Question

In previous years, Cox Transport reacquired 4 million treasury shares at $20 per share and, later, 1 million treasury shares at $25 per share.

If Cox now sells 2 million treasury shares at $28 per share and determines cost as the weighted-average cost of treasury shares, by what amount will Cox’s paid-in capital - share repurchase increase? (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

Answer 1

Answer------------$14,000,000

Working

	Number of shares	Cost per share	Total
First purchase	4000000	$               20	$        80,000,000
Second purchase	1000000	$               25	$        25,000,000
Average cost	5000000	$               21	$     105,000,000
Sales of shares	2000000	$               28	$        56,000,000
Gain on sale per share (28-21)		$                 7
Total addition to paid in capital -Treasury shares (2000000*7)			$        14,000,000