Accounting Multiple Choice Question – 8 January 2021

The information shows the capital and reserves of a company according to its last published accounts. 

1. ordinary shares of £1.00 each – £ 200,000
2. redeemable preference shares of £1.00 each – £50,000
3. Profit and Loss Account – £68,000

The redeemable preference shares were originally issued at par. They have now been redeemed at a premium of 25 %. 

A new issue of 50 000 ordinary shares of £1.00 was made at a premium of £0.15 per share to finance the redemptions. 

What will be the balance on the Share Premium account and Profit and Loss Account after the share redemption? 

Select ONE answer:

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

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

The answer is 3

1. Not correct
2. Not correct
3. Correct -50,000 * £0.15 = £7,500 + £68,000 – (50,000 *0.25)
4. Not correct

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