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Elective Advanced Financial Accounting

Advanced Financial AccountingTU Board 2080

ABC Company has share capital of Rs.1,000,000 of Rs.100 each and capital reserve of Rs.400,000. The management of a company decides to utilize part of its capital reserve to make a bonus issue on…

2

ABC Company has share capital of Rs.1,000,000 of Rs.100 each and capital reserve of Rs.400,000. The management of a company decides to utilize part of its capital reserve to make a bonus issue on one share for every four shares held by the company. Required: a. Amount of bonus b. Capital reserve after bonus

Answer

· Based on the official syllabus and past papers
Updated

Solution

Given:

  • Share capital = Rs. 1,000,000 (10,000 shares of Rs. 100 each)
  • Capital reserve = Rs. 400,000
  • Bonus issue ratio = 1 share for every 4 shares held

a. Amount of Bonus

  • Number of shares eligible for bonus = Total shares × (Bonus ratio / Total ratio) = 10,000 × (1/4) = 2,500 shares
  • Bonus amount per share = Rs. 100 (par value)
  • Total bonus amount = 2,500 × Rs. 100 = Rs. 250,000

b. Capital Reserve After Bonus

  • Capital reserve used for bonus = Rs. 250,000
  • Remaining capital reserve = Rs. 400,000 – Rs. 250,000 = Rs. 150,000

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