Which of the following statements is true about Bonus shares?(1.0 Marks)They Are Issued At A Discounted PriceAExisting Shareholders Pay For ThemBThey Are Issued To New InvestorsCThey Are Issued Out Of Free Reserves And Surplus
Question
Which of the following statements is true about Bonus shares?(1.0 Marks)They Are Issued At A Discounted PriceAExisting Shareholders Pay For ThemBThey Are Issued To New InvestorsCThey Are Issued Out Of Free Reserves And Surplus
Solution
The true statement about Bonus shares is: They Are Issued Out Of Free Reserves And Surplus.
Here's why:
Bonus shares are additional shares given to the current shareholders without any additional cost, based upon the number of shares that a shareholder owns. These are company's accumulated earnings which are not given out in the form of dividends, but are converted into free shares.
They are not issued at a discounted price (option A), existing shareholders do not pay for them (option B), and they are not issued to new investors (option C).
Similar Questions
What is the source of funds for issuing Bonus shares?(1.0 Marks)Cash From New InvestorsAFree Reserves And Surplus Of The CompanyBBank LoansCGovernment Grants
A bonus issue of shares to existing shareholders has which of the following impacts on the equity of a company? Total equity increases. Total equity decreases. No overall change in total equity. Only the amount of issued share capital changes.
How does a Bonus Issue theotrically impact the share price?(1.0 Marks)It Increases The Share PriceAIt Decreases The Share PriceBNo Impact On Share PriceCIt Doubles The Share Price
1. Question 2 In a company's rights issue, the number of shares offered at a discounted price is made to all the existing shareholders of the company in proportion to their existing shareholdings. Choose one of the following answers. False True
According to the bonus plan hypothesis of Positive Accounting Theory, within the available set of accounting policies, management will tend to choose: (1) Accounting methods that increase current period reported income (where the bonus plan is based on reported profit). (2) Asset increasing accounting policies (where there is a positive link between asset values and the bonus plan). (3) Accounting methods that decrease current period reported income (where the bonus plan is based on reported profit). Which of the above statements is/are correct? According to the bonus plan hypothesis of Positive Accounting Theory, within the available set of accounting policies, management will tend to choose: (1) Accounting methods that increase current period reported income (where the bonus plan is based on reported profit). (2) Asset increasing accounting policies (where there is a positive link between asset values and the bonus plan). (3) Accounting methods that decrease current period reported income (where the bonus plan is based on reported profit). Which of the above statements is/are correct? Statements (1) and (2) Statement (1) only Statement (2) only Statement (3) only
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