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Occasionally companies build up large reserves from their accumulated profits. To enable shareholders to derive some tangible benefits from these reserves, the company may decide
Occasionally companies build up large reserves from their accumulated profits. To enable shareholders to derive some tangible benefits from these reserves, the company may decide to capitalise these reserves and distribute them among the shareholders in the form of capitalisation shares. The following balances were taken from the books of ZTL Ltd on 31 December 2023, the financial year end of the company: Included in the capital structure above are the following transaction that took place during the current financial year that ended on 31 December 2023: - A Capitalisation issue that the directors made on 1 December 2023 of one ordinary share for every four shares held at R2,00 per share; The directors of the company also approved the following transactions during the year: - The issue of 500012% cumulative preferences shares at R5 per share on 1 November 2023. - Dividends on ordinary shares was declared at 10c per share on 31 December 2023. No dividends were declared or paid during the previous financial year. REQUIRED: a) Calculate the rand value of the capitalisation share issue to the shareholders and provide the journal entry to record this transaction. Please motivate your answer. (4) b) Calculate the dividend amount payable for the year ended 31 December 2023
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