Accounting Multiple Choice Question – 16 January 2023

The information below shows some extracts from Alex Ltd’s SOFP at 31 December 2014 and at 31 December 2015.

• ordinary shares of £1 each: 31/12/14 – £100M & 31/12/15 – £130M
• share premium account: 31/12/14 – £50M & 31/12/15 – £80M

On 1 July 2015 there was a bonus issue of 1 ordinary share for every 10 held.

On 1 October 2015 there was a rights issue.

There were no other reserve balances.

How much cash was received from the issue of shares in the year ended 31 December 2015?

Select ONE answer:

1. £20M
2. £30M
3. £50M
4. £60M

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 = = > Bonus issue was worth £10M, so Share premium would have gone down £10M. The subsequent rights issue would have been for 20M shares of £1 each at £3 per share = = > £60M

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