At December 31, 2020, the balance sheet of Meca International included the following shareholders' equity accounts...

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At December 31, 2020, the balance sheet of Meca International included the following shareholders equity accounts Shareholde

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Answer 1

Answer #1

Date	Account titles and explanation	Debit	Credit
February 12, 2021	Treasury stock (2*$20)	$40
	Cash		$40
	(To record treasury stock purchased)

June 9, 2022	Treasury stock (3*$15)	$45
	Cash		$45
	(To record treasury stock purchased)

May 25, 2023	Cash (3*$22)	$66
	Treasury stock (3*$17)		$51
	Paid in capital- Treasury stock ($66-51)		$15
	(To record treasury stock sold)

May 25, 2023	Cash (3*$22)	$66
	Treasury stock		$55
	Paid in capital- Treasury stock ($66-55)		$11
	(To record treasury stock sold)

When the company uses Weighted average method

Total cost of treasury stock= $40+45= $85

Total treasury stock= 2 million+3 million= 5 million treasury stock

Weighted average cost of treasury stock= Total cost of treasury stock/Total treasury stock

= $85 million/5 million= $17 per share

When the company uses FIFO method

When the company uses FIFO method, that means the stock which are purchased first will be sold first. So, treasury stock which was purchased on Feb 12, 2021 will be sold first and the remaining will be sold from June 9, 2022

Cost of Treasury stock= (2*$20+1*$15)= $55

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Answer 2

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At December 31, 2020, the balance sheet of Meca International included the following shareholders' equity accounts...

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