Question

At December 31, 2017, the balance sheet of Meca International included the following shareholders' equity accounts:

Shareholders’ Equity	($ in millions)
Common stock, 65 million shares at $1 par	$	65
Paid-in capital—excess of par		490
Retained earnings		600

Required:
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, 2018, Meca reacquired 2 million common shares at $19 per share.
2. On June 9, 2019, Meca reacquired 3 million common shares at $14 per share.
3. On May 25, 2020, Meca sold 3 million treasury shares at $22 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.

Answer 1

Meca International				-
Date	Account	Debit	Credit	Calculation
12-Feb	Treasury Stock	38		=2*19
	Cash		38
	(To record 2 million common shares reacquired at $19 per share)
9-Jun	Treasury Stock	42		=3*14
	Cash		42
	(To record 3 million common shares reacquired at $14 per share)
Weighted-average cost
25-May	Cash	66		=3*22
	Treasury Stock		48	=3*16
	Paid in Capital from Treasury Stock		18
	(To record sale of 3 million treasury shares at $22 per share)
FIFO cost
25-May	Cash	66		=3*22
	Treasury Stock		52	=(2*19)+(1*14)
	Paid in Capital from Treasury Stock		14
	(To record sale of 3 million treasury shares at $22 per share)
	Workings
Date	Weighted-average cost	Shares	Cost	Total Cost
12-Feb	Common shares reacquired	2	19	38
9-Jun	Common shares reacquired	3	14	42
	Totals	5		80
	Weighted-average cost		16	=80 / 5