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Case problem #7 - related to chapter 17 Crandall Corporation (rights offering and the impact on shareholders) The Crandall Corporation currently has 100,000 shares outstanding that are selling at $50 per share. It needs to raise $900,000. Net income after taxes is $500,000. Its vice-president of finance and its investment banker have decided on a rights offering, but are not sure how much to discount the subscription price from the current market value. Discounts of 10 percent, 20 percent, and 40 percent have been suggested. Common stock is the sole means of financing for the Crandall Corporation. a. For each discount, determine the subscription price, the number of shares to be issued, and the number of rights required to purchase one share. b. Determine the value of one right under each of the plans. c. Compute the earnings per share before and immediately after the rights offering under a 10 percent discount from the market price. d. By what percentage has the number of shares outstanding increased? e. Stockholder X has 100 shares before the rights offering and participated by buying 20 new shares. Compute his total claim to earnings both before and after the rights offering (that is, multiply shares by the earnings per share figures computed in part c). 

          Case problem #7 - related to chapter 17
Crandall Corporation (rights offering and the impact on shareholders)
The Crandall Corporation currently has 100,000 shares outstanding that are selling at $50 per share. It needs to
raise $900,000. Net income after taxes is $500,000. Its vice-president of finance and its investment banker have
decided on a rights offering, but are not sure how much to discount the subscription price from the current
market value. Discounts of 10 percent, 20 percent, and 40 percent have been suggested. Common stock is the
sole means of financing for the Crandall Corporation.
a. For each discount, determine the subscription price, the number of shares to be issued, and the number of
rights required to purchase one share.
b. Determine the value of one right under each of the plans.
c. Compute the earnings per share before and immediately after the rights offering under a
10 percent discount from the market price.
d. By what percentage has the number of shares outstanding increased?
e. Stockholder X has 100 shares before the rights offering and participated by buying 20 new shares. Compute
his total claim to earnings both before and after the rights offering (that is, multiply shares by the earnings
per share figures computed in part c).
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Case problem #7 - related to chapter 17 Crandall Corporation (rights offering and the impact on shareholders) The Crandall Corporation currently has 100,000 shares outstanding that are selling at 50 per share. It needs to raise900,000. Net income after taxes is 500,000. Its vice-president of finance and its investment banker have decided on a rights offering, but are not sure how much to discount the subscription price from the current market value. Discounts of 10 percent, 20 percent, and 40 percent have been suggested. Common stock is the sole means of financing for the Crandall Corporation. a. For each discount, determine the subscription price, the number of shares to be issued, and the number of rights required to purchase one share. b. Determine the value of one right under each of the plans. c. Compute the earnings per share before and immediately after the rights offering under a 10 percent discount from the market price. d. By what percentage has the number of shares outstanding increased? e. Stockholder X has 100 shares before the rights offering and participated by buying 20 new shares. Compute his total claim to earnings both before and after the rights offering (that is, multiply shares by the earnings per share figures computed in part c).

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Horngren’s Cost Accounting
Horngren’s Cost Accounting
Srikant M. Datar, Madhav V. Rajan 16th Edition
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Text: Case problem #7 - Related to Chapter 17 Crandall Corporation (Rights Offering and the Impact on Shareholders) The Crandall Corporation currently has 100,000 shares outstanding that are selling at $50 per share. It needs to raise $900,000. Net income after taxes is $500,000. Its vice-president of finance and its investment banker have decided on a rights offering but are not sure how much to discount the subscription price from the current market value. Discounts of 10 percent, 20 percent, and 40 percent have been suggested. Common stock is the sole means of financing for the Crandall Corporation. a. For each discount, determine the subscription price, the number of shares to be issued, and the number of rights required to purchase one share. b. Determine the value of one right under each of the plans. c. Compute the earnings per share before and immediately after the rights offering under a 10 percent discount from the market price. d. By what percentage has the number of shares outstanding increased? e. Stockholder X has 100 shares before the rights offering and participated by buying 20 new shares. Compute his total claim to earnings both before and after the rights offering (that is, multiply shares by the earnings per share figures computed in part c).
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Transcript

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00:01 Hello students, let us solve the problem.
00:02 Glorio detroit corporation was authorized to issue 900 ,000 ordinary share.
00:08 The peer stated the value of preference share of 1 .5 million share.
00:12 No par.
00:12 The following transaction occurred on 2019.
00:16 So, there are some transactions happened in the year 2019.
00:19 So, we will do the journal entry now for that.
00:23 So, first transaction, the journal entry format will be date, account title, debit and credit.
00:38 So, the date is 2nd feb, cash, cash will be 24 ,000 into 24 which gives us 576 ,000.
01:03 Additional paid -in capital of common stock to record the issue of common stock.
01:11 Then the next transaction is on 15th feb, that will be land, 795 ,000 to authorize additional paid -in capital, additional paid -in capital of a preference stock that is 550 ,000.
01:39 Then additional paid -in capital, additional paid -in capital for preference share.
01:52 So, it is 245 ,000 to record the purchase of land again preference shares.
01:58 The next transaction is on 30th april, 20.
02:04 Legal fee incorporation, 77 ,500, common stock 12 ,500, additional paid -in capital 65 ,000.
02:34 So, to record the issue of common stock again a legal fees...
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