Accounting 9706 · AS & A Level · The accounting system

The accounting system — practice question

A company’s statement of financial position lists these balances: Ordinary shares of $1$ each: $100\,000$ Share premium: $10\,000$ Retained earnings: $48\,000$ Bank (debit): $50\,000$ A bonus issue of one ordinary share for every four ordinary shares held is made. The reserves are maintained in their most flexible form. What will the revised account balances be?

  • AShare premium nil; retained earnings $33\,000$; bank (debit) $50\,000$
  • BShare premium nil; retained earnings $33\,000$; bank (debit) $75\,000$
  • CShare premium $10\,000$; retained earnings $23\,000$; bank (debit) $50\,000$
  • DShare premium $10\,000$; retained earnings $23\,000$; bank (debit) $75\,000$

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