- CFA Exams
- 2021 CFA Level I Exam
- Study Session 7. Financial Reporting and Analysis (2)
- Reading 21. Understanding Income Statements
- Subject 7. Earnings per Share

###
**CFA Practice Question**

Sugarland Corporation had 200,000 common shares outstanding on January 1, 2015. They issued 30,000 additional shares on 4/1/2015 and 12,000 shares on 12/1/2015. What is the weighted average number of shares for the basic EPS computation at the end of 2015?

B. 222,500 shares

C. 223,500 shares

A. 200,000 shares

B. 222,500 shares

C. 223,500 shares

Correct Answer: C

The computation is (200,000 x 3/12) + (230,000 x 8/12) + (242,000 x 1/12) = 223,500 shares.

###
**User Contributed Comments**
20

User |
Comment |
---|---|

examinee |
It should be 230000 * 9/12. However, the answer is correct. |

Nancyz |
No, it should be 230,000 * 8/12. the explanation was correct. 8 months between the two issuance. |

synner |
200,000 * 12/12 + 30,000 * 9/12 + 12,000 * 1/12 = 223500 |

cwrolfe |
HP12C f clear reg 200000 enter 3 Sigma+ 230000 enter 8 Sigma+ 242000 enter 1 Sigma+ g xw (#6 key) =223,500 |

tonytt |
Isn't it 24 months from Jan 1,2000 to end of year 2011? |

nagri |
Since there's no change so we should assume that the number of shares was still the same at the beginning of 2011. |

steved333 |
yes, synner's explanation is the best. the original 200k were there for the whole year, the next 30k were there for 9 months of the year, and the final 12k were there for only one month. the analyst notes explanation is right (as you can see, the 245k includes the 230k+12k), but it's more confusing. |

TammTamm |
cwrolfe, your explanation for the HP12C is great. Thanks. |

rfvo |
200,000 * 12/12 + 30,000 * 9/12 + 12,000 * 1/12 = 223500 Agreed!! N1 |

gazelle |
But could you explain why 200000 enter 3 Sigma+ and why 230000 enter 8 Sigma+ please? Many thx |

viannie |
gazelle, that's the HP12c way to calculate weighted average. It's computed so we just key in the no. of shares, enter 3 sigma+ for example is to indicate to HP12c the proportion (3) Since we key in total sigma = 12, HP12c will take that up and once we press g #6 key, the weighted average becomes computed. Hope this helps ;) |

panvino |
I find it easier to do it like this: [(200000*12) + (30000*9) + (12000*1)]/12 = 223500 |

bundy |
way easier this way 200,000 + 30,000 x 9/12 + 12,000 x 1/12 |

jpducros |
my 2 cents advise...don't bother entering the "thousands" in your calc. You'll save time. |

poomie83 |
Damn the american date format!! |

majesty |
Poomie83, LOL. Did you get something like: 200000 * 3/365 + 230000 * 8/365 + 242000 * 355/365 = 241393? |

jayj001 |
lol month/day reversal just cost me 10 minutes! |

gulfa99 |
I got the answer right..but how are we suppose to figure out the date format. |

schweitzdm |
Is there a BA II Plus method for this, similar to the one mentioned for HP12C? |

farhan92 |
awkward moment you enter 8/12 as 0.75 -.- |