Day: July 14, 2023

Accounting Multiple Choice Question – 14 July 2023

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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Alex ltd is a company that has the following capital structure:

  • £1 ordinary shares – £500k
  • Share premium account – £300k
  • Retained Earnings – £200k
  • Total Capital & Reserves- £1M

The following transactions will take place during the year in the following order:

  • a bonus issue of 1 share for every 5 held;
  • a rights issue of 500 000 shares of £1 each at a premium of £0.50;
  • an issue of debentures of £250,000.

What will be the total of the share capital and reserves of Alex Ltd after the completion of these transactions?

Select ONE answer:

  1. £1.5M
  2. £1.75M
  3. £1.85M
  4. £2M

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– 1. Dr SPA £100k Cr OS £100k = TCR Still £1M; 2. Dr Cash £750k Cr SPA £250k OS £500k = TCR now £1.75M; 3. Dr Cash £250k Cr NCL £250k = TCE is £2M but TCR is still £1.75M
  3. Not correct
  4. Not correct

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