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tatiyna
3 years ago
14

Cricket Corp. issued, without consideration, rights allowing stockholders to subscribe for additional shares at an amount greate

r than par value, but less than both market and book values.
When the rights are exercised, how are the following accounts affected?

a. Retained earnings
b. Additional paid-in capital
Business
1 answer:
scoray [572]3 years ago
7 0

Answer:

a. Retained earnings

  • not affected, retained earnings is affected only by net income/losses and dividend distributions.

b. Additional paid-in capital

  • increased, since the new stocks will be sold above par value, additional paid-in capital will increase. This new issuance must be treated as any other issuance of stock.
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