Tag: Financial Accounting

Accounting Multiple Choice Question – 14 July 2023

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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Alex ltd is a company that has the following capital structure:

  • £1 ordinary shares – £500k
  • Share premium account – £300k
  • Retained Earnings – £200k
  • Total Capital & Reserves- £1M

The following transactions will take place during the year in the following order:

  • a bonus issue of 1 share for every 5 held;
  • a rights issue of 500 000 shares of £1 each at a premium of £0.50;
  • an issue of debentures of £250,000.

What will be the total of the share capital and reserves of Alex Ltd after the completion of these transactions?

Select ONE answer:

  1. £1.5M
  2. £1.75M
  3. £1.85M
  4. £2M

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– 1. Dr SPA £100k Cr OS £100k = TCR Still £1M; 2. Dr Cash £750k Cr SPA £250k OS £500k = TCR now £1.75M; 3. Dr Cash £250k Cr NCL £250k = TCE is £2M but TCR is still £1.75M
  3. Not correct
  4. Not correct

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Accounting Multiple Choice Question – 13 July 2023

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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What measures the rate of return on an ordinary share?

Select ONE answer:

  1. dividend paid
  2. dividend yield
  3. earnings per share
  4. price-earnings ratio

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

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

Accounting Multiple Choice Question – 12 July 2023

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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Alex plc’s authorised share capital is 1 million ordinary shares of £1 each.

800,000 shares have been issued and have a market value of £2.50 each.

Year end results show the following:

  • profits before interest and taxation – £100k
  • profits after interest and taxation – £80k
  • profits after interest, taxation and ordinary dividends – £50k

What is the price-earnings ratio?

Select ONE answer:

  1. 10
  2. 20
  3. 25
  4. 40

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- £2.50 / (£80,000 / 800,000) ==> 25
  4. Not correct

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Accounting Multiple Choice Question – 11 July 2023

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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Which of the following will increase gearing?

Select ONE answer:

  1. 1.conversion of a convertible loan into ordinary shares
  2. 2.transfer of a general reserve back to retained earnings
  3. 3.upward revaluation of a freehold premises.
  4. 4.writing off goodwill

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

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Accounting Multiple Choice Question – 10 July 2023

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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The table below shows the capital structure of Alex plc:

  • share capital made up of £5 shares – £300k
  • share premium account – £200k
  • Retained earnings – £500k
  • 10 % debenture (issued 3 years ago) – £600k
  • OPERATING PROFITS average £150,000 a year.

What is the return on shareholders’ funds?

Select ONE answer:

  1. 9.0%
  2. 9.4%
  3. 15.0%
  4. 18.75%

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 – Correct – (150k – £60k (£600k debenture @ 10%) / £300K + £200k + £500k + £600k ==> 9.0%. – many people forget to deduct the interest of £60k from the operating profits when calculating the return on the shareholders’ funds.
  2. Not correct
  3. Not correct
  4. Not correct

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