Tag: Topic 16

The Lucy Partnership comprises of six partners who share profits in the following ratio 6:5:4:3:2:1

They are considering incorporation as a limited company, Lucy Partners Ltd.

Only the six partners will become shareholders on incorporation.

In relation to Lucy Partners Ltd, which of the following statements is necessarily true?

Select ONE answer:

1. All partners will be equal shareholders in Lucy Partners Ltd
2. If Lucy Partners Ltd wishes to raise new share capital, the number of shareholders may be allowed to rise above six
3. All shareholders will become directors and will have the right to be equally involved in the management of the new Limited company
4. If one of the shareholders in Lucy Partners Ltd dies, the company will be dissolved

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  –> Shareholders do not have an  automatic right to be a director or to be involved in management (3).  The partners’ individual shareholdings will be determined by an agreement that is not necessarily related to the existing partnership agreement (1). The concept of perpetual succession means that the company will not dissolve upon the death of a shareholder (4).
3. Not correct
4. Not correct

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Alex is a sole trader who works alone, maintaining and repairing photocopier systems.

He works about 80 hours per week, 52 weeks per year with no holidays.

He wants to take on a major new maintenance and repair contract for a local hospital’s administration department that needs to print out patient records on special paper.

This will require at least 60 working hours each week to do it justice.

It will be extremely profitable if he can acquire the necessary equipment to do the work.

Which of the following statements about his sole trader status is true?

Select ONE answer:

1. It prevents him from employing staff to help with the contract
2. It gives him personal liability for any failure of his in relation to the hospital photocopier system
3. It prevents him from obtaining a loan to obtain the equipment
4. It allows him to issue shares in his business to friends and family

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  –> As a sole trader he does have the disadvantage of personal liability.
3. Not correct
4. Not correct

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

Which of the following business structures necessarily has a legal identity separate from that of its owner(s)?

I A strategic alliance between a limited company and a limited liability partnership
II A limited liability partnership
III A registered company

Select ONE answer:

1. I and II only
2. II and III only
3. I and III only
4. I and II and III

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  –>  A strategic alliance = No separate legal identity + A limited liability partnership = Separate legal identity + A registered company = Separate legal identity
3. Not correct
4. Not correct

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

Alex plc is a large group listed in the UK, with a head office in London and strategic business units (SBUs) spread across the world.

Only overall strategy, research and development and consolidated financial reporting is done in London.

All SBUs manage their own marketing and operations, and report directly to the regional centres across the world for all other forms of functional support.

Alex Insurance is an SBU operating in France and reporting to the Alex Northern European regional centre, based in Belgium.

Alex Insurance is engaged in providing home and car insurance direct to French consumers.

Which of the following areas of functional support would be provided to Alex Insurance by the Alex Northern European regional centre?

Select ONE answer:

1. Sales management
2. Financial reporting for the London Stock Exchange
3. Periodic management accounts
4. Research and development

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 –> Periodic management accounts would be provided by the Regional Office as they are neither marketing/operations, nor are they related to strategic direction, R&D or consolidated financial reporting.
4. Not correct

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

Alex Ltd and Lucy Ltd have recently agreed ot co-operate to exploit the possibilities that both companies have in a particular overseas market, France.

No separate company has been established for this purpose as the companies’ chief executives, who have known each other for many years, have agreed matters informally over a handshake and nice meal.

This arrangement is an example of a ….?

Select ONE answer:

1. Licencing agreement
2. Joint venture between two separate limited liability companies
3. Strategic alliance
4. Group structure

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 –> A strategic alliance (3) is an informal or weak contractual agreement between companies. A licensing agreement (1) would be more formal in nature (based on a legally binding contract to ensure adherence to agreements), whilst a joint venture (2) would nearly always involve the formation of a separate company, with the investing companies taking a financial stake as shareholders and with management being provided as agreed. A group structure (4) would imply the establishment of a new company that would be controlled by one of the two companies.
4. Not correct

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