What is the purpose of issuing bonus shares by a company?

To generate additional capital by selling shares to new investors.

To distribute profits to existing shareholders in the form of shares.

To replace forfeited shares with new shares.

To increase the company's authorized capital.

What are the conditions that must be satisfied for a bonus issue according to the Companies Act, 1956?

The Articles of Association should permit bonus issue, and the company should have sufficient undistributed profits.

The company should increase its authorized capital, and the bonus issue proposal should be approved by the Controller of Capital Issues.

The company should have a provision for revaluation reserves, and the bonus issue should replace dividend payments.

The company should have issued fully convertible debentures, and the bonus issue should be made within 3 months of approval.

What is the maximum permissible discount allowed when reissuing forfeited shares originally issued at a premium?

The maximum discount is equal to the forfeited amount.

The maximum discount is the amount of premium originally charged.

The maximum discount is the difference between the premium and the nominal value.

There is no discount allowed when reissuing forfeited shares.

When a company reissues forfeited shares at a premium, what journal entry is made?

Debit to Share Forfeited Account, credit to Securities Premium Account.

Debit to Bank Account, credit to Share Capital Account.

Debit to Securities Premium Account, credit to Share Forfeited Account.

Debit to Share Capital Account, credit to Bank Account.

What is the main advantage of issuing bonus shares from a shareholder's point of view?

Bonus shares provide immediate cash dividends to shareholders.

Bonus shares have a fixed market price that does not fluctuate.

Shareholders can convert bonus shares into cash by selling them at a higher price.

Bonus shares come with reduced taxation compared to cash dividends.

What is the purpose of the 'Reissue of Shares' process?

To replace forfeited shares with new shares at the same price.

To distribute profits to existing shareholders in the form of bonus shares.

To convert partly paid shares into fully paid shares.

To issue new shares to new investors and generate additional capital.

In the context of reissuing forfeited shares originally issued at a discount, how is the original amount of discount treated?

It is debited from the Share Forfeited Account when reissuing the shares.

It is credited to the Securities Premium Account when reissuing the shares.

It is transferred to the Capital Reserve Account after reissuing the shares.

It remains unaffected during the reissue process.

What is the maximum permissible residual reserve after a bonus issue according to the guidelines?

30% of the increased paid-up capital.

40% of the increased paid-up capital.

Equal to the amount of bonus shares issued.

20% of the increased paid-up capital.

Under what circumstances can bonus shares be issued in lieu of dividend?

Bonus shares can always be issued in lieu of dividend.

Bonus shares can only be issued if the company's reserve exceeds its paid-up capital.

Bonus shares cannot be issued in lieu of dividend.

Bonus shares can be issued if the company has defaulted in paying interest on debentures.

What is the primary purpose of underwriting in the stock market?

To guarantee a fixed market price for shares during an initial public offering.

To ensure that all shares are sold at par value to new investors.

To determine the dividend payout ratio for shareholders.

To mitigate the risk associated with selling securities during an IPO.

Issue Of Shares, Debentures, Underwriting And Bonus Shares- 3 Free MCQ Practice Test with Solutions

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Test: Test: Issue Of Shares, Debentures, Underwriting And Bonus Shares- 3 - B Com MCQ

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What is the purpose of issuing bonus shares by a company?

What are the conditions that must be satisfied for a bonus issue according to the Companies Act, 1956?

What is the maximum permissible discount allowed when reissuing forfeited shares originally issued at a premium?

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