Question

Cricket Corp. issued, without consideration, rights allowing stockholders to subscribe for additional shares at an amount greater than par value, but less than both market and book values. When the rights are exercised, how are the following accounts affected?

Answer 1

Answer:

The capital issued due to issuing of rights issues will recorded as under:

Dr Cash received

Cr Share Capital at the rate par value

Cr Share Premium at the rate (amount received per share - Par value)

Explanation:

So these are the accounts that will be affected and all the remaining accounts will not be affected.