Financial Accounting: Advanced Topics

Professor Oktay Urcan

Module 3: Shareholders’ Equity

Table of Contents
Module 3: Shareholders’ Equity............................................................................................... 1
Lesson 3-1: Shareholders' Equity: Overview ..................................................................................... 2
Lesson 3-1.1: Shareholders' Equity: Overview ..................................................................................................... 2

Lesson 3-2: Shareholders' Equity: Equity Issuance and Profitability .................................................. 4

Lesson 3-2.1: Shareholders' Equity: Equity Issuance and Profitability ................................................................. 4

Lesson 3-3: Shareholders' Equity: Distributions ................................................................................ 9

Lesson 3-3.1: Shareholders' Equity: Distributions................................................................................................ 9

Lesson 3-4: Shareholders' Equity: Earnings per Share ..................................................................... 13

Lesson 3-4.1: Shareholders' Equity: Earnings per Share .................................................................................... 13

Lesson 3-5: Appendix 1: Advanced Issues in Shareholders' Equity .................................................. 15

Lesson 3-5.1: Appendix 1: Advanced Issues in Shareholders' Equity ................................................................. 15

Lesson 3-6: Module 3 Case Video ................................................................................................... 27

Lesson 3-6.1: Module 3 Case Video ................................................................................................................... 27

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Lesson 3-1: Shareholders' Equity: Overview

Lesson 3-1.1: Shareholders' Equity: Overview

In this module, we will cover accounting for stockholders equity. In particular, we will talk
about equity issuances, dividends, treasury stock and earnings per share.

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What is shareholders equity? According to fundamental accounting equation, assets are
equal to liabilities plus shareholders equity. Therefore, shareholders equity is equal to
assets minus liabilities. In other words, shareholders equity is the amount of total assets
financed by firms owners. We call these owners as shareholders. Shareholders do have
voting rights. Let me tell you a very important detail here. There could be many
transactions between shareholders and firms, but these transactions will never result in
a profit or a loss. This is because shareholders are owners of the firms. They fully
control firms, therefore, the transactions between shareholders and firms are like
shareholders are trading with themselves.

Here is Walmart's 2023 shareholders equity. Total shareholders equity of Walmart in

2023 is 83,754. The main components of shareholders equity are common stock capital
in excess of par value, in other words, additional paid in capital and retained earnings.
We will talk about these accounts in detail later in this module.

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Lesson 3-2: Shareholders' Equity: Equity Issuance and Profitability

Lesson 3-2.1: Shareholders' Equity: Equity Issuance and Profitability

Shareholders' equity changes due to three main transactions. These are equity
issuances, profitability, which is a reflection of income statement on retained earnings at
the end of accounting period, and distributions, such as dividends and stock
repurchases. We will now discuss these transactions in detail.

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The first reason why shareholders equity can change is equity issuance. Firms issue
common shares to shareholders. Common shares have two distinctive features. First,
they give residual ownership to shareholders. After all liabilities are paid, whatever is left
in the firm belongs to shareholders. Second, shareholders have voting rights. They can
affect firms operating, investment, and financial policies through their voting rights.

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Here is some terminology about equity issuance. Par value is the value written on a
share certificate. It is generally a very small number, such as $0.01. Additional paid-in
capital, in short APIC, is the difference between shareholders investment in a firm and
par value. Authorized shares is the maximum number of shares that the firm can issue.
Issued shares is the number of shares printed by the firm. Outstanding shares is the
number of shares actively traded in the market. It can be calculated as issued shares
minus treasury stock. Treasury stock is the number of issued shares repurchased by
the firm.

Here is an example about share issuance. Five friends established a firm by investing
5,000 each. In return, the firm issues 10,000 total shares with a par value of $1 each.
Cash increases by 25,000, which is calculated as investment of each friend, which is
5,000 times 5. Common stock account records total par value of issued shares. Since
the firm issues 10,000 shares and each share has a par value of $1, common stock
increases by 10,000. The difference between the shareholders total investment, which
is 25,000, and common stock is recorded as additional paid-in capital.

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Common stock value of Walmart in 2023 is 269. However, this doesn't tell much about
par value or number of shares issued. According to Walmart financial statement
footnotes, in 2023, number of shares issued is 2,693 in millions, and par value per
share is $0.10. Therefore, common stock value is 2,693 times $0.10, which is equal to
269 in millions.

