Day: August 19, 2022

A company has issued £1 000 000 of 8 % convertible loan stock, which the holder can convert in November 2007 into ordinary shares at a rate of 1 share for each £2.00 of loan stock held.

What is the correct presentation in the final accounts for the year ended 31 December 2004?

Select ONE answer:

1. Balance Sheet – Long Term loan £1 000 000 & Profit and Loss – Dividend £80 000
2. Balance Sheet – Long Term loan £1 000 000 & Profit and Loss – Loan Interest £80 000
3. Balance Sheet – Ordinary Share Capital £500 000 & Profit and Loss – Dividend £40 000
4. Balance Sheet – Ordinary Share Capital £500 000 & Profit and Loss – Loan Interest £40 000

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
3. Not correct
4. Not correct

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