What would be the gain or loss arising from Dine's share issue to Chompster?
A) A loss of $4,000.
B) A loss of $2,400.
C) A gain of $2,400.
D)A gain of $4,000.

Question

Quizplus · Accepted Answer

To calculate the gain or loss arising from the share issue to Chompster, we need to calculate the difference between the cash received from Chompster and the net book value of the shares issued.

The net book value of the shares issued to Chompster would be:
10,000 shares x ($0.80 cost - $0.20 depreciation) = $6,000

The cash received from Chompster is:
10,000 shares x $1.00 issue price = $10,000

Therefore, the gain/loss is:
Cash received - Net book value of shares issued = $10,000 - $6,000 = $4,000 gain

What Would Be the Gain or Loss Arising from Dine's