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Capital in excess of par value's another name for APIC. 2023 APIC amount for Walmart
is 4,969, in other words Walmart shareholders paid 4,969 over and above par value to
purchase Walmart shares. The second reason why shareholders equity can change is
profitability. Profitability affects shareholders equity by reflecting net income on retained
earnings at the end of each accounting period.

The value of retained earnings in 2023 balance sheet for Walmart is 83,135. How do we
create retained earnings? To see this, let's go through a simple exercise. A firm
provides a service and earns $500 in November 2024, which is payable in April 2025.
We first record revenue, account receivable is created for the service provided, for
which the payment will be made later. The other side of this transaction is revenues
recorded under income statement column. When the accounting period ends, we reflect
net balance in income statement column on retained earnings. The only item on income
statement column is a revenue of $500, which is reflected under retained earnings
column. The other side of this transaction is to record -500 under income statement
column. The purpose of recording -500 under income statement column is to balance
the transaction worksheet. This doesn't mean that net income at the end of 2024 is
zero.

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Lesson 3-3: Shareholders' Equity: Distributions

Lesson 3-3.1: Shareholders' Equity: Distributions

The third reason why shareholders' equity could change its distributions. There are two
main types of distributions that firms can make. The first one is dividends. Under
dividends, firms distribute the same amount of cash to each common share. The
second way distributions can work, is stock repurchases. Under stock repurchases,
firms go to the stock market and repurchase some of their own shares.

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Here is an example about dividends. A firm with 10,000 shares outstanding declares
and pays $1 per share as dividends. Since the firm has 10,000 shares outstanding, and
each share is entitled to $1 dividend, cash decreases by 10,000. The other side of this
transaction will be a reduction from retained earnings with the same amount. Please
notice that dividends are paid from retained earnings. This makes sense because the
retained earnings are profits earned by firm but not distributed to shareholders yet.
Therefore, when dividends are paid, they are paid from retained earnings. Please also
note that dividends are not expenses. And therefore they do not affect income
statement.

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Here is an example about stock repurchases. A firm repurchases 100 shares from the
stock market by paying 1500 in total, cash decreases by 1500. The other side of this
transaction will be a special shareholders equity account, called treasure stock.
Treasury stock account is used to record repurchase common shares of the firm. Its
value is negative. And therefore it is a contra equity account.

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There are a few reasons why firms repurchase their own shares. First, stock
repurchases increase market value of the firm by signaling management's trust in the
firm. Second, repurchases reduce number of shares outstanding, which is actively
traded shares in the market. As we will talk about soon, the denominator used in
earnings per share calculations, is the number of shares outstanding. Reduced number
of shares outstanding mechanically increases earnings per share. Third, repurchased
shares can be used by firms as a form of compensating employees.

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Lesson 3-4: Shareholders' Equity: Earnings per Share

Lesson 3-4.1: Shareholders' Equity: Earnings per Share

Earnings per share is a very important number used by capital market participants to
judge firms profitability. It is calculated as net income divided by number of shares
outstanding. Here is a small example. If the amount of net income is 150,000 and the
number of outstanding shares is 25,000, earnings per share is 150/25 = $6 per share.
Please note that the denominator in earnings per share formula is number of shares
outstanding. Therefore, repurchase shares are not included in earnings per share
calculation.

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Here's a brief summary of this module. In this module, we learned accounting for equity
issuances, accounting for equity distributions, and how to calculate earnings per share.
In the next module, we will go through cash flows statement.

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Lesson 3-5: Appendix 1: Advanced Issues in Shareholders' Equity

Lesson 3-5.1: Appendix 1: Advanced Issues in Shareholders' Equity

In this video, we will discuss advanced issues in shareholders equity. The first topic we
will talk about is preferred stock. Preferred stock is another form of equity issued by
firms. Preferred stocks may have the following features and thus differ from common
stock. First, preferred stocks are guaranteed a pre specified amount of dividends, which
is usually larger than common share dividends. Second, preferred stock can be
converted to common shares at a pre specified rate. Third, preferred stocks are
cumulative, and therefore, unpaid dividends accumulate and must be paid before
common shareholders. Fourth, preferred stocks are callable and therefore can be
retired by management anytime at a pre specified price. Fifth, preferred stocks are
redeemable. Redeemability is similar to collable preferred stock. Sixth, preferred stocks
are participating and entitled to additional dividends based on some predetermined
condition. For example, when common share dividends are larger than preferred share
dividends. Another important feature of preferred stock is that they generally do not
have voting rights.

