Reference no: EM132745402
On August 1, 2014, Comical Company issued rights to shareholders to subscribe to additional share of its ordinary share. A shareholder can buy one new share for every 10 rights plus P20 cash. The rights will expire on October 1, 2014. On July 31, 2014, the market price of a share with the right attached was P40, while the market price of the right alone was P4.
Comical's equity on July 31, 2014, comprised of the following:
Ordinary share capital, P10 par P 3,000,000
Share premium reserve 600,000
Accumulated profits 200,000
Problem 1: What is the effect on the shareholders' equity if all the rights were exercised?
a. P 1,200,000 increase c. P 120,000 increase
b. P 600,000 increase d. No change
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