Accounting Multiple Choice Question – 7 April 2021

A limited company acquires a business from a sole trader.

The net assets of the business are £612,000. The purchase price has been agreed at £700,000.

The Goodwill element is to be paid in cash.

The balance of the consideration is to be made by the issue of 300 000 shares of £0.50 each valued at £1.80 per share and the balance in 7 % loan stock valued at £90 per £100.

What is the par value of the loan stock?

Select ONE answer:

1. £64,800
2. £72,000
3. £80,000
4. £177,778

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 ==> 300,000 shares * £1.80 = £540,000 ==> £612,000 – £540,000 = £72,000 / 0.9 = £80,000
4. Not correct

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