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The second advanced issue we will discuss is secondary market trading. Firms issue
and sell their shares to the public in primary capital markets, also known as new issues
market through initial public offering and secondary equity offering. Primary market
activity is relevant for accounting through accounting for share issues. Investor trade
firm shares in the secondary capital markets in stock exchanges, for example, New
York Stock Exchange. Investor trading in the secondary market is not relevant for
accounting. In other words, share price changes and names of shareholders are not
accounted for.

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Firms have a number of ways to issue equity. Open market issue is the issuance of
shares for all capital market participants. They are subject to existing shareholder
preemption rights. Rights issue is the issuance of shares to only existing shareholders
usually for a cheaper price. Stock dividend is the issuance of new shares to existing
shareholders instead of dividend payments. Stock dividends are used to give the
impression that the firm is paying dividends. Stock split is the issuance of lower part
value new shares in exchange for current shares. Finally, bonus issue is the issuance of
shares to existing shareholders with no cash consideration. In other words, it is giving
free shares to shareholders.

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How do we account for different equity issuances? Open market issue and right issue
are accounted for usual accounting for share issues. There is no accounting for stock
splits. In a stock dividend, common stock and additional paying capital increase and
retain earnings decrease. In a bonus issue, common stock increases and additional
paying capital decreases by the same amount.

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Here's an example about stock dividends. A firm issues 1,000 new shares with par
value of $1 to give investors as stock dividends at a time when stock prices $20 per
share. Since stock dividends are a form of dividends, retain earnings decrease by
20,000, this can be calculated as 1,000 shares times stock price per share which is $20.
Please note that the firm is issuing 1,000 new shares and each share has a part value
of $1. Therefore, common stock increases by 1,000. The plank, which is the difference
between retain earnings and common stock is recorded under addition paying capital. In
sum, we create common stock and addition paying capital, rather than decrease in cash
in stock dividends.

Here's the example for bonus issue. A firm issues 1,000 new shares with a par value of
$2 each and give them to existing shareholders for free. Since the firm issues 1,000
new shares from $2 par value, common stock increases by 2000. What is the other side
of this transaction? We reduce additional paid in capital by the same amount.

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Another special advance issue we will discuss as share retirements. Sometimes firms
repurchase their own shares and cancel them instead of keeping them as treasury
stock. Share retirement reduces the amount of shareholders equity just like Treasury
Stock.

Here's an example about share retirements. A firm repurchases and retires 1,000
shares for 25,000. These shares have a par value of $1 each and were originally sold

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investors for $20 per share. We start by recording the transaction at the time of share
issues. There are 1,000 shares and each share is originally issued at $20 each to the
public. Therefore, cash increases by 20,000. Since par value per share is $1, common
stack account increases by 1,000. The difference between cash account and common
stack account is recorded under addition paying capital. The firm repurchases these
shares from $25,000, which is recorded as cash decrease. Since these shares are
immediately retired, we need to undo the accounting at the time of share issues.
Therefore, we reduce common stock by 1,000 at APIC by 19,000. The transaction
worksheet doesn't balance. The plug in this transaction will be recorded on retained
earnings as if the firm pays $5,000 to shareholders as dividends.

Here's another example about share retirements. A firm repurchases and retires 1,000
shares for 15,000. These shares have par value of $1 each and were sold to investors
for $20 per share. The first line of the transaction worksheet a share issues is the same
as before. The firm pays 15,000 to repurchase these shares, which is recorded as cash
decrease. We again undo the accounting at the time of share issues. Therefore, we
reduce common stock by 1,000 and APIC by 19,000. The transaction worksheet doesn't
balance. The plug in this transaction will be recorded under addition pending capital
retirement, and its value will be 5,000. It seems the firm shareholders gave 5,000 to the
firm free to rose share issues and share retirement transactions. What did you learn? If
the firm has a loss in a share retirement, it is recorded under retained earnings, if the
firm has a gain in share retirement, it is recorded as another addition pending capital.

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Next, we will discuss accounting for treasury stock rations. Firms can ratio previously
acquired treasury shares to capital markets at a price different than treasury stock
repurchase price. If there are treasury stocks purchased at different times, firms sell first
repurchase shares first, in other words, FIFO.

