At 31 December 2010 the capital structure of Ambia, a limited liability company, was as follows:

The authorized share capital of the company was $1 000 000. The directors of the company are considering the following proposals:
i. Making a bonus issue of one ordinary share for every two held, in order to raise $500 000 for the company.
ii. Paying a dividend of 10 cents per share.
iii. Increasing the revaluation reserve to $300 000 by revaluing goodwill from $800 000 to $1 100 000.
Required: Comment on the validity of these proposals. [ACCA adapted]

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1 000 000 ordinary shares of $1 each Share premium account Revaluation reserve Retained earnings $1 000 000 200 000 100 000 50 000