What are stock rights? How does the issuing company account for them?
Stock rights give a stockholder the choice of buying additional stock at a price below the current market price for a specified period. This type of issue gives existing shareholders securities called rights; the shareholders can purchase new shares at a discount to the market price on stated futures.
Stock rights give their proprietor the right, however, not the commitment to purchase the portions of an organization at a particular exercise cost for an assigned period. The term fundamentally applies to giving current investors the option to purchase extra offers as a feature of the guarantor's next stock deal.
A right offering (rights issue) is a group of rights proposed to existing investors to buy extra stock offers, known as membership warrants, in relation to their current possessions. This is a choice since it gives an organization's investors the right, yet not the commitment, to buy extra offers in the organization.
On January 1, 2017 (the date of grant), Lutz Corporation issues 2,000 shares of restricted stock to its executives. The fair value of these shares is $75,000, and their par value is $10,000. The stock is forfeited if the executives do not complete 3 years of employment with the company. Prepare the journal entry (if any) on January 1, 2017, and on December 31, 2017, assuming the service period is 3 years.
At December 31, 2017, Reid Company had 600,000 shares of common stock issued and outstanding, 400,000 of which had been issued and outstanding throughout the year and 200,000 of which were issued on October 1, 2017. Net income for 2017 was $2,000,000, and dividends declared on preferred stock were $400,000. Compute Reid’s earnings per common share. (Round to the nearest penny.)
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