Category: Accounting

An accounting standard (FRS 3 ‘Reporting Financial Performance’) requires a special format for the Profit and Loss Account.

Under this standard which of the following need not be separately disclosed?

Select ONE answer:

1. profit or loss on continuing operations 
2. profit or loss on discontinued operations
3. profit or loss on disposal of an operation
4. profit or loss on overseas operations

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 4

1. Not correct
2. Not correct
3. Not correct
4. Correct

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

What does the Companies Act 1985 require to be disclosed in the directors’ report?

Select ONE answer:

1. audit fee
2. directors’ remuneration
3. the company’s accounting policies
4. the main activity of the company

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
3. Not correct
4. Not correct

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

A limited company acquires a business from a sole trader.

The net assets of the business are £612,000. The purchase price has been agreed at £700,000.

The Goodwill element is to be paid in cash.

The balance of the consideration is to be made by the issue of 300 000 shares of £0.50 each valued at £1.80 per share and the balance in 7 % loan stock valued at £90 per £100.

What is the par value of the loan stock?

Select ONE answer:

1. £64,800
2. £72,000
3. £80,000
4. £177,778

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 3

1. Not correct
2. Not correct
3. Correct ==> 300,000 shares * £1.80 = £540,000 ==> £612,000 – £540,000 = £72,000 / 0.9 = £80,000
4. Not correct

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

A limited company purchases a partnership.

It issues to the partners 10 % debentures and pays them cash in full settlement of the purchase price. 

Which of the following is true?

Select ONE answer:

1. The company’s gearing is reduced.
2. The company intended to expand its business.
3. The company’s reserves are reduced.
4. The partners now own some of the equity in the company.

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
3. Not correct
4. Not correct

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

A company’s Balance Sheet extract is given. 

The directors have decided to write off the debit balance on the Profit and Loss Account together with Goodwill of £100,000.

The shareholders agreed to exchange their shares for new ordinary shares of £0.50.

How many shares will the directors have to issue to the shareholders? 

Select ONE answer:

1. 600,000
2. 700,000
3. 1,200,000
4. 1,400,000

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 3

1. Not correct
2. Not correct
3. Correct ==> £700k – £100k = £600k * 2 ==> 1.2M shares
4. Not correct

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