Livia Plc makes a bonus issue of 1,000,000 new ordinary shares. Livia Plc's ordinary shares each have a par value of 50 pence and a current market value of 200 pence. What is the correct double entry to record this bonus issue of shares in the company's books of account?

Question

Quizplus · Accepted Answer

The correct double entry to record the bonus issue involves debiting retained earnings for the par value of the new shares issued. Since 1,000,000 shares are issued at a par value of 50 pence each, the total amount is £500,000 (1,000,000 shares * £0.50).

Livia Plc Makes a Bonus Issue of 1,000,000 New Ordinary