Calculating Weighted-Average Shares Outstanding: A 2018 Case Study

To calculate the weighted-average number of shares outstanding for 2018, we need to consider the different transactions that occurred throughout the year. Let's break down the calculations step-by-step.

1. Shares outstanding on January 1: 370,000

This is our starting point.

2. Additional shares sold on March 1: 740,000

This increases the total number of shares outstanding.

3. Stock dividend issued on May 1: A 20% stock dividend is equivalent to 20% of the total shares outstanding at that time. The total shares outstanding on May 1 is the sum of the shares outstanding on January 1 and the additional shares sold on March 1.

• Shares outstanding on May 1 = 370,000 + 740,000 = 1,110,000
• Additional shares from the stock dividend = 20% of 1,110,000 = 222,000
• Total shares outstanding after the stock dividend = 1,110,000 + 222,000 = 1,332,000

4. Shares purchased and retired on August 1: 410,000 shares were retired, so they are no longer considered outstanding. This decreases the total number of outstanding shares.

5. Shares sold on November 1: 590,000

This increases the total number of shares outstanding.

Calculating the Weighted-Average

To calculate the weighted-average number of shares outstanding, we need to calculate the weighted average for each period and then sum them up.

• Weighted-average shares for January 1 to February 28 = 370,000 * 2 months = 740,000
• Weighted-average shares for March 1 to April 30 = 1,110,000 * 2 months = 2,220,000
• Weighted-average shares for May 1 to July 31 = 1,332,000 * 3 months = 3,996,000
• Weighted-average shares for August 1 to October 31 = (1,332,000 - 410,000) * 3 months = 2,754,000
• Weighted-average shares for November 1 to December 31 = (1,332,000 - 410,000 + 590,000) * 2 months = 2,104,000

Summing up the weighted-average shares for each period: 740,000 + 2,220,000 + 3,996,000 + 2,754,000 + 2,104,000 = 11,814,000

Conclusion

Rounded to the nearest dollar, the weighted-average number of shares outstanding for 2018 is 11,814,000.