Tag: A-Level

A company has issued £1 000 000 of 8 % convertible loan stock, which the holder can convert in November 2007 into ordinary shares at a rate of 1 share for each £2.00 of loan stock held.

What is the correct presentation in the final accounts for the year ended 31 December 2004?

Select ONE answer:

1. Balance Sheet – Long Term loan £1 000 000 & Profit and Loss – Dividend £80 000
2. Balance Sheet – Long Term loan £1 000 000 & Profit and Loss – Loan Interest £80 000
3. Balance Sheet – Ordinary Share Capital £500 000 & Profit and Loss – Dividend £40 000
4. Balance Sheet – Ordinary Share Capital £500 000 & Profit and Loss – Loan Interest £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 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.

The summarised Balance Sheet of a sole trader shows:

• fixed assets – £200 000
• net current assets – £10 000
• capital – £210 000

He agrees to sell his business to a limited company. The purchase consideration is £260 000 being made up of £60 000 cash, £80 000 debentures and 180 000 ordinary shares of £0.50 each.

Which amount will be credited to the share premium account of the limited company?

Select ONE answer:

1. £30 000
2. £50 000
3. £90 000
4. £120 000

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 – £60,000 + £80,000 + (180,000 * £0.5) = £230,000 ==> £260k – £230k = £30k
2. Not correct
3. Not correct
4. Not correct

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

A limited company purchases a business by issuing 320 000 ordinary shares of £1.00 each at a premium of £0.75 per share.

Goodwill of £150 000 arises on the purchase.

What is the fair value of the separable net assets?

Select ONE answer:

1. £170 000
2. £410 000
3. £560 000
4. £710 000

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 – 320,000 * £1.75 – £150,000 = £410,000
3. Not correct
4. Not correct

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