Number of shares to be issued

Shahid_fss · 05-05-2005, 07:12 AM

Please help me if in bellow case 240 right shares will be issued or 200 right shares will be issued. Waiting for your kind reply?
Figures are in rupees and I used combine entries.

Balance sheet
Authorized capital-------------100,000
Issued and subscribed capital---50,000
Share premium-------------------10,000
Reserves------------------------13,000
Profit and loss------------------7,000
Total---------------------------80,000
Liabilities
Bank-----------------------------2,000
Sundry Assets-------------------78,000
Total---------------------------80,000

Directors decided to issue one bonus shares for every five held at present out of reserve or profit and loss or both. Then it is decided to issue two right shares for every five held at present.
All shares are of rupees 100 each.

Entries # 1

Profit and loss--------7,000
Reserve---------------3,000
---------Share capital----------10,000
Issue of bonus shares

Bank--------------20,000
---------Share capital----------20,000
Issue of right shares

We issued 100 bonus shares (1/5*50,000) and then 200 right shares (2/5*50,000). This method is being followed in books.

Entries # 1

Profit and loss--------7,000
Reserve---------------3,000
---------Share capital----------10,000
Issue of bonus shares

Bank-------------24,000
---------Share capital----------24,000
Issue of right shares

I issued 100 right shares 100 each (1/5*50,000) and then 240 shares of 100 each because I think that now number of shares issued is 600 (500 existing issued shares + 100 bonus shares) so its (2/5*60,000 = 240,000 or 240 shares)

Now question is that why authors donât count the shares we have issued (i.e. 100 bonus shares) when they issue further shares (i.e. 200 right shares). Are they really wrong or my concept is not clear yet?

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