Week 14 Accounting Workshop: The Bicycle Shop's Year 2 Equity, Line by Line

Part 1 — The Big Picture

This week you learned that the owners' claim on a corporation is built from what owners pay in and what the business earns and keeps, less what it hands back or buys back. In this workshop you work one small set of books end to end: the bicycle shop's stockholders' equity in Year 2. You record the stock issue, the cash dividend on its dates, and the buyback, check that every entry balances, build the statement of stockholders' equity and tie it to the equity section, compute basic earnings per share, read what the result shows in one plain sentence, and then check a chatbot's version of the same work. This is the adjust-and-report mode of the Accounting Workshop: the record-and-post work from Week 3 carries forward into the entries, and the analyze-and-explain work happens in your plain-sentence reading and your critique.

Time budget: Plan for about 90 minutes.

Part 2 — The Task

Guiding question: How did the bicycle shop's stockholders' equity grow from $43,000 to $140,000 in Year 2, and how do its entries keep the owners' money in and out separate from its revenue and expenses?

Workshop data: Dataset K, the bicycle shop's Year 2 stockholders' equity (illustrative)

Source: The running case in Year 2: an illustrative, unnamed bicycle repair and sales shop, organized as a corporation by two founders, that sells new shares, pays its owners a cash dividend, and buys back some of its own shares; it describes no real business.

• Rows: five equity events in Year 2 (a stock issue, a dividend declaration, its record date, its payment, and a buyback) plus the year-end close of Dividends; the entry table has 6 rows, the statement of stockholders' equity has 6 rows, and the shares table has 5 rows
• Shares and par: 100,000 shares of $1-par common stock authorized; the founders hold 30,000 shares bought for $30,000 in Month 1 of Year 1
• Stock issue: 5,000 more shares sold at $9 a share on the first day of Year 2
• Cash dividend: $0.20 a share on 35,000 shares, declared and recorded in Month 5 and paid in Month 6
• Treasury stock: 1,000 of the shop's own shares bought back at $10 a share at the end of Month 6
• Earnings: Retained Earnings of $13,000 at the start of Year 2, net income of $69,000 for Year 2, and no preferred stock

Part 3 — Materials & Procedure

Tools and materials

• A free spreadsheet (Google Sheets, or any free spreadsheet) for journals, T-accounts, trial balances, schedules, and statements, with every total computed by formula; the SEC's free EDGAR search for public companies' annual reports; and one approved chatbot used as a sparring partner whose entries, totals, and claims about standards and tax rates the student checks by hand and against the pinned source before trusting them
• A free spreadsheet (Google Sheets, or any free spreadsheet)
• One approved chatbot

Ways of working

• record-and-post
• adjust-and-report
• analyze-and-explain

Procedure

1. Read Dataset K in Part 2 twice. For each equity event, write one line in your own words saying who paid whom, and whether the owners' claim on the shop grew or shrank. Check: Five short lines, one per event, each naming the direction of the change in equity.
2. Open a new sheet and copy the entry table from Part 4. For each row, enter the account debited first and the account credited below it, compute each amount with a formula that multiplies the shares by the price, the par value, or the amount per share, and write No entry where nothing is recorded. Tool: A free spreadsheet (Google Sheets, or any free spreadsheet). Check: Every entry balances, the stock issue credits two accounts, and the record date shows no entry.
3. On a second tab, copy the statement of stockholders' equity from Part 4. Enter each event's amount in the column of the account it changes, compute each row's total with a SUM formula, and total each column with a SUM formula. Tool: A free spreadsheet (Google Sheets, or any free spreadsheet). Check: The bottom-right cell equals the sum of the four account columns in the ending row.
4. Copy the shares table from Part 4. Compute the shares issued and outstanding, the weighted-average common shares outstanding with a formula that weights each half of the year by 6 divided by 12, and basic earnings per share with a division formula. Tool: A free spreadsheet (Google Sheets, or any free spreadsheet). Check: Issued shares stay the same after the buyback, outstanding shares fall, and earnings per share is computed on the weighted average.
5. Answer the analysis questions in Part 5, including the plain sentence that says what the statement of stockholders' equity shows. Check: Written answers to all five questions.
6. Paste your three tables and then the Part 6 prompt into one approved chatbot. Compare every entry, every total, and every claim about a standard or a rate with your own work and with Chapter 14, and write the critique report, or complete the equivalent route instead. Tool: One approved chatbot. Check: A three-to-five-sentence report that quotes at least two of the chatbot's slips and corrects each by hand, or the marked-up equivalent-route analysis.

Fallback route

When to use it: Use this route if you cannot open a spreadsheet or print the tables.

Copy the three tables by hand onto paper or into any text file, read Dataset K from this page, compute each amount, column total, and share count by hand, add each column twice, and complete every analysis question and the critique step in the same order. Submit a photo or scan of the paper, or the text file, for equal credit.

This route earns the same credit as the primary route.

Part 4 — The Scaffold

Record each equity event in the same order every time, debit first and credit below, so you can check that the two sides are equal.

Student scaffold table 1

Entry	What happened	Account debited	Account credited	Amount
1	Issue 5,000 shares at $9, first day of Year 2
2	Declare the $0.20 cash dividend, Month 5
3	Record date of the dividend, Month 5
4	Pay the dividend, Month 6
5	Buy back 1,000 shares at $10, end of Month 6
6	Close Dividends to Retained Earnings, end of Year 2

Build the statement of stockholders' equity one event at a time, so each column shows where each change in the owners' claim came from.

Student scaffold table 2

Event	Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock	Total
Balance, beginning of Year 2	30,000	0	13,000	0
Issued 5,000 shares at $9
Net income
Cash dividends
Bought 1,000 treasury shares at $10
Balance, end of Year 2

Count the shares three ways and then average them over the year, so earnings per share uses the shares that were really outstanding.

Student scaffold table 3

Line	Value
Shares authorized	100,000
Shares issued after the Year 2 issue
Shares outstanding after the buyback
Weighted-average common shares outstanding
Basic earnings per share

Part 5 — Analysis Questions

1. Compute the amounts in every entry, including the split of the stock issue between Common Stock and Additional Paid-in Capital, and the ending balance of each column in the statement of stockholders' equity, showing each multiplication, sum, and subtraction.
2. Compute the shares issued and outstanding after the buyback, the weighted-average common shares outstanding, and basic earnings per share, showing each step.
3. Describe why the dividend records no expense and why Treasury Stock is subtracted in the equity section instead of listed with the assets, using the shop's own entries.
4. Write one plain sentence saying what the statement of stockholders' equity shows. Then say in words how paying the same $10,000 to owners as an extra cash dividend, instead of buying back shares, would change total stockholders' equity, shares outstanding, and earnings per share, without calling either choice better.
5. Choose one reflection: (a) which step did your first instinct get wrong, and what changed your mind? or (b) name one thing the equity section cannot tell a lender about the shop, and one line of it a lender might ask about.

Part 6 — AI-Critique Moment

Choose one equal-credit critique route. Route A: ask an approved AI tool to critique your completed work, then check its response against your own evidence. Route B is the no-AI equivalent printed below.

Approved tools: Claude, Gemini, ChatGPT, Grok, Microsoft Copilot.

Prompt to paste:

I've pasted my completed entry table, statement of stockholders' equity, and shares table above. Here is an illustrative bicycle shop organized as a corporation. Its charter authorizes 100,000 shares of $1-par common stock, and its founders hold 30,000 shares they bought for $30,000. On the first day of Year 2 it sells 5,000 more shares at $9 a share. In Month 5 its board declares a cash dividend of $0.20 a share on 35,000 shares, and it pays the dividend in Month 6. At the end of Month 6 it buys back 1,000 of its own shares at $10 a share. Retained Earnings was $13,000 at the start of Year 2, net income for Year 2 was $69,000, and the shop has no preferred stock. Please write the journal entries for the stock issue, the dividend's declaration, record, and payment dates, and the buyback; prepare the stockholders' equity section at the end of Year 2; and compute basic earnings per share. Then tell me whether the $45,000 from the new shares is revenue, whether the shop has $69,000 more cash because it earned $69,000, where Treasury Stock goes on the balance sheet, what rule says how soon a declared dividend must be paid, what Social Security rate and wage base apply to the shop's mechanic in 2026, what the shop's $200 a month of equipment depreciation says about the equipment's value, and whether the shop could use LIFO for its bicycles under IFRS.

Test the response for these likely failures:

• Chatbots sometimes write the buyback backwards, debiting Cash and crediting Treasury Stock, as if the shop had sold shares.
• Chatbots sometimes write the stock issue as debit Cash 45,000 and credit Common Stock 5,000, leaving the amount above par out of the entry.
• Chatbots sometimes call the $45,000 the new owners paid for shares revenue, because cash came in.
• Chatbots often book the dividend as an expense in Month 6, when the cash is paid, instead of recording the liability in Month 5.
• Chatbots often add the treasury stock to the other equity accounts and report total stockholders' equity of $160,000.
• Chatbots sometimes invent a rule, such as GAAP requiring a declared dividend to be paid within 30 days, or requiring shares to be issued at par.
• Chatbots often quote an earlier year's Social Security wage base when asked about the mechanic's wages.
• Chatbots sometimes say a business reporting under IFRS may choose LIFO for its inventory.
• Chatbots sometimes say the shop has $69,000 more cash because it earned $69,000 of net income.
• Chatbots often describe the shop's $200 a month of equipment depreciation as the drop in what the equipment would sell for.
• Chatbots sometimes list Treasury Stock among the assets because the shop paid cash for it.

Write three to five sentences naming what the chatbot got right and at least two places where it slipped into one of the failures above, quoting its words and correcting each by hand against Dataset K, Chapter 14, and the pinned source.

