Question

On February 12, 2018, Meca reacquired 2 million common shares at $19 per share. On June 9, 2019, Meca reacquired 3 million common shares at $14 per share. On May 25, 2020, Meca sold 3 million treasury shares at $22 per share—determine cost as the weighted-average cost of treasury shares. For the previous transaction, assume Meca determines the cost of treasury shares by the FIFO method.

Answer 1

Answer:

Weighted-average cost of treasury shares is 16 per share amounting 48 million dollars in total. (W-1)

Explanation:

(W-1) 16 * 3M i.e total number of share sold (W-1.1)

   

(W.1.1)

Calculations    

   

Date Purchase               Sale              Closing stock WA method

12-Feb-18 2M/19/38M*                                   2M/19/38M

09-Jun-19 3M/14/42/M                                   5M/16/80M

   

25-May-20                     3M/22/42/M           2M/16/32M

Date         Purchase       Sale          Closing Stock FiFo method

12-Feb-18 2M/19/38M*                                       2M/19/38M

09-Jun-19 3M/14/42/M                                     2M/19/38M

                                                                    3M/14/42/M

25-May-20                  3M/22/42/M                    2M/14/28M

*Key  2M/19/38M means 2 millions share at the rate of 19 each totaling 88 million dollars.