Here's an example about treasury stock rations. A firm repurchases 1,000 shares for
25,000. Half of these shares are issued from 20,000 and rest is issued from 10,000 at

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later dates. We start by recording treasure stock repurchase. Cash decreases by
25,000, and the other side of this transaction is treasury stock of 25,000. Please note
that treasury stock account has a negative balance. The firm sells half of these
repurchase shares from 20,000, cash increases by 20,000. We then remove the original
cost of half of the repurchase shares from treasury stock account. The original cost of
half of the repurchase shares is 12,500. Since Treasury Stock account is a contra equity
account, we add 12,500 to reduce half of the value of treasury stock account. It seems
that the firm has made a profit of 7,500, which is a difference 20,000 and 12,500 from
this transaction. This is recorded under additional pending capital account, which we will
call as APIC Treasure stock. The next half of the repurchase shares is sold from
10,000. Cash increases by 10,000 and we record 12,500 under on the Treasure Stock
account to remove the original cost of half of the repurchase shares. It seems that the
firm makes a loss of 2,500 from this transaction, which is recorded as a reduction from
APIC treasure stock. If there was no APIC treasure stock, we would use retained
earnings to record the loss of 2,500.

The next advance special is about shareholders equity is other comprehensive income.
Some special changes in value do not affect income statement and net income, but
affect a special shareholders equity account called other comprehensive income, OCI.
OCI includes gains and losses from foreign currency translation adjustments, gains and
losses in some special derivative instruments, gains and losses of available for sale
securities, and gains and losses of employee benefits, which is pensions. These are
advanced topics in financial accounting, and therefore, we will not talk about them in
this class.

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The final advanced issue in shareholders equity is diluted earnings per share. We know
that earnings per share is equal to net income divided by number of common shares
outstanding. This is the definition of basic EPS and ignores dilutive effect of special
financial instruments, including convertible debt, and convertible preferred stock. In the
presence of these special financial instruments, which can increase the number of
shares outstanding, a more appropriate definition of EPS is diluted EPS. Diluted EPS is
equal to net income, adjusted for the effect of dilutive securities divided by number of
shares, outstanding plus number of dilutive shares.

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Here's an example about diluted earnings per share. Illini Corp has the following capital
structure in 2024. Common stock is 100,000 shares, convertible preferred stock is 5,000
shares, and there is a 10% convertible bonds with an amount of 750,000, 10% is the
interest rate of the convertible bond. During 2024, Illini Corp paid dividends of $1 per
share on its common stock and $3 per share on the preferred stock. The preferred stock
is convertible into 15,000 shares of common stock. The bonds are convertible into
20,000 shares of common stock. Net income in 2024 was 250,000, and the company
tax rate is 30%.

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Let's start with calculation of basic earnings per share. Number of shares outstanding is
100,000, net income is given in the question as 250,000. There is a special item in Illini
corps capital structure, which is preferred stock. If you remember our discussion about
preferred stocks, dividends paid to preferred stock holders is like paying interest
because the firm has to pay preferred dividends. Therefore, we will deduct preferred
dividends from net income before we calculate basing on it per share. The amount of
preferred dividends is 5,000 shares times $3 per share preferred dividends, which is
equal to 15,000. Therefore, total income for EPS calculation becomes 235,000 and
basic earnings per share becomes 235/100= 2.35. When we calculate diluted earnings
per share, we will assume that all convertible items are converted into shares. We will
assume that convertible preferred stocks are converted into 15,000 common shares and
convertible bonds are converted into 20,000 shares. Therefore, the new number of
shares for EPS calculation becomes 100,000 +15,000 + 20,000 =135,000. Net income
is still 250,000. Since we assume that convertible preferred shares are converted in the
common shares, there is no preferred dividends. Similarly, there is also no interest
payment for the convertible bond. Since interest expenses included in net income, we
need to add back the interest expense. Interest expense is 10% * 750,000 = 75,000. We
multiply the interest expense with 1 - tax rate of 30% to consider the tax effect of
expenses. Therefore, the net addition to net income is 52,500. Total income for EPS
calculation becomes 250,000 + 52,500 =302,500. We can now calculate diluted
earnings per share as 302,500/135,000=$2.24.

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Lesson 3-6: Module 3 Case Video

Lesson 3-6.1: Module 3 Case Video

In this lesson, we will go through three case studies about shareholders equity, here is
case number one, YaHo reported the following summarized balance sheet on
December 31, 2024. Lets please focus on stockholders equity section, common stock
has a par value of $1. Since total common stock is 100,000, there are 100,000 common
shares issued, paid-in capital in excess of par, which is additional paid-in capital, is 5.5
million. Finally, the amount of retained earnings is 3 million.

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During 2025, YaHo completed the following transactions that affected stockholders
equity. These transactions are issuance of common shares, reacquiring common stock
as treasury stock, declaration of dividends, payment of dividends and sale of treasury
stock.

