The balance appearing in books of a company at the end of year were: CRR A/c Rs. $50, 000$ , Security Premium. Rs. $5, 000$ . Revaluation Reserve Rs. $20, 000$ , P & L A/c(Dr.) Rs. $10, 000$ . Maximum amount available distribution of Bonus shares will be ________.

Rs.

50, 000

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Rs.

55, 000

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Rs.

45, 000

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Rs.

57, 000

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Solution

The correct option is B Rs. $55, 000$
Bonus shares are issued when the company has sufficient cash to pay the shareholders with their regular dividends. The shareholders can sell these shares and meet their cash needs. Firstly the company uses its reserves to pay off the dividend and the reserve balance can be calculated as under:
$A m o u n t i n r e s e r v e s = C R R + R e v a l u a t i o n r e s e r v e - S e c u r i t y p r e m i u m - P / l b a l a n c e$
Substitute values in the above equation
$A m o u n t i n r e s e r v e s = R s 50, 000 + R s 20, 000 - R s 5, 000 - R s 10, 000 = R s 55, 000$
Thus, the company has Rs55,000 in its reserves to meet the expense during the issue of bonus shares.

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The balance appearing in books of a company at the end of year were: CRR A/c Rs. 50,000, Security Premium. Rs. 5,000. Revaluation Reserve Rs. 20,000, P & L A/c(Dr.) Rs. 10,000. Maximum amount available distribution of Bonus shares will be ________.

The balance appearing in books of a company at the end of year were: CRR A/c Rs. $50, 000$ , Security Premium. Rs. $5, 000$ . Revaluation Reserve Rs. $20, 000$ , P & L A/c(Dr.) Rs. $10, 000$ . Maximum amount available distribution of Bonus shares will be ________.