What is the effect on the stockholders’ equity as a result of the issuance of stock rights? a. 200,000 increase b. 500,000 increase c. 2,500,000 increase d. change
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
Treasury shares, 80,000 shares 1,750,000
What is the effect on the
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