Calculate weighted-average shares outstanding for the basic EPS denominator in two worked examples: first with share issuances and a retirement, then with a 20% stock dividend. This CPA FAR practice simulation is for CPA candidates and intermediate accounting students.

How do you calculate weighted-average shares?
For each period, multiply common shares outstanding by the fraction of the year they were outstanding, adjust for stock dividends or splits when required, and add the weighted amounts. The lecture builds a table of dates, shares, restatement factors, time fractions and weighted shares.

Example 1: Without the stock dividend
Laptop Corporation starts with 25,000 shares, issues 50,000 on March 1, retires 28,000 on August 1 and issues 40,000 on November 1.
• January–February: 25,000 × 2/12 = 4,166.67
• March–July: 75,000 × 5/12 = 31,250
• August–October: 47,000 × 3/12 = 11,750
• November–December: 87,000 × 2/12 = 14,500
Total = 61,666.67, or approximately 61,667 weighted-average shares.

Example 2: Include the May 1 stock dividend
A 20% stock dividend uses a 1.20 restatement factor for shares outstanding before the dividend:
• January–February: 25,000 × 1.20 × 2/12 = 5,000
• March–July: 75,000 × 1.20 × 5/12 = 37,500
• August–October: (90,000 − 28,000) × 3/12 = 15,500
• November–December: (62,000 + 40,000) × 2/12 = 17,000
Total = 75,000 weighted-average shares.

Why can March–July remain one row?
Restating the 75,000 pre-dividend shares produces 90,000, equal to the actual count after May 1. Do not apply another 1.20 factor to the later 28,000-share retirement or 40,000-share issuance; those are already post-dividend share quantities.

This lesson calculates the denominator, not a numerical EPS amount. In a simple capital structure, basic EPS divides income available to common shareholders by weighted-average common shares.

Chapters
00:00 EPS simulation overview
00:10 Study resources
00:58 What the weighted-share question asks
01:53 Laptop Corporation share transactions
03:16 Build the weighted-average shares table
03:46 January–February: beginning shares
04:29 What if shares never change?
04:53 March–July: issue 50,000 shares
05:40 August–October: retire 28,000 shares
06:16 November–December: issue 40,000 shares
06:41 Total without a stock dividend
07:28 Add the 20% stock dividend
07:50 Restate beginning shares by 1.20
09:50 Restate the March share issuance
10:34 Carry adjusted shares into later periods
11:16 Retirement and final issuance after the dividend
11:52 Stock-dividend and stock-split reminders
12:45 Further EPS study resources

Clarifications (reviewed September 2026)
• The first interval is January 1 through February 28, ending just before March 1—not through March 31. The next interval is March 1 through July 31. The month weights are 2 + 5 + 3 + 2 = 12.
• Use 25,000 beginning shares and a 20% stock dividend, despite occasional spoken/caption slips. The original slide states that November's 40,000 shares sell for $30 PER SHARE. Dollar par/issue prices do not enter this share-count denominator.
• This classroom example uses monthly weights. ASC 260-10-55-2 identifies daily averaging as most precise but allows less precise methods producing reasonable results.
• ASC 260-10-55-12 requires retrospective EPS adjustment for stock dividends/splits for all periods presented. Cash share issuances and repurchases are weighted from their transaction dates in this example.
• The 2022 year is a hypothetical fact pattern in a 2020 recording. Current FAR coverage includes EPS; comments predicting what the exam is likely to ask are not guarantees. This is a teaching simulation, not identified as an official released exam question.

Standards and exam references
ASC 260 excerpts: https://dart.deloitte.com/USDART/home/codification/presentation/asc260-10/roadmap-earnings-per-share/chapter-8-other-considerations/8-2-shareholder-distributions
Current AICPA blueprints: https://www.aicpa-cima.com/resources/article/learn-what-is-tested-on-the-cpa-exam

Continue learning
Basic EPS & Weighted Average Shares: https://www.youtube.com/playlist?list=PLNBt75FjDCQE
CPA FAR Practice & Simulations: https://www.youtube.com/playlist?list=PLxP0KZzCGFYOnWWmbr2qx7lQ9aNix52yO
Lectures and practice resources: https://farhatlectures.com

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