(Accounting for Bonus Issues)

1-CarCo declares and distributes a 1-for-4 bonus issue on 4 million ordinary shares. Par value is $3; market value

is $25.

Required:

(A) If the corporation law requires a reclassification from retained earnings to issued capital of an amount

equal to the market value of the bonus shares distributed, the journal entry is:

(B) If the corporation law requires a reclassification from share premium to share capital of an amount equal to

the par value of the bonus shares distributed, the journal entry is:

2- CarPro Corporation has incurred losses for several years. The board of directors voted to implement a quasi

reorganization, subject to shareholder approval. The statement of financial position prior to restatement, in

millions, follows :

Cash $ 85 Liabilities $ 500

Receivable 300 Ordinary Share Capital 900

Inventory 465 Share Premium 450

PPE (net) 600 Retained Earnings (deficit) -400

1450 $ 1450

Note: Fair value of inventory $400,000,000 and PPE $425,000,000

Required:

Journal entry necessary for the quasi reorganization.