Tag: Capital

Alex plc is a retailer that owns no properties and only has fixtures and fittings as non-current assets, all of which were purchased within the last six months.

The company has been experiencing trading problems for some time.

The directors have concluded that the company is no longer a going concern and have changed the basis of preparing the financial statements to a break-up (gone concern) basis.

Which ONE of the following will be the immediate effect of changing the accounting concept of Going Concern now to the break-up basis?

Select ONE answer:

1. The company ceases to trade
2. All fixtures and fittings are transferred from non-current to current assets
3. Fixtures and fittings are valued at their historical book value
4. A liquidator is appointed

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. Notcorrect
2. Correct ==> If a company is no longer a going concern, then the directors have concluded that it will not trade for the foreseeable future (i.e. less than twelve months) and so all non-current assets and liabilities are transferred to current assets and current liabilities respectively
3. Not correct
4. Not correct

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

Alex plc is a retailer that owns no properties and only has fixtures and fittings as non-current assets, all of which were purchased within the last six months.

The company has been experiencing trading problems for some time.

The directors have concluded that the company is no longer a going concern and have changed the basis of preparing the financial statements to a break-up (gone concern) basis.

Which ONE of the following will be the immediate effect of changing the accounting concept of Going Concern now to the break-up basis?

Select ONE answer:

1. All fixtures and fittings are transferred from non-current to current liabilities
2. The company ceases to trade
3. Fixtures and fittings are valued at their resale value
4. A liquidator is appointed

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 – All assets are valued at their resale or break-up value, which is the expected selling price in a forced sale position. This is likely to be a substantially lower value than carrying amount for assets such as fixtures and fittings acquired recently. An exception to this may arise in the case of properties, of which Alex plc has no such asset class.
4. Not correct

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

Alex plc is preparing its financial statements for the year ended 31 December 2023.

Its initial trial balance shows the following balances:

Tax payable as at 1 January 2023 £2,091
Tax paid regarding 2022 in 2023 (as finally agreed with HMRC) £1,762

The estimated tax due for the year ended 13 December 2022 is £2,584.

In Alex plc’s income statement for the year ended 31 December 2023 the figure for tax expense will be?

Select ONE answer:

1. £1,269
2. £2,255
3. £2,584
4. £2,913

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. Notcorrect
2. Correct ==> Dr Bank Payments £1,762 + Bal c/d £2,584 = Total £4,386 – Cr Balance B/D £2,091 == > I/S £2,255
3. Not correct
4. Not correct

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

Alex plc is preparing its financial statements for the year ended 31 December 2023.

Its initial trial balance shows the following balances:

Tax payable as at 1 January 2023 £2,091
Tax paid regarding 2022 in 2023 (as finally agreed with HMRC) £1,762

The estimated tax due for the year ended 13 December 2022 is £2,584.

In Alex plc’s income statement for the year ended 31 December 2023 the figure for tax expense will be?

Select ONE answer:

1. £1,269
2. £2,255
3. £2,584
4. £2,913

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. Notcorrect
2. Correct ==> Dr Bank Payments £1,762 + Bal c/d £2,584 = Total £4,386 – Cr Balance B/D £2,091 == > I/S £2,255
3. Not correct
4. Not correct

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