Zimmer Co. had the following common shares outstanding: January 1, 2003: 50,000 October 1, 2003: Issued 20,000 shares March 1, 2004: Issued a 10% stock dividend July 1, 2004: Declared a 2 for 1 stock split October 1, 2004: Repurchased 30,000 shares Calculate the weighted average number of common shares outstanding for 2003 and 2004. 2003 2004 A) 55,000 124,500 B) 10,000 124,000 C) 55,000 146,500
That question is just plain wrong. I’ve done 20-30 of these types and unless I’m completely off base, thats a bullshit question.
55000 (50000 + 20000*.25) they are only outstanding 1/4 of the year 146500 -you start 2004 with 70k from 2003. -add 10% (7k) -double it -subtract 30k*.25 (you did not repurchased 30k for the whole year…only 1/4) remember, it’s not as tricky as it might seems…stock dividend or splits, simply multiply all the shares outstanding before that date, regardless of when the events occur…issues after these events won’t be adjusted… hope it helps…must go to sleep…lisbon it’s 01:00 AM… hasta
Thanks man. The answer indeed is C. I was wndering how tht 70,000 came but got it now…stupid mistake…
I misread the question, the answer is C, but I am too late anyhow =/ 2003 Jan 1 2003 ---- 50,000 ----- oustanding for 9/12 months (0.75*50000)= 37500 Oct 1 2003 ---- Issue 20,000 so 70,000 outstanding for 3/12 months (0.25*70000)= 17500 Sum = 55,000 2004 – you ended 2003 with 70000 so you start 2004 with the same January 1 — 70000 *1.1 stock div = 77000*2 stock split = 154000 – oustanding for 9/12 months (0.75*154000)= 115500 March 1 — 10% stock div (applied retrospectively) July 1 ---- 2 for 1 split (retrospective again, both div and splits are applied retro) October 2004 — 154000-30000 – oustanding for 3/12 months (0.25*124000)=31000 115,500+31,000 = 146,500 The key is remember dividends and splits are applied retrospectively, so you don’t “per month” them, you just tack them on to whatever shares you had prior for the year. Any actual sales or purchases are on a “per month” weight.