Final answer:
The weighted average number of shares to be used for calculating earnings per share for Warren Corporation in 2015 is 1,575,000. This number accounts for the issuance of new shares, a 2-for-1 stock split, and the repurchase and retirement of shares throughout the year.
Step-by-step explanation:
To compute the weighted average number of shares for earnings per share (EPS) in 2015 for Warren Corporation, we consider the timeline of share transactions throughout the year:
- January 1: 1,000,000 shares outstanding.
- March 1: Issued 150,000 new shares.
- July 1: 2-for-1 stock split, doubling the number of shares.
- October 1: Repurchased and retired 500,000 shares.
Let's calculate:
- From January 1 to March 1 (2 months or 2/12 of the year): 1,000,000 shares.
- From March 1 to July 1 (4 months or 4/12 of the year): 1,000,000 + 150,000 = 1,150,000 shares.
- From July 1 to October 1 (3 months or 3/12 of the year), after the stock split: 1,150,000 * 2 = 2,300,000 shares.
- From October 1 to December 31 (3 months or 3/12 of the year), after share retirement: 2,300,000 - 500,000 = 1,800,000 shares.
Now, we weight these by the fraction of the year they each represent:
- (1,000,000 shares * 2/12) = 166,667 weighted shares
- (1,150,000 shares * 4/12) = 383,333 weighted shares
- (2,300,000 shares * 3/12) = 575,000 weighted shares
- (1,800,000 shares * 3/12) = 450,000 weighted shares
Adding these up gives us the weighted average number of shares:
166,667 + 383,333 + 575,000 + 450,000 = 1,575,000 weighted average shares.
Therefore, Warren Corporation should use 1,575,000 as the weighted average number of shares for calculating its 2015 EPS.