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Occasionally companies build up large reserves from their accumulated profits. ...
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Occasionally companies build up large reserves from their accumulated profits. To enable shareholders to derive some tangible benefits from these reserves, the company may decide to capitalise these reserves and distribute them among the shareholders in the form of capitalisation shares.
The following balances were taken from the books of Congo Ltd on 31 December 2024, the financial year end of the company:
|
R
|
Issued ordinary share capital (R1 shares)
|
1 100 000
|
70 000 10% non-cumulative preference shares
|
440 000
|
30 000 12% cumulative preference shares
|
180 000
|
Retained earnings
|
1 300 000
|
Included in the capital structure above are the following transaction that took place during the current financial year that ended on 31 December 2024:
A capitalisation issue that the directors made on 1
December 2024 of one ordinary share for every four shares held at R1,00 per
share.
The directors of the company also approved the following transactions during the year:
· The issue of 10 000 12% cumulative preferences shares at R5 per share on 1 November 2024.
· Dividends on ordinary shares was declared at 10c per share on 31 December 2024. No dividends were declared or paid during the previous financial year.
REQUIRED:
The rand value of the capitalisation share issue to the shareholders, amounts to: