Accounting Multiple Choice Question – 28 August 2023

The capital structure of Alex plc is:

• £1 ordinary shares – £40,000
• convertible loan shares – £20,000
• share premium – £10,000

The loan share conversion is made on the basis of 1 new ordinary share for every £4 of convertible shares held.

What is the capital structure of Alex plc after the conversion?

Select ONE answer:

1. ordinary shares £40,000 & share premium £30,000
2. ordinary shares £45,000 & share premium £25,000
3. ordinary shares £50,000 & share premium £20,000
4. ordinary shares £60,000 & share premium £10,000

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 2

1. Not correct
2. Correct – new ordinary shares £20,000 / 4 = £5,000 & share premium now £10k + £20k – £5k
3. Not correct
4. Not correct

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