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1 March, 02:04

In previous years, Cox Transport reacquired 2 million treasury shares at $22 per share and, later, 1 million treasury shares at $28 per share. By what amount will Cox's paid-in capital-share repurchase increase if it now sells 2 million treasury shares at $32 per share and determines cost as the weighted-average cost of treasury shares?

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  1. 1 March, 05:09
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    24 million shares; $16 million

    Explanation:

    The computation of the weightage number of treasury shares are shown below:

    Number of shares Price Total

    2 $22 $44 million

    1 $28 $28 million

    Total 3 $72 million

    So, the weighted average number of shares would be

    = $72 : 3 = 24 million shares

    Now the journal entry would be

    Cash A/c Dr $64 million (2 million treasury shares * $32)

    To Paid in capital - share repurchase A/c $16 million

    To Treasury stock $48 million (24 million treasury shares * $2)

    (Being the treasury shares are sold)
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