The Capital and reserves of a company appear as shown. On this day the directors of the company resolve to make a bonus issue of one for every five ordinary shares, for the purpose of enlarging the capital base of the company. Which of the following entries is correct?

(a) Dr Share premium £160,000, Cr Share capital £160,000
(b) Dr Share premium £120,000, Cr Share capital £120,000
(c) Dr Retained earnings £160,000, Cr Share capital £160,000
(d) Dr Share premium £120,000, Dr Retained earnings £40,000, Cr Share capital £160,000

Transcribed Image Text:

Ordinary shares of 50p Share premium account Retained earnings £800,000 £120,000 £195,500