Problem: Hanover Limited is considering expanding its business operations. The company is looking at the methods of financing available. The CEO of the company is in favour of equity financing, whereas the CFO is recommending a mixture of debt and equity financing. The CEO's plan is as follows: First make a bonus issue of 1 ordinary share for every four held. This would be followed by a rights issue of 1 for every 5 shares held at a price of $1.75 per share The CFO's plan is as follows: Issue 3,000 5% debentures of $250 each, followed by an issue of ordinary shares on the market of 40,000 new ordinary shares at a price of $1.20. REQUIRED: Assuming that all cash collected from the issue of shares or debentures was recorded in the bank account show the following:
(A) The statement of financial position of the company assuming the CEO's plan is executed.
(B) The statement of financial position of the company assuming the CFO's plan is executed
(C) Explain two (2) benefits to management of issuing bonus shares