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    An investor held 10,000 shares that were acquired at a total cost of $1,800,000. The company issued rights to subscribe to new shares at $150 per share in a 1 for 5 ratio. The investor would receive 2,000 new shares for exercising their rights. The document provides journal entries to record the original investment, rights received, exercise of rights for new shares, sale of rights, and expiration of any remaining rights.

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    An investor held 10,000 shares that were acquired at a total cost of $1,800,000. The company issued rights to subscribe to new shares at $150 per share in a 1 for 5 ratio. The investor would receive 2,000 new shares for exercising their rights. The document provides journal entries to record the original investment, rights received, exercise of rights for new shares, sale of rights, and expiration of any remaining rights.

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    © All Rights Reserved
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    23 views9 pages

    Problem 16 4

    Uploaded by

    one dev onli
    An investor held 10,000 shares that were acquired at a total cost of $1,800,000. The company issued rights to subscribe to new shares at $150 per share in a 1 for 5 ratio. The investor would receive 2,000 new shares for exercising their rights. The document provides journal entries to record the original investment, rights received, exercise of rights for new shares, sale of rights, and expiration of any remaining rights.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    of 9

    Problem 16-4

    Viable Company Issued rights to subscribe to new share at P150 per


    share in the ratio of one new share for every five rights held. The share
    has market value of P190 and the right has a market value of P10.

    An Investor held 10,000 shares acquired at a total cost of P1,800,000.


    The share rights are accounted for separately.

    This study source was downloaded by 100000858547024 from CourseHero.com on 12-06-2022 04:21:01 GMT -06:00
    Required:
    1. Prepare journal entry to record the acquisition of the original investment.
    2. How many rights will the investor receive?
    3. What is the initial measurements of the rights?
    4. What is the journal entry to record rights?
    5. What is the journal entry to record the acquisition of new investment
    through exercise of rights?
    6. What is the journal entry to record the sale of the rights at P15 each?
    7. What is the journal entry to record the expiration of rights?

    This study source was downloaded by 100000858547024 from CourseHero.com on 12-06-2022 04:21:01 GMT -06:00
    1. Prepare journal entry to record the
    acquisition of the original investment.

    Investment in Shares 1,800,000


    Cash 1,800,000
    #

    This study source was downloaded by 100000858547024 from CourseHero.com on 12-06-2022 04:21:01 GMT -06:00
    2. How many rights will the investor
    receive?
    10,000 rights

    This study source was downloaded by 100000858547024 from CourseHero.com on 12-06-2022 04:21:01 GMT -06:00
    3. What is the initial measurements of
    the rights?
    10,000 x 10 = 100,000

    This study source was downloaded by 100000858547024 from CourseHero.com on 12-06-2022 04:21:01 GMT -06:00
    4. What is the journal entry to
    record rights?

    Share Rights 100,000


    Investment in Shares 100,000
    #

    This study source was downloaded by 100000858547024 from CourseHero.com on 12-06-2022 04:21:01 GMT -06:00
    5. What is the journal entry to record the acquisition
    of new investment through exercise of rights?

    Investment in Shares 400,000


    Cash (10,000/5=2,000x150) 300,000
    Share Rights 100,000
    #

    This study source was downloaded by 100000858547024 from CourseHero.com on 12-06-2022 04:21:01 GMT -06:00
    6. What is the journal entry to record
    the sale of the rights at P15 each?

    Cash (10,000 x 15) 150,000


    Share Rights 100,000
    Gain on Sale of Share Rights 50,000
    #

    This study source was downloaded by 100000858547024 from CourseHero.com on 12-06-2022 04:21:01 GMT -06:00
    7. What is the journal entry to
    record the expiration of rights?

    Loss on Share Rights 100,000


    Share Rights 100,000
    #

    This study source was downloaded by 100000858547024 from CourseHero.com on 12-06-2022 04:21:01 GMT -06:00
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