Reference no: EM132629878
Question 1 - Stock Right
On June 15, 2018, Mars Company owns 10,000 shares with a cost of P700,000 of Moon Company's stocks. During the same period, Moon Company issued stock rights to existing shareholders. Mars received 10,000 stock rights entitling him to purchase 5,000 new shares at P80. The ordinary share was trading ex-rights at P80 a share and the rights had a market value of P20 per right.
a. Assuming that the above information are FVTPL, the stock rights should be initially recognized at.
b. Assuming the above securities are FVTOCI, the stocks rights should be initially recognized at.
c. Assuming that the above securities are FVTPL, the cost of investment acquired through exercised of stocks should be.
d. Assuming that the above securities are FVTOCI, the cost of the investment acquired through the exercise of stock rights should be.
Question 2 - Theoretical Value of Stock Rights
On January 2, 2018, Jupiter Company purchased 10,000 shares of P200 par value ordinary shares at P240 per share of Saturn Company. On March 2, 2018, Saturn Company issued stock rights to its shareholders. The holder needs five rights to purchase one share of ordinary stock at par. The market value of the stock on that date was P320 per share. There was no quoted price for the rights.
a. Compute for the theoretical value of the rights assuming the stock is selling right-on.
b. Compute fir the theoretical value of the rights assuming the stock is selling ex-right.