Black company owned 50,000 ordinary shares which were purchased for P120 per share. During the year, the investee distributed 50,000 stock rights to the investor. The investor was entitled to buy one new share for P90 cash and two of these rights. Each share had a market value of P130 and each right had a market value of P20 on the date of issue. What amount should be debited to the investment account if the rights were not accounted for separately?

Black company owned 50,000 ordinary shares which were purchased for P120 per share. During the year, the investee distributed 50,000 stock rights to the investor. The investor was entitled to buy one new share for P90 cash and two of these rights. Each share had a market value of P130 and each right had a market value of P20 on the date of issue. What amount should be debited to the investment account if the rights were not accounted for separately?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Black company owned 50,000
ordinary shares which were
purchased for P120 per share.
During the year, theinvestee
distributed 50,000 stock
rights to the investor. The
investor was entitled to buy
one new share for P90 cash
and two of these rights. Each
share had a market value of
P130 and each right had a
market value of P20 on the
date of issue. What amount
should be debited to the
investment account if the
rights were not accounted for
separately?

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