On January 1, 2018, Albacore Company had 340,000 shares of its common stock issued and outstanding. Albacore issued a 10% stock dividend on July 1, 2018. On October 1, 2018, Albacore retired 14,000 of its common shares. When calculating basic earnings per share for 2018, what is the appropriate number of shares for Albacore to use in the denominator of the EPS fraction?

370,500

Explanation:

The computation of appropriate number of shares is shown below:-

Appropriate number of shares = Common stock shares × (1 + 10%) - (Common shares retired × 3 months (From Oct to Dec) ÷ Total number of months)

= 340,000 × 1.10 - (14,000 × 3 months ÷ 12 months)

= 374,000 - 3,500

= 370,500

Therefore for computing the appropriate number of shares by using in the denominator of the EPS fraction we simply applied the above formula.

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