Newton Inc. uses a calendar year for financial reporting. The company is authori
ID: 2464898 • Letter: N
Question
Newton Inc. uses a calendar year for financial reporting. The company is authorized to issue 9,062,000 shares of $12 par common stock. At no time has Newton issued any potentially dilutive securities. Listed below is a summary of Newton’s common stock activities.
2,500,000
300,000
2,063,000
4,863,000
Compute the weighted-average number of common shares used in computing earnings per common share for 2014 on the 2014 comparative income statement.
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.
1. Number of common shares issued and outstanding at December 31, 20122,500,000
2. Shares issued as a result of a 12% stock dividend on September 30, 2013300,000
3. Shares issued for cash on March 31, 20142,063,000
Number of common shares issued and outstanding at December 31, 20144,863,000
4. A 2-for-1 stock split of Newton’s common stock took place on March 31, 2015Explanation / Answer
Beginning common shares at 1 Jan 2014 2,800,000
1.
From 1 Jan 2014 - 31 march 2014 = 2,800,000 * 3 / 12 = 700,000
From 1 April 2014 - 31 December 2014 = 4,863,000 * 9 /12 = 3,647,250
Outstanding shares 4,347,250 shares
2. Split 2 in 1
Weighted average number of common shares for 2014 on the 2015 = 4,347,250 * 2
= 8,694,500 shares