Aira Company issued rights to subscribe to its stock, the ownership of 4 shares entitling the shareholders to subscribe for 1 share at P100. An investor owned 50,000 shares with total cost of P5,000,000. The share is quoted right-on at 125. The stock rights are accounted for separately and measured initially at fair value. What is the cost of the new investment assuming all of the stock rights are exercised by the investor?

SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter13: Corporations: Earning & Profits And Distributions
Section: Chapter Questions
Problem 31P
icon
Related questions
Question

Aira Company issued rights to subscribe to its stock, the ownership of 4 shares entitling the shareholders to subscribe for 1 share at P100. An investor owned 50,000 shares with total cost of P5,000,000. The share is quoted right-on at 125. The stock rights are accounted for separately and measured initially at fair value. What is the cost of the new investment assuming all of the stock rights are exercised by the investor?

Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Recommended textbooks for you
SWFT Essntl Tax Individ/Bus Entities 2020
SWFT Essntl Tax Individ/Bus Entities 2020
Accounting
ISBN:
9780357391266
Author:
Nellen
Publisher:
Cengage
Corporate Fin Focused Approach
Corporate Fin Focused Approach
Finance
ISBN:
9781285660516
Author:
EHRHARDT
Publisher:
Cengage
Principles of Accounting Volume 1
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
SWFT Comprehensive Volume 2019
SWFT Comprehensive Volume 2019
Accounting
ISBN:
9780357233306
Author:
Maloney
Publisher:
Cengage