Month: April 2021

A company’s Balance Sheet extract is given. 

The directors have decided to write off the debit balance on the Profit and Loss Account together with Goodwill of £100,000.

The shareholders agreed to exchange their shares for new ordinary shares of £0.50.

How many shares will the directors have to issue to the shareholders? 

Select ONE answer:

1. 600,000
2. 700,000
3. 1,200,000
4. 1,400,000

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 3

1. Not correct
2. Not correct
3. Correct ==> £700k – £100k = £600k * 2 ==> 1.2M shares
4. Not correct

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

A company’s Balance Sheet shows below the following information: 

The preference shares are to be redeemed at par with no new issue of shares.

The company wishes to maintain maximum distributable profits. 

What will the balance on the Profit and Loss Account be after redemption of the shares?

Select ONE answer:

1. £100,000
2. £200,000
3. £300,000
4. £400,000

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

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

When a company redeems shares, it may create a capital redemption reserve.

Why does it create this reserve?

Select ONE answer:

1. to make the Balance Sheet balance
2. to protect the creditors’ rights
3. to provide cash for the redemption
4. to replace the cash used in the redemption

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
3. Not correct
4. Not correct

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

The table below shows an extract taken from the final accounts of a limited company.

The only acquisitions and disposals were those stated above.

What will be the net cash outflow as a result of these transactions? 

Select ONE answer:

1. £103,500
2. £108,500
3. £110,000
4. £115,000

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 – £100,000 + £10,000 – £1,500
3. Not correct
4. Not correct

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

What is not included in cash flow statements?

Select ONE answer:

1. capital commitments
2. foreign currency deposits
3. liquid investments
4. taxation

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 1

1. Correct 
2. Not correct
3. Not correct
4. Not correct

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