Question

On its 2010 balance sheet, Lowell Co, reports treasury stock at cost of $1,000 million. The company has a total of 1,000,000,000 shares issued and 900,000,000 shares outstanding. What average price did Lowell Co. pay for treasury shares

Answer 1

$10

Step-by-step explanation:

The average price paid for a treasury stock is computed using the formula below:

Average price of treasury stock=balance of treasury stock/number of shares repurchased

balance of treasury stock=$1,000 million=$1,000,000,000

number of shares repurchased =number of shares issued- number of shares outstanding

number of shares issued=1,000,000,000 shares

number of shares outstanding=900,000,000 shares

number of shares repurchased =1,000,000,000-900,000,000= 100,000,000

Average price of treasury stock= $1,000,000,000/100,000,000=$10