Tag: Accounting

Goodwill maIn the financial statements of a company, goodwill should be shown . . .?

Select ONE answer:

1. under the heading ‘current assets’.
2. under the heading ‘intangible fixed assets’.
3. under the heading ‘tangible fixed assets’.
4. None of the above.

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 – As goodwill will normally have an expected useful economic life of more than one year, it is a fixed asset. As it does not have physical substance, it is an intangible asset.
4. Not correct

 

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Goodwill may arise in a company’s financial statements if. . .?

Select ONE answer:

1. the company acquires another company for more than the fair value of its separable net assets.
2. the company sells a fixed asset at a profit.
3. the market value of its shares exceeds their nominal (par) value.
4. None of the above.

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 – If a company sells a fixed asset at a profit. the asset and the depreciation on it (if any) are removed from the balance sheet. the money received is added to the bank balance and the profit is shown in the profit and loss account. An asset disposal account is used to record the above.
3. Not correct – The market value of most companies’ shares exceeds their nominal (par) value. However, as the market value is not shown in the financial statements this is of no significance from this point of view.
4. Not correct

 

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

In the accounts of a company, goodwill (when it exists) . . . ?

Select ONE answer:

1. must be a debit balance.
2. must be a credit balance.
3. can be either a debit or a credit balance.
4. None of the above.

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 – Goodwill is the difference between the sum of the fair values of individual assets and liabilities and their purchase price. This difference can be either positive (in which case goodwill will be a debit balance) or negative (in which case goodwill will be a credit balance), depending on the purchase price.
4. Not correct

 

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A company issued ordinary shares at their nominal (par) value and received payment in full.

The effect of this on the company’s financial statements is . . .?

Select ONE answer:

1. the bank balance is increased and the figure shown in the balance sheet for ordinary share capital is increased.
2. the bank balance is decreased and the figure shown in the balance sheet for ordinary share capital is decreased.
3. the bank balance is increased and the figure shown in the balance sheet for ordinary share capital is decreased.
4. None of the above.

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 – Money has been received – so the bank balance is increased. Shares have been issued – so the company’s share capital has been increased.
2. Not correct
3. Not correct
4. Not correct

 

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

In the case of a company which has issued both cumulative preference shares and ordinary shares, which of the following statements is true?

Select ONE answer:

1. If the dividend on the cumulative preference shares is not paid when due, an ordinary dividend cannot be paid until all arrears of the preference dividend have first been paid.
2. If the dividend on the cumulative preference shares for the current year is not paid when due, the company may pay an ordinary dividend next year once next year’s preference dividend is paid first.
3. A dividend must be paid on the ordinary shares before any dividend can be paid on the cumulative preference shares.
4. None of the above.

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 – In respect of any particular accounting period, dividends on preference shares, whether cumulative or non-cumulative, must be paid before any dividend can be paid on ordinary shares. If the company is unable to pay the dividend due on preference shares, whether cumulative or non—cumulative, it cannot pay a dividend on ordinary shares. In the case of non- cumulative preference shares, the shareholder‘s right to receive a dividend lapses. However, in the case of cumulative preference shares, the shareholder’s right to receive a dividend does not lapse – and all such dividends must be paid before any dividend can be paid on ordinary shares in any future accounting period.
2. Not correct
3. Not correct
4. Not correct

 

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