Month: January 2023

A limited company purchases a partnership.

It issues to the partners 20 % debentures and pays them cash in full settlement of the purchase price.

What is true?

Select ONE answer:

1. The company’s gearing is reduced.
2. The company intended to expand its business.
3. The company’s reserves are reduced.
4. The partners now own some of the equity in the company.

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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Alex plc converts £2,000,000 debenture stock into £0.50 ordinary shares.

The conversion rate is 40 ordinary shares per £100 debenture stock.

What amount is credited to the Share Premium account?

Select ONE answer:

1. £800,000
2. £1,000,000
3. £1,200,000
4. £1,600,000

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 == > £2,000,000 / £100 = 20,000 units * 40 = 800,000 ordinary shares / 0.5 = £1,600,000

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

Alex plc has the following capital structure:

• 50,000 ordinary £10 shares – £500,000
• 1,000,000 5% convertible loan stock – £1,000,000

One half of the loan stock holders converted at the rate of three new ordinary shares of £10 each per £100 of loan stock.

How many new ordinary shares were issued?

Select ONE answer:

1. 15,000
2. 150,000
3. 200,000
4. 300,000

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 = = > 500,000 convertible loan stock / 100 = 5,000 * 3 = 15,000
2. Not correct
3. Not correct
4. Not correct

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

The table shows Alex plc’s Statement Of Financial Position.

Non-current assets – £60,000
Current assets – £10,000
Total – £70,000

Issued share capital £100,000
Profit & Loss Account (£30 000)
Total – £70,000

Alex plc has decided to do the following:

• The issued shares of £0.50 each are to be reduced to shares of £0.25 each.
• The non-current assets are to be revalued at £40,000.
• The Profit and Loss balance is to be written off.

What will be the total of non-current and current assets?

Select ONE answer:

1. £20,000
2. £50 000
3. £70,000
4. £80,000

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 = = > Dr P&L £20K Cr NCA £20k & then Dr Issued Share Capital £50k Cr P&L £50k
3. Not correct
4. Not correct

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