Problem 16-11 (IAA) On July 1, 2021, Queen Company purchased for P2,400,000. 50,000 newly issued 6% cumulative P20 par value preference shares. Each preference share had one share warrant attached which entitled the holder to acquire at P15 one ordinary share of P10 par value for each two warrants held. The market price on this date of the preference share without warrant was P50 and the market price of the share warrant was P10. On December 1, 2021, all the share warrants wre sold for P700,000. 1. What amount should be recorded as cost of the investment in preference shares? a. 2,400,000 b. 2,000,000 с. 1,200,000 d. 1,000,000 2. What amount should be recognized as gain on sale of warrants? a. 300,000 b. 700,000 с. 400,000 d. 0.
Problem 16-11 (IAA) On July 1, 2021, Queen Company purchased for P2,400,000. 50,000 newly issued 6% cumulative P20 par value preference shares. Each preference share had one share warrant attached which entitled the holder to acquire at P15 one ordinary share of P10 par value for each two warrants held. The market price on this date of the preference share without warrant was P50 and the market price of the share warrant was P10. On December 1, 2021, all the share warrants wre sold for P700,000. 1. What amount should be recorded as cost of the investment in preference shares? a. 2,400,000 b. 2,000,000 с. 1,200,000 d. 1,000,000 2. What amount should be recognized as gain on sale of warrants? a. 300,000 b. 700,000 с. 400,000 d. 0.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Problem 16-11 (IAA)
On July 1, 2021, Queen Company purchased for P2,400,000
50,000 newly issued 6% cumulative P20 par value preference
shares. Each preference share had one share warrant attached
which entitled the holder to acquire at P15 one ordinary share
of P10 par value for each two warrants held.
The market price on this date of the preference share without
warrant was P50 and the market price of the share warrant
was P10. On December 1, 2021, all the share warrants wre sold
for P700,000.
1. What amount should be recorded as cost of the investment
in preference shares?
a. 2,400,000
b. 2,000,000
c. 1,200,000
d. 1,000,000
2. What amount should be recognized as gain on sale of
warrants?
a. 300,000
b. 700,000
c. 400,000
d.
0.
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