On August 1, 2021, Comical Company issued rights to stockholders to subscribe to additional share of its common stock. A stockholder can buy one new share for every 5 rights plus P25 cash. The rights will expire on October 1, 2021. On July 31, 2021, the market price of a share with the right attached was P50, while the market price of the right alone was P5. Comical’s equity on July 31, 2021, comprised of the following:
Ordinary Shares, P10 par P4,000,000
Subscribed ordinary shares 1,000,000
Share premium 600,000
Retained earnings 200,000
Treasury shares, 80,000 shares 1,750,000
What is the effect on the stockholders’ equity as a result of the issuance of stock rights?