Livia Plc Makes a Bonus Issue of 1,000,000 New Ordinary

question 8

Multiple Choice

Livia Plc makes a bonus issue of 1,000,000 new ordinary shares. Livia Plc's ordinary shares each have a par value of 50 pence and a current market value of 200 pence. What is the correct double entry to record this bonus issue of shares in the company's books of account?

• A) Debit retained earnings £2,000,000.
• B) Debit retained earnings £2,000,000
• C) Debit retained earnings £500,000
• D) Debit retained earnings £1,000,000

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Definitions:

Equivalent Unit

A measure used in accounting to express the amount of work done by employees or the amount of goods produced in terms of fully completed units.

Process Costing

is a costing method used where production is continuous, assigning costs to units of product based on the processes they go through.

Conversion Costs

Costs related to transforming raw materials into finished goods, specifically including direct labor and manufacturing overhead expenses.

Equivalent Unit

A measure used in process costing that converts the work done on partial units into a number of fully completed units.