Accounting Multiple Choice Question – 16 August 2022

The summarised Balance Sheet of a sole trader shows:

• fixed assets – £200 000
• net current assets – £10 000
• capital – £210 000

He agrees to sell his business to a limited company. The purchase consideration is £260 000 being made up of £60 000 cash, £80 000 debentures and 180 000 ordinary shares of £0.50 each.

Which amount will be credited to the share premium account of the limited company?

Select ONE answer:

1. £30 000
2. £50 000
3. £90 000
4. £120 000

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 1

1. Correct – £60,000 + £80,000 + (180,000 * £0.5) = £230,000 ==> £260k – £230k = £30k
2. Not correct
3. Not correct
4. Not correct

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