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a) Normal course issuer bid
For the years ended March 3, 2012 and February 26, 2011, the Corporation repurchased 10,400,000 and 6,819,900 Class A subordinate voting shares at an average price of $ 11.93 and $ 9.23 per share for a total consideration of $ 124.1 million and $ 63.0 million including related costs, respectively. Amounts of $ 68.6 million and $ 26.4 million representing the excess of the purchase price over the carrying value of the repurchased shares were included in retained earnings for the years ended March 3, 2012 and February 26, 2011, respectively. The shares repurchased during fiscal year ended March 3, 2012 were cancelled during this period. The shares repurchased during fiscal year ended February 26, 2011 were cancelled during this period, except for 287,200 shares that were cancelled after February 26, 2011.
Required:
1. Why do you think Jean Coutu board of directors decided to repurchase the company shares?
2. Prepare the journal entry to record a summary of the repurchase transactions.
3. Compute the weighted- average issuance price per common share when the shares were repurchased, and explain why Jean Coutu paid a much higher price for repurchasing its own shares.
4. What impact will this transaction have on Jean Coutu future dividend obligations?