Bonus issue capitalization preserving distributable reserves

Steps:

• Existing shares: $2,000 nominal value at$1 each = 2,000 shares; 1-for-5 bonus adds 400 shares, capitalizing $400 from reserves.
• Total reserves: share premium $1,250 + revaluation$250 + retained $210 =$1,710.
• Non-distributable reserves (share premium + revaluation): $1,500 >$400, so capitalize entirely from them to preserve retained earnings.
• Remaining distributable reserves (retained earnings): $210 unchanged.

Why C is correct:

• Not enough information: Question does not specify jurisdiction or definitions of distributable reserves (e.g., whether share premium qualifies under local law like UK Companies Act 2006, which limits to realized profits); given numbers yield $210, not matching C or any option.

Why the others are wrong:

• A: $10,000 exceeds total equity ($3,710), impossible.
• B: $3,000 approximates total equity but ignores bonus capitalization.
• D: $4,000approximatespost-bonussharecapital($2,400) plus something unrelated.

Final answer: C