The data below were taken from the accounting records of Fosel Inc. for 2006:Net

Question

The data below were taken from the accounting records of Fosel Inc. for 2006:Net income - $150,000;Income tax expense - 55,000;Interest expense - 35,000;Preferred stock dividends - 30,000;Common stock dividends - 45,000;Beginning shares of common stock- 54,000 shares;Shares of common stock issued February 28- 12,000 shares;Shares of treasury stock purchased July 1- 6,000 shares.Assuming that Fosel Inc. had split its stock 2 for 1 on June 1, compute the weighted-average number of shares outstanding at December 31, 2006.

Explanation / Answer

NI = 150000

TAX = 55000

INT = 35000

Preferred stock dividend = 30000

COmmon stock dividend = 45000

Beginning share common stock = 54000

equivalent share = 54000*2 = 108000 (due to stck split)

share issued = 12000*2 = 24000

share treasury stock purchased = 6000

weighted avg = (108000)+(24000*(10/12))-(6000*(6/12)) = 125000

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