Question
Question 1 Maxi Berhad offered 1 million ordinary shares for issue to public on 1 January 2018 having face value of RM1 each at an
Question 1 Maxi Berhad offered 1 million ordinary shares for issue to public on 1 January 2018 having face value of RM1 each at an issue price of RM1.50 per share. Maxi Berhad requires the equity injection to finance a new project. The minimum amount of subscription necessary for the project is RM1,250,000. As per the terms of the issue of shares, RM1.50 per share was to be received in full from the applicants on 30 November 2018. A total amount of RM3,000,000 was received. The oversubscription of RM1,500,000 was returned to unsuccessful applicants on 20 December 2018. On 31 January 2020, Maxi Berhad declared a 3 for 2 bonus issue. Extract of Maxi Berhad's balance sheet prior to issuance of bonus shares is as follows:
RM Ordinary Share Capital 1,500,000
Revaluation Reserve 1,500,000
Retained Profits 5,000,000 8,000,000
Required:
(a) State the journal entries required to account for the above transactions and prepare extract of the balance sheet after bonus issue..
(b) Explain the advantages and disadvantages of bonus issues.
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