Choice "D" is correct. When calculating the weighted - average number of shares to be used in the earnings-per-share calculation, stock dividends are treated as if they occurred at the beginning of the period. Ceil Co.'s weighted average number of shares should therefore be calculated as:
| |
|---|
| 124,000 shares x 6/12 = | $ 62,000 |
| 129,000 shares x 6/12 = | 64,500 |
| Weighted average | $ 126,500 |
Choice "a" is incorrect. This weighted average calculation does not treat the stock dividend retroactively. Stock dividends must be treated as if they occurred at the beginning of the period.
Choice "c" is incorrect. This weighted average calculation treats the stock issuance as if it occurred at the beginning of the year and does not make a retroactive adjustment for the stock dividend. Stock issuances are not adjusted retroactively, but instead are time weighted for the period of the year in which the shares are outstanding. Stock dividends and stock splits must be treated retroactively.
Choice "b" is incorrect. This is the total number of shares outstanding at December 31, not the weighted average number of shares outstanding for the year.
