Detailed Answer
(b) For EPS purposes, shares of stock issued as a result
of stock dividends or splits should be considered outstanding for
the entire period in which they were issued. Therefore, both the
original 20,000 shares and the additional 20,000 issued in the 4/1
stock split are treated as outstanding for the entire year (20,000 ×
2 = 40,000). The 7/1 issuance of 10,000 shares results in a
weighted-average of 5,000 shares (10,000 × 6/12) because the
shares were outstanding for only six months during the year.
Therefore, Jet should use 45,000 shares (40,000 + 5,000) to calculate
EPS.