Day: August 13, 2023

Accounting Multiple Choice Question – 13 August 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 plc’s capital is made up as follows:

  • ordinary shares of £1.00 each – £200,000
  • share premium account – £80,000
  • Retained profits – £160,000

Changes now to be made (in the order given):

  • A one for one bonus issue
  • A rights issue of 100 000 ordinary shares of £1.00 each at £1.40 per share

The company wishes to maximise the amounts available to pay dividends.

What will be the ordinary capital and reserves of the company?

Select ONE answer:

  1. ordinary share capital £500,000 and share premium £40,000 and Retained profits £40,000
  2. ordinary share capital £500,000 and share premium £80,000 and Retained profits £NIL
  3. ordinary share capital £540,000 and share premium £NIL and Retained profits £40,000
  4. ordinary share capital £540,000 and share premium £40,000 and Retained profits £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 1

  1. Correct – a. Dr Share Premium Account £80,000 Dr Retained profits £120,000 Cr Share Capital £200,000 PLUS b. Dr Cash £140,000 Cr Share Capital £100,000 Cr Share Premium £40,000
  2. Not correct
  3. Not correct
  4. Not correct

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