Day: February 6, 2021

A company purchases a business with net assets of £110,000. In addition, the Goodwill of the business is valued at £10,000.

The purchase price of the business is settled by the issue of 80,000 £1 ordinary shares in the company. 

What will be the entry in the company’s Share Premium account?

Select ONE answer:

1. debit £40,000
2. credit £40,000
3. debit £30,000
4. credit £30,000

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 2

1. Not correct
2. Correct – £110k + £10k – £80k = £40k credit
3. Not correct
4. Not correct

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