Accounting Multiple Choice Question – 14 July 2023

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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