Question

The balance appearing in the books of a company at the end of year was:
CRR A/c = Rs. 50,000
Securities Premium = Rs. 5,000
Revaluation Reserve = Rs. 20,000
Profit & Loss A/c (Dr.) = Rs. 10,000.
Maximum amount available for bonus shares will be ________.

• A. Rs. 50,000
• B. Rs. 55,000
• C. Rs. 45,000
• D. Rs. 57,000

Answer 1

The correct option is B Rs. 55,000

If a company cannot declare and pay a dividend for want of liquid resources, the company issues new shares to the existing shareholders which are known as Bonus Shares instead of paying a dividend in cash. Here cash redemption reserve is Rs 50,000 and securities premium is Rs 5,000. Hence, bonus share cannot be more than CRR A/c and Securities premium A/c together. Hence, maximum amount available for bonus shares will be Rs 55,000.