On August 1, 2021, Comical Company issued rights to stockholders to subscribe to additional share of its common stock.  A stockholder can buy one new share for every 5 rights plus P25 cash.  The rights will expire on October 1, 2021.  On July 31, 2021, the market price of a share with the right attached was P50, while the market price of the right alone was P5.  Comical’s equity on July 31, 2021, comprised of the following:             Ordinary Shares, P10 par                                                         P4,000,000             Subscribed ordinary shares                                                        1,000,000                  Share premium                                                                              600,000             Retained earnings                                                                         200,000             Treasury shares, 80,000 shares                                                 1,750,000   What is the effect on the stockholders’ equity if all but 60,000 share rights were exercised? a. no change b. 2,100,000 increase c. 1,800,000 increase d. 1,300,000 increase

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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On August 1, 2021, Comical Company issued rights to stockholders to subscribe to additional share of its common stock.  A stockholder can buy one new share for every 5 rights plus P25 cash.  The rights will expire on October 1, 2021.  On July 31, 2021, the market price of a share with the right attached was P50, while the market price of the right alone was P5.  Comical’s equity on July 31, 2021, comprised of the following:

            Ordinary Shares, P10 par                                                         P4,000,000

            Subscribed ordinary shares                                                        1,000,000     

            Share premium                                                                              600,000

            Retained earnings                                                                         200,000

            Treasury shares, 80,000 shares                                                 1,750,000

 

What is the effect on the stockholders’ equity if all but 60,000 share rights were exercised?

a. no change
b. 2,100,000 increase
c. 1,800,000 increase
d. 1,300,000 increase
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