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Difficulty: EasyBonus and Rights Issues

Crestview Manufacturing Ltd has an issued share capital of 800,000800,000 ordinary shares of ₦0.50\text{₦}0.50 each. The board of directors resolves to make a bonus issue of 11 new ordinary share for every 44 ordinary shares held. What is the total nominal value (in ₦\text{₦}) of the bonus shares issued?

Answer: 100000 ₦

Answer

The total nominal value of the bonus shares issued is ₦100,000.
To find the total nominal value of bonus shares issued, first calculate the quantity of bonus shares (800,000 existing shares divided by 4 = 200,000 bonus shares). Then multiply this quantity by the nominal value per share (200,000 shares × ₦0.50 = ₦100,000).

Step-by-Step Solution

1
Determine the number of bonus shares issued.
200,000 shares
The ratio is 1 new share for every 4 existing shares, so dividing 800,000 by 4 yields 200,000 bonus shares.
2
Calculate the monetary nominal value of the bonus shares.
₦100,000
Multiplying 200,000 bonus shares by their par value of ₦0.50 each gives ₦100,000.

Key Concept

Bonus share capitalization of reserves
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Topics

Bonus and Rights Issues

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