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:
The company ceases to trade
All fixtures and fittings are transferred from non-current to current assets
Fixtures and fittings are valued at their historical book value
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
Notcorrect
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
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:
All fixtures and fittings are transferred from non-current to current liabilities
The company ceases to trade
Fixtures and fittings are valued at their resale value
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
Not correct
Not correct
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.
In relation to purchases Alex plc recorded £9,801 in its purchases journal and £107 in its cash book for the year ended 31 January 2024.
The company’s purchases accruals need to be £75 less than at the previous year end, and prepayments need to be £60 less as well.
What is the figure for purchases that should be included in the cost of sales section in Alex plc’s income statement for the year ended 31 January 2024?
Select ONE answer:
£9,893
£9,923
£9,786
£9,908
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
Not correct
Not correct
Not correct
Correct == > The initial entry was one sided, so a suspense account with a credit balance of £1.9M must have arisen in the TB. To eliminate the suspense account a debit entry of £1.9M is required. The rights issue is 1 for 4, so (3,000,000/4) = 750,000 × 20p shares are issued, giving a credit of £150,000 in the share capital account. The share premium is therefore (£3.60 – 0.20) = £3.40 per share, which gives a credit to the share premium account of 750,000 × £3.40 = £2,550,000. The remainder of the journal is to record the amount unpaid on the shares ((750,000 ×£3.60) – £1,900,000) = £800,000 as an “other” receivable.
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