Warrants: AIG
Issue: How do I enter the distribution of
warrants by AIG?
Cause: AIG issued warrants giving the
holders of the warrants the right to buy AIG stock at a set price until a date
in January 2021, ten years after the issue of the warrants. The warrants were issued
as a taxable dividend.
Resolution:
This action will need two entries in the accounting
software. The information below is based
on the information available from AIG and the opening market price of the
warrants and the distribution date...
The Dividend Entry
Go to Transactions
> Dividend or Distribution or Accounting > Securities > Cash
Dividend depending on the version of the software being used. Here is the
information you need to complete the dividend entry.
Date: 1/20/2011
Select Transaction Type: Dividend or Distribution
Amount: 16.50 x .533933
x (# of AIG shares owned)
# of AIG
warrants = .533933 x (# of AIG shares)
16.50 =
opening price of AIG warrants on the distribution date, 1/20/2011
For example if you owned 100 shares
of AIG your amount would be
16.50 x .533933
x 100 = 880.98945. Round up to 880.99
This amount
includes the cash received in-lieu fractional warrants of AIG.
Ex-Dividend date: 1/20/2011
Type: Dividend
Select Security: AIG
(AIG)
Save the transaction and the dividend has been entered.
The Buy Entry
Go to Transactions
> Buy or Accounting > Securities > Buy depending on the version of the
software being used.
Here is the information you need to complete the buy.
Date: 1/19/2011
Select Security: AIG warrants (AIG.WT)
Number of Shares Bought: The whole number part of .533933 x (# of DSX shares owned). Check this
with your broker statement.
Net Total of
Purchase: Subtract your cash-in-lieu received from the Amount calculated in the Dividend entry above. Use the result as
the total purchase price. Find the cash-in-lieu amount on your broker
statement. Using the example above for 100 shares of AIG owned and cash-in-lieu
received of 6.40, the purchase price would be 880.99 – 6.40 = 874.59.
Save the buy transaction and you have completed the distribution
of the AIG warrants.
Note: The cash-in-lieu seldom equals the (fractional shares
sold) x (the opening price).
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