6.19 LO3 Woolwell Ltd has the following equity capital at year-end:

Ordinary shares of $0.25 each $400,000 Revaluation reserve 160,000 General reserve 40,000 Retained profits 50,000

$650,000 In addition, the company has 200,000 $1 5% preference shares in issue. The board of directors wishes to eliminate the company’s reserves. It has decided to make an immediate one-for-four bonus issue of ordinary shares. Following the issue, an annual dividend will be paid to shareholders. The board would like the amount paid to ordinary shareholders to be the maximum possible.

What will be the:

1 total reserves of the company following the above transaction?