Gogeon Inc. uses a calendar year for financial reporting. The company is authorized to issue 50 million common shares. At no time has Gogeon issued any potentially dilutive securities. The following list is a summary of Gogeon's common share activities:
Number of common shares issued and outstanding at December 31, 2012 ............. 6,500,000
Shares issued as a result of a 10% stock dividend on September 30, 2013 ............... 650,000
Shares issued for cash on March 31, 2014 ................................................... 2,500,000
Number of common shares issued and outstanding at December 31, 2014 ............. 9,650,000
Gogeon issued its 2014 financial statements on February 28, 2015. A 3-for-1 stock split of Gogeon's common shares occurred on March 31, 2015.
Instructions
(a) Calculate the weighted average number of common shares to use in calculating earnings per common share for 2013 on the 2013 comparative income statement.
(b) Calculate the weighted average number of common shares to use in calculating earnings per common share for 2013 on the 2014 comparative income statement.
(c) Calculate the weighted average number of common shares to use in calculating earnings per common share for 2014 on the 2014 comparative income statement.
(d) Calculate the weighted average number of common shares to use in calculating earnings per common share for 2014 on the 2015 comparative income statement.
(e) Calculate the weighted average number of common shares to use in calculating earnings per common share for 2015 on the 2015 comparative income statement.
(f) Referring to how EPS is used and applied, discuss why the weighted average number of common shares must be adjusted for stock dividends and stock splits.