Explain what is bonus share or scrip issue. Give a simple worked example to illustrate Bonus share issue.
|Bonus shares are:-
On 31 st December 20xx, the directors of ABC Ltd having complied with all necessary requirements use the credit balance on the Share Premium account to issue Bonus Shares at the rate of two new shares for every fifteen shares held.
Existing data of ABC Ltd before bonus shares issue:
(a) Issued share capital comprises 150,000 ordinary shares of $1 each fully paid up $150,000
(b) Credit balance on Share Premium Account is $20,000
Original Balance Sheet as at 31 st Dec BEFORE bonus share issued:
Issued share capital:
150,000 Ordinary shares of $1 each fully paid up $150,000
To compute bonus share issued:
Total ADDITIONAL BONUS SHARES = 150,000/15 x 2 = 20,000
Revised Total Number of shares after issue = 150,000 + 20,000
SHARE PREMIUM ACCOUNT
SHARE CAPITAL ACCOUNT
Revised Balance sheet of ABC Ltd AFTER Bonus share issued:
170,000 ordinary shares of $1 each fully paid up $170,000
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