(a) Calculate earnings per share for 2014 as it should be reported to shareholders — Koala Inc had 210 000 common shares outstanding December 2013 During the

($40,600 ÷ 213,000) (.19)

Net income per share ($229,290 ÷ 213,000) $1.08

(b) Weighted average number of shares outstanding—unadjusted 213,000

Stock split, 1/31/15 3

Weighted average number of shares outstanding—adjusted 639,000

Income per share before discontinued operations

($229,690 + $40,600 = $270,290;

($270,290 ÷ 639,000 shares) $0.42

Discontinued operations loss per share, net of tax

($40,600 ÷ 639,000) (.06)

Net income per share ($229,290 ÷ 639,000) $0.36

(c) Common shareholders need to know how much of a company’s available income can be attributed to the shares they own. This helps them assess future dividend payouts and the value of each share. When the income statement presents discontinued operations, earnings per share should be disclosed for income from continuing operations, discontinued operations, and net income. These disclosures make it possible for users of the financial statements to know the specific impact of income from continuing operations on earnings per share, as opposed to a single earnings per share number, which also includes the impact of a gain or loss from irregular items.

(d) It is possible to have simple and complex capital structures over different fiscal years of a corporation. For each accounting period a corporation would need to determine whether options, warrants, convertible debt or convertible preferred shares were outstanding during the fiscal year. Issuance or redemption of such securities would lead to a change in the capital structure from simple to complex or vice versa and this would be reflected in the EPS disclosure.