Before the merger of Mendy’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)

Income Statement

Revenue ………...… $ 2,439

Expense …………….. 2,345

Net income ………….…. 94

Balance sheet

Assets …………….. $ 3,060

Liabilities …………. $1,048

Shareholder’s Equity $2,012

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

(b) Compute the ration of total liabilities to shareholders’ equity before and after the purchase.

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

(d) Compute on why a company might choose to purchase treasury stock.