Accounting Multiple Choice Question – 27 August 2017

Accounting

Bob, Michael, and Simon are proposing to set up a limited company with a share capital of £180 000. They will be the only shareholders and originally planned to invest in the share capital using Ratio 1 below. However, circumstances have changed and they have to use Ratio 2.

Untitled 2

What difference will it make to Bob’s investment when Ratio 2 is chosen?

Select ONE answer:

  1. Invests £21 000 less
  2. Invests £21 000 more
  3. Invests £24 000 less
  4. Invests £24 000 more
  5. Invests £30 000 more

Explain your answer
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 3 – In Ratio 1 the £180,000 is divided by 5 shares (1+2+2) which makes Bob’s investment = £36,000. In Ratio 2 the £180,000 is divided by 15 (2+9+4) which makes Bob’s investment now = £12,000 which means he will invest £24,000 less.

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.

Author: stuart001uk2014

Referral marketing, business, economics and accounting s​pecialist & corporate mentor

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s