Question

Newt Inc. uses a calendar year for financial reporting. The company is authorized to issue 9,000,000 shares of $10 par common stock. At no time has Newton issued any potentially dilutive securities. Listed below is a summary of Newton's common stock activities.

1. Number of common shares issued and outstanding at December 31, 2012 - 2,000,000

2. Shares issued as a result of a 10% stock dividend on September 30, 2013 - 200,000

3. Shares issued for cash on March 31, 2014 - 2,000,000

Number of common shares issued and outstanding at December 31, 2014 - 4,200,000

4. A 2-for-1 stock split of Newt's common stock took place on March 31, 2015

Instructions:

(a) Compute the weighted average number of common shares used in computing earnings per common share for 2013 on the 2014 comparative income statement.

(b) Compute the weighted average number of common shares used in compting earnings per common share for 2014 on the 2014 comparative income statement.

(c) Compute the weighted-average number of common shares to be used in computing earnings per common share for 2014 on the 2015 comparative income statement.

(d) Compute the weighted-average number of common shares to be used in computing earnings per common share for 2015 on the 2015 comparative income statement

Answer 1