16-10.

B
Original shares on October I 40,000
Stock dividend on November 30 (10%) 4,000
Total shares 44,000
Shares sold on December 31 -4,000
Balance 40,000

Sales price 1,000,000

Cost of shares sold (4,000/44,000 x 6,600,000) -600,000
Gain on sale 400,000

16-11.
D
Cash dividend (10% x 500,000) 50,000
1A Jun-01 Dec-01
Original shares 20,000 30,000
Share dividend - 20% 4,000 6,000
Total shares 24,000 36,000

Sales price (30,000 x 125) 3,750,000

Cost of shares sold
From June 1-24,000 shares 2,000,000
From December 1-6,000 shares (6,000 / 36,000 x 3,600,000) 600,000 2,600,000
Gain on sale 1,150,000

2A
Average approach
Sale price 3,750,000
Cost of shares sold (30,000/60,000 x 5,600.000) 2,800,000
Gain on sale 950,000

3A
Dividend income (50,000 x 10) 500,000
Gain on sale of investment - FIFO 1,150,000
Total income from investment 1,650,000
16-13.
1D
Cost of rights (100,000 x 6) 600,000

2D
Cash payment (20,000 x 90) 1,800,000
Cost of rights exercised 600,000
Total cost of new investment 2,400,000

16-14. B
Initial cost of rights (50,000 x 20) 1,000,000
Cash paid for new shares (25,000 x 90) 2,250,000
Total cost of new shares 3,250,000
B
Total cost of rights (60,000 x 5) 300,000

10,000 shares x 5 rights 50,000 rights

Cash paid (10,000 x 80) 800,000

Cost of rights exercised (50,000 x 5) 250,000
Total cost of 900 shares 1,050,000
A Shares Cost
Original investment 50,000 3,800,000
New investment acquired through stock rights (50,000 x 80) 50,000 4,000,000
Total 100,000 7,800,000

FIFO approach
Sales price (25.000 x 90) 2,250,000
Cost of shares sold (25,000/ S0,000 x 3,800,000) 1,900,000
Gain on sale 350,000

Average approach
Sales price 2,250,000
Cost of shares sold (25,000/ 100,000 x 7800,000) 1,950,000
Gain on sale 300,000