The first question of case one asks, what are the journal or worksheet entries for YaHo's
transactions? The first transaction is issue 65,000 shares of common stock for $62 per

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share. Therefore, cash increases by 65,000 times 62, which is equal to 4,030,000.
Since there are 65,000 shares of common stock issued and each share has a par value
of $1, common stock account increases by 65,000. The difference between cash
increase and common stock increase is 3,965,000 and is recorded under additional
paid-in capital.

The second transaction is reacquired 6,000 shares of common stock as treasury stock
paying $65 per share. Cash decreases by 6,000 times 65, which is equal to 390,000.
The other side of this transaction is recorded under treasury stock, please note that
treasury stock has a negative value. The third transaction is declared a cash dividend of
$2 per common share, It is very important to remember that dividends are paid to
common shares outstanding. The number of common shares outstanding is 100,000
shares from 2024, 65,000 shares issued in March 2025 minus 6,000 shares
repurchased in May 2025. Therefore, there are 159,000 shares outstanding. The total
amount of dividends for these shares is 159,000 times two, which is equal to 318,000.
Dividends are paid out of retained earnings. Therefore, retained earnings account
decreases by 318,000. Since dividends are not paid yet, the other side of the
transaction is dividends payable with the same amount. The first transaction is pay the
cash dividends. Cash decreases by 318,000 and the same amount is reduced from
dividend payable account. The fifth transaction is sold 3,000 shares of treasury stock for
$70 per share. Cash increases by 3,000 times 70, which is equal to 210,000. The
original acquisition cost of these shares is 3,000 times 65, which is equal to 195,000.
This amount is reduced from treasury stock. Since treasury stock is a contra equity
account, we add this number to reduce the amount of treasury stock. The difference

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between cash increase and treasury stock account increase is 15,000 which is recorded
under additional paid in capital. The second question of case one asks, what is YaHo's
shareholders equity on December 31, 2025? The net income for 2025 was 700,000.
The common stock is 100,000 from the beginning common stock plus 65,000 from
March 2025 share issuance, therefore, 2025 common stock is 165,000. APIC is 5.5
million from the beginning edition of paid-on capital plus 3,965,000 from March 2025
stock issuance plus 15,000 from October 2025 treasury stock sale. Therefore, 2025
APIC is 9,480,000, retained earnings is 3 million from beginning retained earnings
minus 318,000 from June dividend declaration plus 700,000 from 2025 net income,
therefore, 2025 retained earnings is 3,382,000. Treasury stock is -390,000 from May
stock repurchase plus 195,000 from October treasury stock sale therefore, 2025
treasury stock is -195,000 if we sum all shareholders equity accounts, we find
12,832,000.

Here is case number two. The following pages contain the consolidated statement of
equity for Chevron from their 2022 annual report. Using this information, please answer
the following questions. The first question of case two asks, what was the number of
common shares outstanding at the end of 2022?

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Outstanding number of shares can be calculated as number of issued shares minus

number of shares in the treasury. Chevrons statement of Equity explicitly provides the
number of shares outstanding. It is 1,915,216,343.

Question two a of case two asks, how many shares of common stock did Chevron
repurchase in 2022?

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The second part of statement of equity is about common stock share activity. The
middle column of this section provides information about number of treasury stock
transactions. The firm repurchased 69,912,961 shares in 2022.

Question two B of case two what was the average price per share Chevron paid for the
shares it repurchased in 2022?

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According to the statement of Equity, the firm spent 11,255 on stock repurchases in
2022. Please note that the fourth column provides information about treasury stock.
Please also note that this amount is in millions of dollars as indicated in the top left
corner of the statement of equity. We know from question two a that the number of
treasury stock repurchased is 69,912,961.

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Therefore, the firm paid on average 11,255 divide by 69.91 which is equal to $160.99
per share to repurchase its own shares in 2022.

Question two C of case two asks, how many shares did Chevron reissue in 2022?

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The question is asking about the number of treasury stock reissued to the market. We
can find this information from the second column of common stock share activity.
Chevron reissued 55,323,247 shares in 2022 from treasury stock.

Question two d of case two asks what was the average price Chevron received from
Rishon shares in 2022? This is a tricky question. We don't know how much cash
Chevron generated from treasury stock ratios as we are not given cash flow statement.

