Walker Corporation Issues One Right to Purchase One Share of Preferred

question 67

Multiple Choice

Walker Corporation issues one right to purchase one share of preferred stock at $90 for each ten shares of common stock owned by a shareholder.Seth owns 200 shares of common stock and receives 20 rights.The rights can be exercised anytime during the next 6 months.On the date of issuance of the stock rights, the common stock is selling for $14 per share and the rights are selling for $10 each.Seth has a total basis in the 200 common shares of $600 and elects to allocate basis to the rights.If Seth sells the 20 rights for $600 five months after they are received, what is his realized gain?

• A)$600
• B)$560
• C)$400
• D)$0

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Definitions:

Airline Flights

Scheduled services operated by airlines for the transportation of passengers and cargo between different destinations.

Market Price

The present cost at which a service or asset is available for purchase or sale in a specific market.

Airlines

Companies that provide air transport services for traveling passengers and freight.

Real Estate Market

A sector of the economy that deals with the buying, selling, and leasing of land, buildings, and properties.