Question

At December 31, 2020, the balance sheet of Meca International included the following shareholders' equity accounts Shareholders Equity Common stock, (5 in millions). 60 million shares at $1 par $60

Paid-in capital - excess of par 300 Retained earnings Required: 410 Assuming that Meca International views its share buybacks as treasury stock record the appropriate journal entry for each of the following transactions: (if no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) 1. On February 12, 2021. Meca reacquired 1 million common shares at $13 per share 2 On June 9, 2022. Meca reacquired 2 million common shares at $10 per share.

3. On May 25, 2023, Meca sold 2 million treasury shares at $15 per share Determine cost as the weighted average cost of treasury shares

4. For the previous transaction, assume Meca determines the cost of treasury shares by the FIFO method

Required 2.) Prepare a statement of shareholders' equity for Meca International reporting the changes in shareholders' equity accounts for 2021, 2022, and 2023.

Answer 1

Step-by-step explanation:

weighted average cost method

1m x$13=$13 m

2mx$10=$20m

3m total=$33/3m=$11

2M reacquired treasury stocks at $11 avg cost per share.

Journal Entry

Cash (2mx $15 per share) 30

Paid-in capital-Share repurchase 8

Treasury Stocks (2mx$11) 22

4. FIFO method (FIRST IN FIRST OUT)

1m x $13

1m x $10

total=$23m

Journal entry

Cash (2m x$15) 30

Paid-in capital-share repurchase 7

Treasury Stocks 23

Answer 2

1. The journal entry includes Debit for Treasury stock by $13 and Credit for Cash by $13

2. The journal entry includes Debit for Treasury stock $20 and Credit for Cash $20

3. The journal entry includes Debit for Cash $32, Credit for Treasury stock $22 and Credit for Paid-in capital—share repurchase $10.

1. Meca reacquired 2 million common shares at $10 per share.

February 12, 2021

Debit: Treasury stock $13

Credit: Cash $13

2. Meca reacquired 2 million common shares at $10 per share.

June 9, 2022

Debit: Treasury stock $20 ($2 * $10)

Credit: Cash $20

3. Meca sold 2 million treasury shares at $15 per share

May 25, 2023

Debit: Cash $32

Credit: Treasury stock $22 (20+13)*2/3

Credit: Paid-in capital—share repurchase $10