Day: January 31, 2023

A trader provides the following financial information.

• goodwill – £10,000
• Non-current assets at net book value – £20,000
• current assets – £15,000
• trade creditors – £5,000
• bank overdraft – £2,000

The trader accepts an offer from a company to take over all his assets and liabilities, excluding the bank overdraft.

The trader receives ordinary shares of £1.00 each at a premium of £0.25.

How many shares will the trader receive?

Select ONE answer:

1. 24,000
2. 30,400
3. 32,000
4. 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 3

1. Not correct
2. Not correct
3. Correct == > (£10k + £20k + £15k – £5k) / 1.25 = 32,000 shares
4. Not correct

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