Equivalent route (no AI required)

No AI account is required for this workshop. This route assesses the same objectives, Objective 8 (account for long-term liabilities, including bonds issued at face, at a discount, and at a premium, and for stockholders' equity, including stock issuance, dividends, and treasury stock) and Objective 4 (complete the accounting cycle: prepare an income statement, a statement of retained earnings, and a classified balance sheet, journalize closing entries, and prepare a post-closing trial balance), takes comparable effort of about the same 90 minutes, uses the same rubric, and earns the same credit. Instead of the chatbot, critique this flawed analysis of Dataset K, printed here in full: "The shop's $45,000 from selling 5,000 shares is revenue for Year 2, so the entry is debit Cash 45,000 and credit Common Stock 5,000. The dividend is an expense recorded in Month 6, when it is paid: debit Dividend Expense 7,000 and credit Cash 7,000, and nothing is recorded in Month 5. For the buyback, debit Cash 10,000 and credit Treasury Stock 10,000, and list Treasury Stock with the assets. Total stockholders' equity is 35,000 + 40,000 + 75,000 + 10,000 = $160,000. Because the shop earned $69,000, it has $69,000 more cash. GAAP requires a declared dividend to be paid within 30 days. The shop's $200 a month of equipment depreciation shows the equipment loses $200 of resale value each month. The mechanic's wages carry Social Security at 6.2 percent on wages up to a $176,100 wage base, and under IFRS the shop could choose LIFO for its bicycles." Mark every error you find, name the failure it shows, and correct it by hand against Dataset K, Chapter 14, and the pinned source; find at least two. The wage base in it is out of date on purpose and is itself one of the errors. Submit the marked-up analysis with your corrections in place of the chatbot report and share link.

Part 7 — What to Submit

• The completed entry table, statement of stockholders' equity, and shares table from Part 4
• Written answers to all five analysis questions
• The chatbot critique report with its share link, or the equivalent route's marked-up flawed analysis

Deliverable:

A short Accounting Workshop report on the bicycle shop's stockholders' equity in Year 2: three completed tables (the equity entries, the statement of stockholders' equity, and the shares and earnings per share), written answers to five analysis questions, and a critique of a chatbot's version of the same work, or, on the equivalent route, a marked-up correction of the printed flawed analysis. Choose how you show it: a completed spreadsheet with written answers, a recorded explanation with a transcript, or hand-drawn tables with short notes; every form is graded by the same scoring criteria. Submit in any accessible file type or as a link; a recorded response may be submitted as audio or video with a transcript, or as text.

Rubric

The rubric below shows how each submitted part is evaluated; bands are full, partial, or none.

Workshop evaluation criteria

Criterion	Full	Partial	None
Balanced, correctly classified entries	All entries have the right accounts and amounts, each balances with the debit listed first, the stock issue splits par from the amount above par, the record date has no entry, and the dividend records no expense.	Most entries are right, or all are present but one is reversed, unbalanced, or records the dividend as an expense.	Fewer than half the entries are correct, or the stock issue or the dividend is recorded as revenue or expense throughout.
Statement of stockholders' equity, computed and tied	Every event sits in the right column, each column is totaled by formula or written sum, Treasury Stock is subtracted, and the ending total ties to the equity section.	The statement is mostly complete but one column total is wrong, or Treasury Stock is added instead of subtracted.	No statement, or events entered with no columns or totals.
Plain-sentence reading and the effect of a different choice	One plain sentence says what the statement shows, and the answer says in words how an extra dividend in place of the buyback would leave total equity the same but keep more shares outstanding and lower earnings per share, without ranking either choice.	The plain sentence or the effect of the other choice is present, but not both, or one of them is vague.	Neither the plain sentence nor the effect of the other choice is present.
Caught-and-corrected AI slip, on either route	The chatbot critique report, or the equivalent route's marked-up flawed analysis, quotes at least two errors and corrects each by hand against Dataset K, Chapter 14, and the pinned source; either route earns this band equally.	One error is quoted and corrected on either route, or errors are named without a correction.	No critique on either route, or chatbot output is pasted without checking it.
Shares, earnings per share, and reflection	The answers compute outstanding shares and earnings per share on the weighted average, explain why the year-end count is not the divisor, and answer the chosen reflection option with a specific step or line from Dataset K.	Either the earnings per share work or the reflection is present, but not both, or one is general.	Neither the earnings per share work nor the reflection is present.

Quality Gate

• Every journal entry lists the debit first and the credit second, and its debits equal its credits.
• The dividend records no expense, the record date has no entry, and Treasury Stock is subtracted in the equity section.
• Every amount, column total, and share count is computed by formula or written as a sum, product, or difference, and the statement of stockholders' equity ties to the equity section.
• No standard, rule, rate, statistic, or quotation is invented anywhere in the submission.
• The plain-sentence reading names what the statement shows and ranks neither a dividend nor a buyback as better.
• The critique quotes the chatbot or the flawed analysis and corrects at least two errors by hand.