Question
At 31 December 2005 the capital structure of Dompo, a limited liability company, was as follows: GHS 1,000,000 ordinary shares of GHS 1 each 1,000,000
At 31 December 2005 the capital structure of Dompo, a limited liability company, was as follows: GHS 1,000,000 ordinary shares of GHS 1 each 1,000,000 Share premium account 200,000 Revaluation reserve 100,000 Retained earnings 50,000 The authorized share capital of the company was GHS 1,000,000. The directors of the company are considering the following proposals. None of them is a qualified accountant: a. Making a bonus issue of one ordinary share for every two held, in order to raise GHS500,000 for the company. b. Paying a dividend of 10p per share c. Increasing the revaluation reserve to GHS 300,000 by revaluing goodwill from GHS 800,000 to GHS 1,000,000. d. Combining all reserves into a single figure. Comment on the validity of these proposals.
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