Question

TR15-6 Rights (LO 15-5)

Locomotive Co. decided to raise new equity using a rights offering and on June 15 announced that it would issue one right for each share owned to existing shareholders. The company currently has 1,800,000 shares outstanding, which are priced at $45 per share. The subscription price is $30 and it will take four rights and the subscription price to purchase one share. On 30 June the 1,800,000 rights were issued. The rights expire on 31 July. During the ex-rights period (after 29 June), the value of one right is $3.00 and the share price is $42. By 31 July, 1,750,000 rights had been exercised and 50,000 rights expired.

Required:
1. Provide the journal entry to record the issue of the rights on 30 June. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2. Provide the journal entry to record the total transactions to the end of July for the exercise of the rights and the expiration of rights. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

SoLUTIONg of tu Pght on 3o June Shaure holders usl ture be On dun ne 30 → No entry

ounk AlCSa,500,ooo To Equity sheure Copftel elc. S,Soo, 000 So,000 x 30 tle ч łtoJ-Poe ufuuq ufll be Credited to ω81k .