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Researching GAAP Situation Russell International, a publicly traded company, reacquired 500,000 shares of its common stock during July 2019 at a cost of $25 per share. The current market price of the stock was $20 per share when the 500,000 shares were reacquired. The shares that were reacquired had been owned by a group of minority shareholders who had been dissatisfied with Russell’s earnings trend, stock price, and dividends paid. In fact, these minority shareholders had been so disgruntled that they had filed a suit against Russell’s directors during 2018. The minority shareholders’ suit claimed damages of $3 million because of the board’s failure to fulfill its fiduciary responsibility to maximize shareholders’ value. In August 2019, the minority shareholders’ suit was dropped, with neither Russell nor its directors having to offer or pay a set-dement. Russell accounts for its treasury stock transactions using the cost method. Directions 1. Research the related generally accepted accounting principles and explain how Russell should account for the treasury stock transaction. Cite your reference and applicable paragraph numbers. ( Contributed by Daryl G. Krause )

BuyFind

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281
BuyFind

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281

Solutions

Chapter
Section
Chapter 15, Problem 13C
Textbook Problem

Researching GAAP

Situation

Russell International, a publicly traded company, reacquired 500,000 shares of its common stock during July 2019 at a cost of $25 per share. The current market price of the stock was $20 per share when the 500,000 shares were reacquired.

The shares that were reacquired had been owned by a group of minority shareholders who had been dissatisfied with Russell’s earnings trend, stock price, and dividends paid. In fact, these minority shareholders had been so disgruntled that they had filed a suit against Russell’s directors during 2018. The minority shareholders’ suit claimed damages of $3 million because of the board’s failure to fulfill its fiduciary responsibility to maximize shareholders’ value.

In August 2019, the minority shareholders’ suit was dropped, with neither Russell nor its directors having to offer or pay a set-dement. Russell accounts for its treasury stock transactions using the cost method.

Directions

  1. 1. Research the related generally accepted accounting principles and explain how Russell should account for the treasury stock transaction. Cite your reference and applicable paragraph numbers. (Contributed by Daryl G. Krause)

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Chapter 15 Solutions

Intermediate Accounting: Reporting And Analysis
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