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I am studying but i have a obstacle with bonus issue
Eg: At the December 20X1 the capital structure of the company was as follows:
100,000 shares of 50c each: $50,000
Share premium account: $180,000During 20X2 the company made a bonus issue of 1 share for every 2 held, using the share premium account for the purpose, and later issued for cash another 60,000 shares at 80c each.
What is the company’s capital at 31 December 20X2?
Can you help me to calculate the exercise?
And why we have a issue bonus that makes a new share made the share capital increase and reduce in share premium?You really must watch the free lectures because I explain all about the effect of bonus issues in the lecture and I cannot simply write out the entire lecture here.
A bonus issue is an issue of free shares to existing shareholders.
Whenever shares are issued, then the same capital increases.If the purchasers had paid cash for them, then the double entry would be to increase cash.
However, since bonus issues are free of charge and therefore no cash is received, the double entry is to reduce the share premium.Dear sir,
I need your help in my revisionsThe issued share capital of Alpha, a limited liability company, is as follows:
$
ordinary shares of 10c each 1,000,0008% redeemable preference
shares of 50c each 500,000In the year ended 31 October 20X2, the company has paid the preference dividend for the year and an interim dividend of 2c per share on the ordinary shares. A final ordinary dividend of 3c per share was proposed, before the reporting date
What would be recognized for dividends in the equity section of the statement of financial position at 31 October 20X2?
A. $580,000
B. $90,000
C. $130,000
D. $200,000In future you must start a new thread if you are asking a question on a different topic – this question has nothing to do with bonus issues.
If dividend are certain or have been paid, then they reduce the retained earnings.
`The preference dividends that are owing are always certain.
The interim dividend on the ordinary shares has been paid and therefore this does reduce retained earnings. However the final dividend has only been proposed. It is therefore not certain (it has not been voted on) and there is therefore this is shown nowhere in this years statements.
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