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Which one of the alternatives represents the correct value

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Reference no: EM132769526

Madala Ltd was incorporated on 1 May 2017 with an authorised share capital of 1 500 000 NPV ordinary shares and 700 000 11% preference shares.

  • On 31 October 2020, the directors approved a capitalisation issue of 5 shares for every 12 ordinary shares held at R3.20 per share.
  • On 30 November 2020, the board of Madala Ltd declared an interim ordinary dividend of R1.25 per share payable during December 2020. The company met the liquidity and solvency requirements and on 08 December 2020 payment was made to the shareholders in respect of the dividends.

Problem 1: Assume that the total number of capitalisation shares issued is 460 000. Which one of the following alternatives represents the correct value of the capitalisation shares to be issued by Madala Ltd on 31 October 2020?

A. R 2 300 000
B. R 1 472 000
C. R 300 000
D. R 1 100 000
E. R 400 000

Reference no: EM132769526

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