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Module 7 Example Cases Solutions

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Module 7 Example Cases Solutions

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smasakwa
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Financial Accounting

Module 7 Cases

Oktay Urcan
Question 1
YaHo, Inc., reported the following summarized balance sheet on
December 31, 2024:
Assets

Current assets $3,600,000

Property and equipment, net 5,200,000

Total assets $8,800,000

Liabilities

Liabilities $200,000

Stockholders’ equity

Common stock, $1 par 100,000

Paid-in capital in excess of par, common 5,500,000

Retained earnings 3,000,000

Total liabilities and equity $8,800,000

YaHo, Inc. - Shareholders’ Equity


Question 1
During 2025, YaHo, Inc., completed these transactions that affected
stockholders’ equity:

March 1 Issued 65,000 shares of common stock for $62 per


share.
May 10 Reacquired 6,000 shares of common stock as treasury
stock, paying $65 per share.
June 1 Declared a cash dividend of $2 per common share.

July 1 Paid the cash dividend.

October 21 Sold 3,000 shares of the treasury stock for $70 per
share.
YaHo, Inc. - Shareholders’ Equity
Question 1
1. What are the journal or worksheet entries for YaHo’s transactions?
Assets Liabilities Shareholders’ Equity

Cash Dividends Common APIC Treasury Retained


Payable Stock Stock Earnings

Issue common shares 4,030,000 65,000 3,965,000

Share repurchase (390,000) (390,000)

Dividends declared 318,000 (318,000)*

Dividend payment (318,000) (318,000)

Treasury stock sale 210,000 15,000 195,000

*159,000 shares * $2. After repurchase of shares as treasury stock on May 10, only 159,000
shares of common stock will be outstanding when dividends are declared on June 1 (100,000 +
65,000 – 6,000).
YaHo, Inc. - Shareholders’ Equity
Question 1
2. What is YaHo’s stockholders’ equity on December 31, 2025? The net
income for 2025 was $700,000.

Calculation Value
Common stock 100,000 + 65,000 $165,000

Paid-in capital 5,500,000 + 3,965,000 + $9,480,000


15,000
Retained earnings 3,000,000 – 318,000 + $3,382,000
700,000
Treasury stock 0 + (−390,000) + 195,000 ($195,000)

Total shareholders’ equity $12,832,000

YaHo, Inc. - Shareholders’ Equity


Question 2
The following pages contain the consolidated statement of
equity for Chevron from their 2022 annual report. Using this
information, please answer the following questions.

1. What was the number of common shares outstanding at


the end of 2022?
1,915,216,343 shares (2,442,676,580 − 527,460,237)

Chevron - Shareholders’ Equity


Chevron Corporation, 2023
Question 2

2a. How many shares of common


stock did Chevron repurchase in
2022?

69,912,961

Chevron - Shareholders’ Equity


Chevron Corporation, 2023
Question 2

b. What was the average price per share Chevron paid for
the shares it repurchased in 2022?

$11,255 million / 69.91 million = $160.99 per share

Chevron - Shareholders’ Equity


Treasury Stock

Chevron Corporation, 2023


Question 2

c. How many shares did Chevron (re)issue in 2022?

55,323,247

Chevron - Shareholders’ Equity


Chevron Corporation, 2023
Question 2

d. What was the average price Chevron received from


(re)issuing shares in 2022?

($4,523 + $1,315 + $63) million / 55.32 million


= $106.67 per share

Chevron - Shareholders’ Equity


Common Stock + APIC Treasury Stock

Chevron Corporation, 2023


Question 3

Using the attached excerpts from Wells Fargo & Company’s


2022 annual report, answer the following questions. In addition:
All numbers in Wells Fargo’s 2022 financial statements are in
$ millions.
Provide calculations when necessary.

Wells Fargo - Shareholders’ Equity


Question 3
1. Shares issued and outstanding
a. How many shares of common stock were authorized at
fiscal year-end 2022? How many were issued as of fiscal
year-end 2022?

Authorized: 9,000,000,000; issued: 5,481,811,474 (see


Consolidated Balance Sheet)

Wells Fargo - Shareholders’ Equity


Question 3

Wells Fargo & Company, 2023


Question 3

b. Wells Fargo also has repurchased some of its own


shares of stock that had been previously issued
(treasury stock). How many shares did Wells Fargo hold
as treasury stock at the end of 2022?

1,648,007,022 (see Consolidated Balance Sheet)

Wells Fargo - Shareholders’ Equity


Question 3

Wells Fargo & Company, 2023


Question 3

c. How many total shares were outstanding at fiscal year-


end 2022?

5,481,811,474 – 1,648,007,022 = 3,833,804,452 (see


Consolidated Balance Sheet)

Wells Fargo - Shareholders’ Equity


Question 3

Wells Fargo & Company, 2023


Question 3
2. Common stock

a. What is the par value of each share of common stock


issued?

$1.67/share (see Consolidated Balance Sheet)

Wells Fargo - Shareholders’ Equity


Question 3

Wells Fargo & Company, 2023


Question 3

b. How much money in excess of the par value of the


stock was contributed by shareholders by the end of
2022?

$60,319 million (see Consolidated Balance Sheet)

Wells Fargo - Shareholders’ Equity


Question 3

Wells Fargo & Company, 2023


Question 3

c. How much did Wells Fargo pay for treasury stock it


held at fiscal year-end 2022?

$82,853 million (see bottom of Consolidated Balance


Sheet)

Wells Fargo - Shareholders’ Equity


Question 3

Wells Fargo & Company, 2023


Question 3
3. Transactions related to shareholders’ equity

a. Record the declaration and payment of preferred share dividends in


2022.
Cash Dividend APIC Retained
Payable Earnings
Declaration - preferred $1,115 ($1,115)
Payment - preferred ($1,115) ($1,115)

See dividends declared in Consolidated Statement of Changes in Equity


See cash in Consolidated Statement of Cash Flows (financing section)

Wells Fargo - Shareholders’ Equity


Question 3

Wells Fargo & Company, 2023


Question 3

Wells Fargo & Company, 2023


Question 3
3. Transactions related to shareholders’ equity
b. Record the purchase of treasury stock in 2022.
Cash Common Stock Treasury Stock
Treasury stock ($6,033) ($6,033)

See cash in Consolidated Statement of Cash Flows


(financing section)

Wells Fargo - Shareholders’ Equity


Question 3

Wells Fargo & Company, 2023


Question 3
4. Earnings per share
a. What is Wells Fargo’s Basic Earnings Per Share for
2022?

$3.17/share (see Consolidated Statement of Income)


Note: This is calculated as Wells Fargo’s net income
applicable to common stock ($12,067) divided by
average common shares outstanding (3,805.2).

Wells Fargo - Shareholders’ Equity


Question 3

Wells Fargo & Company, 2023


Question 3
4. Earnings per share
b. What is Wells Fargo’s Diluted Earnings Per Share for
2022?

$3.14/share (see Consolidated Statement of Income)


Note: This is calculated as Wells Fargo’s net income
applicable to common stock ($12,067) divided by Diluted
average common shares outstanding (3,837.0).

Wells Fargo - Shareholders’ Equity


Question 3

Wells Fargo & Company, 2023


References
Chevron Corporation. (2023). Energy in progress: 2022 annual report.
https://www.chevron.com/-/media/chevron/annual-report/2022/documents/2022-
Annual-Report.pdf

Wells Fargo & Company. (2023). 2022 annual report.


https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/annual-
reports/2022-annual-report.pdf

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