Question

Stock Rights to Shareholders Nichols Electronics Corporation has been experiencing a steadily growing demand for its products. In order to meet this demand, a major expansion of production facilities is necessary. Nichols plans to raise the money for this proposed expansion by issuing 10,000 shares of $50 par preferred stock and 50,000 shares of $10 par common stock. These shares were previously authorized but have not yet been issued 3 There are presently 200,000 shares of $10 par common stock issued and outstanding. To maintain the preemp- tive right of the current shareholders, the board of directors authorizes the issuance of stock rights to the current common shareholders on March 2, 2016. The current market price of the common stock at this date is $24 per share. Each common shareholder is to receive one stock warrant for each share of common stock owned. One addi- tional share of common stock may be purchased at any time prior to April 7, 2016, for $23 and 4 of the stock warrants There are presently 20,000 shares of the $50 par preferred stock issued and outstanding. They were selling for S78 per share on March 4, 2016. No preemptive right applies to the preferred stock. In order to assure the sale of the additional 10,000 shares of the preferred stock, the board of directors also authorizes one stock warrant to be attached to each share of preferred stock in the new issue. One of these stock warrants allows the preferred share- holder to purchase one share of $10 par common stock for $18 per share at any time prior to April 7, 2016. The preferred shares with warrants attached are issued on March 5, 2016, at a price of $83 per share. The warrants begin trading in the market at $6 each

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Answer 1

				Per share	No of shares
		Prefered stock		$50	10000
		Common stock		$10	50000
SR No	Ans.	Particular		Debit $	Credit $
	Date
1	2/3/2016	Bank a/c		120,000
		common stock A/c			50,000
		share premium A/c			70,000
2
a	5/3/2016	Prefered stock A/c		500,000
		Bank a/c			500,000
b	19/3/2016	Bank a/c		144,000
		common stock A/c			60,000
		share premium A/c			84,000
		Bank a/c		474,000
		Prefered stock A/c			300,000
		share premium A/c			174,000
c	2/4/2016	Bank a/c		705,000
		common stock A/c			300,000
		share premium A/c			405,000
d	6/4/2016	Bank a/c		332,000
		Prefered stock A/c			200,000
		share premium A/c			132,000