Accounting Multiple Choice Question – 2 February 2021

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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A company converts £2,000,000 debenture stock into £0.50 ordinary shares.

The conversion rate is 40 ordinary shares per £100 debenture stock.

What amount is credited to the Share Premium account?

Select ONE answer:

  1. £800,000
  2. £1,000,000
  3. £1,200,000
  4. £1,600,000

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 4

  1. Not correct
  2. Not correct
  3. Not correct
  4. Correct – £2,000,000 / £100 = 20,000 * 40 = 800,000 / 2 = £400,000 ==> £2M – £0.4M = £1.6M Premium

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