PROBLEM 6 The extracts are given from the draft Balance Sheet of Gears Ltd. as on 31st March, 2010: Authorised capital: 20,000 Equity Shares of 10 each 2,00,000 Issued and Subscribed Capital : 7,000 equity Shares of 7 10 each fully paid up 70,000 Reserve Fund 36,000 Profit and Loss Account 29,000 The Board of Directors pass a resolution to capitalize a part of existing reserves and profits by issuing Bonus Shares. One bonus share is being issued for every 4 equity shares held at present. For this purpose, * 10,000 are to be provided out of Reserve Fund and the balance out of the Profit and Loss Account Set out the Journal entries to give effect to the resolution, and show how they would affect the Balance Sheet of the Company