Compute earnings per share before and after the purchase

Reference no: EM131427353

Before the merger of Wendy's and Arby's, Wendy's made a huge purchase of its own shares and in total bought back over 26 million shares for approximately $1 billion. Before the purchase, 125.5 million shares were outstanding, and the financial statements appeared as follows (dollars in millions).

a. Provide the journal entry for the treasury stock purchase.

b. Compute the ratio of total liabilities to shareholders' equity before and after the purchase.

c. Compute earnings per share before and after the purchase.

d. Comment on why a company might choose to purchase treasury stock.

Reference no: EM131427353

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