CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

The following data pertains to the Megatron company:

Net income: $15,000
5,000 shares of common stock issued on January 1
10% stock dividend issued on June 1
1,000 shares of common stock repurchased on July 1
1,000 shares of 10 percent, par $100 preferred stock, each convertible into 8 shares of common stock, were outstanding the whole year.

How many common shares should be used in computing the company's basic earnings per share (EPS)?
A. 5,500
B. 4,500
C. 5,000
Explanation: 1/1 5,500 shares issued (includes 10% stock dividend on 6/1) x 12 = 66,000
7/1 1,000 shares repurchased x6 months = -6,000 = 60,000
60,000 shares/12 months = 5,000 average shares

User Contributed Comments 6

User Comment
chenyx 5000*1.1*6/12+(5000*1.1-1000)*6/12
iceluke if you have stock dividends, restate the whole previous period
alki buyback should be kept out of the stock div calc...
achu Good points iceluke, alki.
Lamkerst stock div is retroactive
stock split is for the whole period
chandsingh Hi, so from above stock dividends are assumed to have happened from the start - however what do you mean that stock splits are for the whole period?
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