Month: October 2022

A business is sold to a limited company.

The net assets acquired have a total book value of £90,000 and are valued at £100,000.

Goodwill is valued at £30,000.

The purchase price is settled by an issue of ordinary £1.00 shares, valued at £1.25 each.

How many shares are issued?

Select ONE answer:

1. 80,000
2. 96,000
3. 104,000
4. 130,000

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 = £100,000 + £30,000 = £130,000 / £1.25 = = > 104,000 shares
4. Not correct

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

A company is considering redeeming its debentures at par at the start of its financial year.

What will be the effect on the company’s profit and net current assets in the year of redemption?

Select ONE answer:

1. Decrease in profit & decrease in net current assets
2. Decrease in profit & increase in net current assets
3. Increase in profit & decrease in net current assets
4. Increase in profit & Increase in net current assets

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
4. Not correct

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

A company issued 10,000 £10 ordinary shares at a price of £20 each.

A month after the issue, the company used £156,000 of the proceeds to repay an 8% Debenture including six months’ accrued interest due.

The company prepared a cash flow statement just  after repayment of the Debenture.

What amount of net cash inflow will appear under the heading ‘Financing’ in the cash flow statement?

Select ONE answer:

1. £38,000
2. £44,000
3. £50,000
4. £56,000

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 – £150,000 * 0.08 = £12,000 / 2 = £6,000 = = > £20 * 10,000 = £200,000 – £156,000 + £6,000
4. Not correct

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