What is the number of shares to be used in computing basic EPS?
A)5,500,000.
B)4,210,000.
C)5,303,750.
D)5,050,000.

Question

Gear Corporation had the following common stock record during the current calendar year:

What is the number of shares to be used in computing basic EPS?
A)5,500,000. 
B)4,210,000. 
C)5,303,750. 
D)5,050,000.

Quizplus · Accepted Answer

The number of shares to be used in computing basic EPS is the weighted average of outstanding common shares during the period. Based on the record provided, the weighted average would be [(4,000,000 x 6 months) + (5,000,000 x 6 months)] / 12 = 4,500,000. However, there was a 5% stock dividend declared and issued during the year, so the number of shares increases to 4,210,000 [(4,500,000 x 105%)]. Therefore, the answer is B.

Gear Corporation Had the Following Common Stock Record During the Current