Doubt about an example from Schweser 10000, understand, therefore, assigned

MiniMe7

Hi PPl,
Need ur help just started with FSA and i came across an example i hve a doubt. the example is named effect of stock dividends in study session 8 in assigned reading 32. Now the doubt: while caculating the stock dividend shares i didnot understand why 10% that is applied should start from Jan for 10000 shares and for 4000 shares from April. Shouldnot 10% be applied on 10000+4000 shares on July and therefore be multiplied by 6 and not by (12 and 9 respectively)
heregoes my calculation:
Compute the weigh red average number of posrstock dividend shares
Jan Initial shares 10000 x 12 monrhs outstanding 120000
April Issued shares 4.000 x 9 monrhs outstanding 36000
July Stock dividend 10% on (10000+4000)*6 8400
Retired shares 3000*4 (12000)
Total sharemonth 152400
average shares 152400/12 12700
my logic is the stock dividend happens in July so the shares come into existence only in jUly so they should be multiplied by 6 and not by 12 and 9 .

atate2007

Is it mentioned in Schweser? thanks a lot for clarrifyin my doubt.

defour44

Yes they mentioned it in page 66 at the end of the example that you’ve already pointed out.
CFA text also states ” for the EPS calculation purpose, a stock split is treated as if it occurred at the beginning of the period” in the example 15 page 168, vol 3.
I think stock dividend and stock split are treated in similar manner.