Accounting Multiple Choice Question – 5 July 2023

The balance sheet of Lucy Ltd shows net assets of £0.5M.

Alex plc buys this business for £0.8M by issuing new share capital.

The fair value of the net assets acquired is £0.7M.

By how much do the net assets of Alex plc increase?

Select ONE answer:

1. £0.3M
2. £0.5M
3. £0.7M
4. £0.8M

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 – Dr Cash £0.8M Cr SC £0.8M then Dr Assets £0.7M Cr Cash £0.7M – left with Dr Assets £0.7M & Cash £0.1M Cr SC £0.8M

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