Problem 16-13 (AICPA Adapted)
On January 1, 2019, Scoundrel Company purchased 100,000
ordinary shares at P80 per share to be classified as nontrading
through other comprehensive income.
On September 30, 2019, the entity received 100,000 share
rights to purchase 20,000 shares at P90 per share. The share
rights had an expiration date of February 1, 2020.
On September 30, 2019, each share had a market value of
P114 and the share right had a market value of P6.
1. What amount should be reported on September 30, 2019
as investment in share rights?
a. 500,000
b. 400,000
c. 100,000
d. 600,000
2. What is the total cost of the new investment if all of the
share rights are exercised?
a. 1,800,000
b. 1,600,000
c. 2,200,000
d. 2,400,000
Problem 16-14 (AICPA Adapted)
Temporal Company owned 50,000 ordinary shares held for
trading. These 50,000 shares were purchased for P120 per
share. During the year, the investee distributed 50,000 share
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 total cost should be recorded for the new shares that
are acquired by exercising the rights?
a. 2,250,000
b. 3,250,000
c. 3,050,000
d. 5,500,000
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