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What amount should be credited to Share Premium when the rights in connection with the warrants were exercised on December 31, 2020?

What amount should be credited to Share Premium when the rights in connection with the warrants were exercised on December 31, 2020?

FINANCIAL ACCOUNTING
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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What amount should be credited to Share Premium when the rights in connection with the warrants were exercised on December 31, 2020?
Curve Company reported the following shareholders' equity on January 1, 2020: Ordinary share capital, P100 par; 200,000 shares authorized; 50,000 shares 5,000,000 issued and outstanding Share premium 1,000,000 Retained earnings 3,000,000 On May 31, 2020, the entity issued bonds of P5,000,000 at 120, giving with each P1,000 bond a warrant enabling the holder to purchase 3 shares at P120 per share for a one year period. Shares were selling for P140 at this time. The market value of bond ex-warrant is 105. By December 31, 2020, 10,000 shares had been issued in connection with warrants issued on the sale of bonds. Net income for 2020 was P2,000,000. On July 15, 2021, the entity issued rights to shareholders, 1 right on each share, permitting holders to acquire for a one-year period 1 share at P130 with every 5 rights submitted. Shares were selling for P150 at this time. All rights were exercised and the additional shares were issued on December 31, 2021. The remaining share warrants issued to the bondholders expired. Net income for 2021 was P3,000,000.
Transcribed Image Text:Curve Company reported the following shareholders' equity on January 1, 2020: Ordinary share capital, P100 par; 200,000 shares authorized; 50,000 shares 5,000,000 issued and outstanding Share premium 1,000,000 Retained earnings 3,000,000 On May 31, 2020, the entity issued bonds of P5,000,000 at 120, giving with each P1,000 bond a warrant enabling the holder to purchase 3 shares at P120 per share for a one year period. Shares were selling for P140 at this time. The market value of bond ex-warrant is 105. By December 31, 2020, 10,000 shares had been issued in connection with warrants issued on the sale of bonds. Net income for 2020 was P2,000,000. On July 15, 2021, the entity issued rights to shareholders, 1 right on each share, permitting holders to acquire for a one-year period 1 share at P130 with every 5 rights submitted. Shares were selling for P150 at this time. All rights were exercised and the additional shares were issued on December 31, 2021. The remaining share warrants issued to the bondholders expired. Net income for 2021 was P3,000,000.
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