On July 1, 2005, Vail Corp. issued rights to stockholders to subscribe to additional shares of its
Question:
On July 1, 2005, Vail Corp. issued rights to stockholders to subscribe to additional shares of its common stock. One right was issued for each share owned. A stockholder could purchase one additional share for 10 rights plus $15 cash. The rights expired on September 30, 2005. On July 1, 2005, the market price of a share with the right attached was $40, while the market price of one right alone was $2.
Vail's stockholders' equity on June 30, 2005 comprised the following:
Common stock, $25 par value, 4,000
Shares issued and outstanding $100,000
Additional paid-in capital 60,000
Retained earnings 80,000
By what amount should Vail's retained earnings decrease as a result of issuance of the stock rights on July 1, 2005?
Financial Accounting An Integrated Statements Approach
ISBN: 978-0324312119
2nd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren