Cool Ltd acquired 4.5 million of the issued shares of Cat Ltd on 1 July 20X0 when the equity of Cat Ltd (at fair value) was as follows:
$\begin{array} { l l }
\text { } & \$000s \
\text { Paid up capital (5 million shares) } & 4000 \
\text { Retained profits } & 1000 \
\text { General reserve } & 1000
\end{array}$
Cool Ltd paid $6.5 million for this acquisition. On 1 July 20X1 Cat Ltd issued bonus shares in lieu of paying a dividend. The terms of the issue were 1 bonus share for every 4 shares held.
-How many bonus shares did Cool Ltd receive?

Question

Cool Ltd acquired 4.5 million of the issued shares of Cat Ltd on 1 July 20X0 when the equity of Cat Ltd (at fair value) was as follows:
$\begin{array} { l l } 
  \text {  } & \$000s \
\text { Paid up capital (5 million shares) } & 4000 \
\text { Retained profits } & 1000 \
\text { General reserve } & 1000
\end{array}$
Cool Ltd paid $6.5 million for this acquisition. On 1 July 20X1 Cat Ltd issued bonus shares in lieu of paying a dividend. The terms of the issue were 1 bonus share for every 4 shares held.
-How many bonus shares did Cool Ltd receive?

Quizplus · Accepted Answer

Cool Ltd owned 4.5 million shares of Cat Ltd. The bonus share issue was 1 for every 4 shares held, so Cool Ltd would receive 4.5 million / 4 = 1.125 million bonus shares.

Cool Ltd Acquired 4 Cool Ltd Paid $6