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We know that when treasury stock is ratioed, the other side of the transaction will be
recording a positive number under treasury stock account. This is to reduce the value of
treasury stock account for the shares ratioed. We also know that gains and losses from
treasury stock ratios can be recorded under either additional paid in capital or retained
earnings. The change in treasury stock account due to share ratios is 4,523. What are
the changes in APIC, or retained earnings due to treasury stock ratios? Retained
earnings is the second column and it is not affected by treasury stock transactions.
According to footnote number one of statement of equity common stock account. In
column number one also includes additional paid in capital. Treasury stock transactions
increases APIC by 63 and 1315.

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We can then calculate the average price chevron received from reissuing shares in
2022 as (4523 + 1315 + 63) / 55.32, which is equal to $106.67 per share.

Here is case number three using the attached excerpts from Wells Fargo's 2022 annual
report. Answer the following questions.

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Here is question one a of case three. How many shares of common stock were
authorized at fiscal year-end 2022? How many were issued as of fiscal year-end 2022?

We find this information from the shareholders equity section of Wells Fargo balance
sheet. Common stock account explicitly states that authorized number of shares is 9
billion and the number of issued shares is 5.481 billion.

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Question one b of case three asks, Wells Fargo also has repurchased some of its own
shares of stock that had been previously issued which is treasury stock. How many
shares did Wells Fargo hold as treasury stock at the end of 2022?

The question asks the number of shares in treasury stock at the end of 2022. We find
this information from shareholders equity section of the balance sheet. Please note that
the first column on the balance sheet provides information about 2022. Therefore, we

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pick the first number of shares in the treasury stock account. The answer we are looking
for is 1.648 billion shares.

Question one c of case three asks how many total shares were outstanding at fiscally-
end 2022.

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Outstanding shares is the number of shares actively traded in the market. Outstanding
number of shares is equal to total number of issued shares minus the number of shares
in the treasury stock. Issued number of shares is about 5.481 billion and the number of
shares in treasury stock is about 1.648 billion. Therefore, outstanding number of shares
is about 3.833 billion.

Question two a asks, what is the par value of each share of common stock issued?

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The information is explicitly given on the balance sheet, under common stock account.
Par value per share is $1.67.

Question two b asks how much money in excess of par value of the stock was
contributed by shareholders by the end of 2022?

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In other words, the question is asking additional paid in capital please note that the first
column on the balance sheet provides information about 2022. The amount of APIC in
2022 is 60,319.

Question two c asks, how much did Wells Fargo pay for treasury stock it held at fiscal
year end 2022?

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Wells Fargo paid 82,853 for all stocks in its treasury stock held at the fiscal year end
2022.

Question three a asks, record a declaration and payment of preferred share dividends in
2022. Dividend declarations reduce retained earnings. Therefore, we will look at
statement of shareholders equity to find the amount of declared dividends. On the other
hand, we will check the cash flow statement to find the amount of dividend payments.

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Professor Oktay Urcan

According to the statement of changes in equity, the amount of dividends declared for
preferred stock is 1115.

According to the financing section of cash flow statement, the amount of dividends paid
for preferred shares in 2022 is 1115.

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 Financial Accounting: Advanced Topics
Professor Oktay Urcan

We can then record declaration and payment of preferred dividends. Declaration of

dividends reduces retained earnings and creates dividend payable with the amount of
1115. Payment of dividends reduces both dividends payable and cash with the same
amount. Let me please emphasize that we need to check cash flow statement to
confirm the amount of dividend payments. Dividend declaration and dividend payment
amounts can be different.

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 Financial Accounting: Advanced Topics
Professor Oktay Urcan
Question three b, record the purchase of treasury stock in 2022. We can find
information about treasury stock purchases either from statement of shareholders
equity, or cash flow statement. I will look at cash flow statements.

According to the financing section of the cash flow statement. Wells Fargo spent 6033
in 2022, to purchase stock as treasury stock.

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 Financial Accounting: Advanced Topics
Professor Oktay Urcan
Treasury stock purchases reduce cash and increase treasury stock account with an
amount of 6033. Please note that treasury stock account is a Contra equity account.
Therefore, negative values increase the amount of treasury stock.

Question four a asks, what is Wells Fargo's basic earnings per share for 2022?

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 Financial Accounting: Advanced Topics
Professor Oktay Urcan
The information is explicitly given on the income statement, basic earnings per share in
2022 is $3.17.

Question four b what is Wells Fargo's diluted earnings per share for 2022?

This information is explicitly given on the income statement, diluted earnings per share
in 2022 is $3.14.

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