Category: Accounting

Given below are extracts from a company’s Profit and Loss Account and Statement Of Financial Position for last year.

                                                                    Profit and Loss Account £000 

• profit before interest and tax – £200k
• interest paid – £(20)k
• net profit before taxation – £180k
• taxation – £(60)k
• dividends – £(10)k
• retained profit for year – £110k

                                                                    Statement Of Financial Position £000 

• Total assets – £1 000k
• long term loan – (£100)k
• Net current assets – £900k
• share capital and reserves – £900k

What is the return on total capital employed?

Select ONE answer:

1. 18%
2. 20%
3. 22.2%
4. 25.7%

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 ==> Profit before interest and tax / Capital Employed (Share capital & reserves + NCL) = £200k / £1,000k = 20%
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

A business increases its provision for doubtful debts.

What is the effect on the current and acid test ratios?

Select ONE answer:

1. current ratio decrease / acid test ratio decrease
2. current ratio decrease / acid test ratio no change
3. current ratio no change / acid test ratio decrease
4. current ratio no change / acid test ratio no change

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
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

A company with an issued share capital of £200 000 of £1.00 ordinary shares makes a bonus issue of one £1.00 ordinary share for every five already held.

It also issues £80 000 debentures at a discount of 5%.

The company has a bank balance of £40 000 before the issues.

What is the bank balance after the issues?

Select ONE answer:

1. £76 000
2. £116 000
3. £120 000
4. £166 000

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 ==> £40,000 + £80,000 * 0.95
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

A limited company has an authorised share capital of £750 000 and an issued share capital of £450 000 in £1.00 ordinary shares.

It makes a 1 for 3 rights issue of shares at £2.00 per share which is fully taken up.

What is the balance on the share capital account following this transaction?

Select ONE answer:

1. £600 000
2. £700 000
3. £750 000
4. £900 000

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 – £40k / 3 = £150k ==> £450k + £150k = £600k
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

A company made a bonus issue of shares on the basis of 1 for every 3 held.

The directors wish to keep the reserves in the most flexible form.

Balance Sheet extract (before bonus issue) – capital and reserves £000s

• ordinary shares £0.20 each – £900k
• share premium – £100k
• revaluation reserve – £170k
• retained profits £130k
• Total Capital and Reserves – £1,300k

What will be the position after the bonus issue?

Select ONE answer:

1. Share capital – £1,200k / Share premium – NIL / Revaluation reserve – NIL / Retained profits – £100k
2. Share capital – £1,200k / Share premium – NIL / Revaluation reserve – £70k / Retained profits – £30k
3. Share capital – £1,200k / Share premium – NIL / Revaluation reserve – £100k / Retained profits – NIL
4. Share capital – £1,200k / Share premium – £100k / Revaluation reserve – NIL / Retained profits – NIL

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 – £900K / 3 = £300k ==> £100k from share premium , £170k from revaluation reserve & the last £30k from retained profits
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.