This problem has 2 questions. AAA Company had the following transactions in the ordinary shares of BBB Company: January 5 Bought 4,000 ordinary shares, P100 par, at P88. June 15 Received 10% bonus issue. August 31 Received P4 cash dividend for each ordinary share. October 10 Received stock rights to buy one new share at P100 for every 5 shares held. Market value of stock ex-right, P156. November 15 Sold all stock rights at P4 per right.   What is the gain or loss on the sale of stock rights? a. 31,680 b. 0 c. (33,280) d. 17,600 Assuming AAA Company exercised its rights to buy new shares, what is the cost of the new investment? a. 124,800 b. 88,000 c. 186,560 d. 137,280

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Stockholder's Equity

The stockholders’ equity (often referred to as the book value of the company) is the number of assets available to the stockholder after its entire liabilities is paid off. The stockholders’ equity is also sometimes referred to as owner's equity. The stockholders’ equity or book value generally includes common stock, treasury stock retained earnings. It is an indicator of a company's financial strength and is an important item on the company's balance sheet.