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1.) On January 1, 2019, Otto Company had 390,000 shares of its $1 par value common...

1.) On January 1, 2019, Otto Company had 390,000 shares of its $1 par value common stock outstanding. On March 1, Otto sold an additional 748,000 shares on the open market at $10 per share. Otto issued a 20% stock dividend on May 1. On August 1, Otto purchased 414,000 shares and immediately retired the stock. On November 1, 595,000 shares were sold for $15 per share. What is the weighted-average number of shares outstanding for 2019?

2.) Rice Corporation has the following investment which was held throughout 2018–2019:

Fair Value

                                                   Cost              12/31/18             12/31/19

      Equity Investment:         $972,000         $1,281,000         $1,230,000

The equity investments is recorded using the fair value method as no ownership % is greater than 20%. What is the balance of the Fair Value Adjustment Account-Equity Investments at 12/31/2019?

(Be sure to include debit or credit in your answer for example $10,000 debit)

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Answer #1

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Weighted Average number of Shares
Date Particulars No: of Shares (A) Shares Outstanding Period (B) Weighted No: of Shares (A*B/12)
01-Jan Beginning Balance 390000 12 390000
01-Mar Shares Issued 748000 10 623333
01-May Stock Dividend @ 20% ((390000+748000)*20%) 227600 12 227600
01-Aug Repurchase 414000 7 241500
01-Nov Shares Issued 1595000 2 265833
Total 1748267

2

Equity Investment Fair Value
12/31/18 1281000 A
12/31/19 1230000 B
(A-B) 51000 Debit
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