The Multiple Choice Questions Blog

A company issues 500 000 £1 ordinary shares for £3 each and £250 000 debentures of 6%.

By which amount will the net assets of the company increase?

Select ONE answer:

1. £750,000
2. £1,250,000
3. £1,500,000
4. £1,750,000

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 – Dr Cash £1,750k Cr Share Capital £1,500 Cr LT Liability £250k
4. Not correct

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

An extract from a company’s statement of financial position showed the following information.

• issued capital: 2 million ordinary shares of £0.50 each – £1,000,000
• share premium – £600,000
• retained earnings – £2,400,000

The directors have agreed to make a bonus issue of 3 ordinary shares for 4 shares held. They wish to maintain reserves in their most flexible (distributable) form.

Which debit entry should be made in the retained earnings account?

Select ONE answer:

1. £150,000
2. £750,000
3. £900,000
4. £1,500,000

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 ==> 2,000,000 shares * ¾ = 1,500,000 new shares or £750k  £600K from share premium & balance of £150k from retained earnings.
2. Not correct
3. Not correct
4. Not correct

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

A company issued £1 ordinary shares for £1.20 each. The total proceeds were recorded in the ordinary share capital account.

Which journal entry completes the entries for the share issue?

Select ONE answer:

1. debit – suspense / credit – ordinary share capital
2. debit – ordinary share capital / credit – suspense
3. debit – ordinary share capital / credit – share premium
4. debit – share premium / credit – ordinary share capital

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
4. Not correct

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

Harold, Donald and Edgar are in partnership.

Donald is retiring and the following terms have been agreed.

Goodwill is valued at £35,000 but will not be retained in the books of account.

Net assets are revalued downwards.

Which double-entries in the capital account of Donald record these adjustments?

Select ONE answer:

1. goodwill – credit & revaluation of assets – credit
2. goodwill – credit & revaluation of assets – debit
3. goodwill – debit & revaluation of assets – credit
4. goodwill – debit & revaluation of assets – debit

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.

Ken and Harold had been in partnership sharing profits and losses equally.

On 1 July 2021, Edgar was admitted as partner and the three partners shared profits and losses equally.

On that date assets were revalued and there was a profit on revaluation, £36 000.

What were the accounting entries to record the profit on revaluation?

Select ONE answer:

1. credit Ken current account £18,000, credit Harold current account £18,000
2. credit Ken current account £12,000, credit Harold current account £12,000, credit Edgar current account £12,000
3. credit Ken capital account £18,000, credit Harold capital account £18,000
4. credit Ken capital account £12,000, credit Harold capital account £12,000, credit Edgar capital account £12,000

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
4. Not correct

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