Question

Splish Inc. uses a calendar year for financial reporting. The company is authorized to issue 9,720,000 shares of $10 par common stock. At no time has Splish issued any potentially dilutive securities. Listed below is a summary of Splish’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 Splish'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 computing 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

Answer:

Explanation:

#common shares issued and outstanding (December 31, 2012 ) 2,000,000

Shares issued, 10% stock dividend (September 30, 2013)  200,000

Shares issued for cash on March 31, 2014  2,000,000

#of common shares issued and outstanding (December 31, 2014 ) 4,200,000

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

Jan 1, 2013-Sept. 30, 2013 2,000,000 /12 * 9 =  1,500,000

Adjustment for stock dividend 10%

Jan 1, 2013-Sept. 30, 2013 as adjusted 1,500,000 + 10% =  1,650,000

Oct. 1, 2013 - Dec. 31, 2013 2,200,000 /12 x 3 =  550,000

Total 2,200,000

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

Jan.1, 2014 - Mar. 31,2014 2,000,000 /12 x 3 =  550,000

Apr. 1, 2014 - Dec. 31, 2014  4,200,000 /12 x 9 =  3,150,000

Outstanding shares  3,700,000

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.

2014 weighted average number of shares    3 700 000  

Adjustment for stock split 2 for 1 2  

Outstanding Shares 7 400 000  

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.

Jan. 1, 2015 - Mar. 31, 2015 4,200,000  / 12 x 3 =  1 050 000  

Adjustment for stock split 2 for 1 2  

Jan. 1, 2015 - Mar. 31, 2015 adjusted 1,050,000 x 2 = 2 100 000  

Apr. 1 , 2015 - Dec. 31, 2015 8,400,000 / 12 x 3 =  6 300 000  

Answer 2

Answer:

Explanation:

Answer:

A.$2,200,000

B.$3,700,000

C.$7,400,000

D.$2,100,000

Explanation:

A.

Jan 1, 2013-Sept. 30, 2013

2,000,000 /12 * 9 = $1,500,000

Adjustment for stock dividend 10% 1.10

Jan 1, 2013-Sept. 30, 2013 as adjusted 1,500,000 + 10% = $1,650,000

Oct. 1, 2013 - Dec. 31, 2013 2,200,000 /12 x 3 = $550,000

1,650,000+550,000 = $2,200,000

B.

Jan.1, 2014 - Mar. 31,2014 2,000,000 /12 x 3 =$ 550,000

Apr. 1, 2014 - Dec. 31, 2014 4,200,000 /12 x 9 =$ 3,150,000

3,150,000+550,000 =$3,700,000

C.

2014 weighted average number of shares previously computed 3,700,000 Adjustment for stock split 2 for 1

3,700,000×2= $7,400,000

D.

Jan. 1, 2015 - Mar. 31, 2015 4,200,000 / 12 x 3 = $1,050,000

Adjustment for stock split 2 for 1

2 Jan. 1, 2015 - Mar. 31, 2015 adjusted

1,050,000 x 2 = $2,100,000