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26 December, 20:07

The following information pertains to Torque Corp.'s outstanding stock for 2021: Common stock, $1 par value Shares outstanding, 1/1/2021 60,000 2-for-1 stock split, 4/1/2021 Shares issued, 7/1/2021 30,000 Preferred stock, $10 par value, 6% cumulative Shares outstanding, 1/1/2021 12,000How many shares should Torque use to calculate 2021 basic earnings per share?

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  1. 26 December, 23:53
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    135,000 shares

    Explanation:

    The stock split is the re-denomination of the shares where the number of shares increases without a corresponding increase in shareholders' equity. For instance assigning two shares for each share had earlier with two new shares priced at the price of previous one share, however in calculating the number of shares applicable to basic earnings stock split is treated retrospectively, as if it has always been part of the company's shares

    Opening number of shares 60,000

    add increase due to stock split (2*60,000) - 60,000 60,000

    new shares half-way through the year 30,000*6/12 15,000

    Weighted average number of shares 135,000
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