➡️QUESTION⬅️
Which items increase when a company issues new shares?
1 cash (and cash equivalents)
2 equity
3 non-current liabilities
4 retained earings
A 1and2
B 1and3
C 2and3
D 2and4
Answer: A
Cash increases due to proceeds of issue and increase share capital increases equity.
➡️QUESTION⬅️
Which items do not appear in a statement of changes in equity?
1 dividend paid
2 dividend proposed
3 loan interest
A 1and2ony
B 1,2and3
C 1only
D 2and3 only
ANSWER D
➡️QUESTION⬅️
A company’s year end is 31 December. During the year ended 31 December 2018 it paid the following dividends:
-final dividend for the year ended 31 December 2017: $15000
-interim dividend for the year ended 31 December 2018: $8000
On 1 February 2019 it declared a final dividend of $10 000 for the year ended 31 December 2018.
How much should be recorded for dividends in the statement of changes in equity for the year ended 31 december 2018?
A $8000
B $18000
C $23000
D $33000
ANSWER C
➡️QUESTION⬅️
A company issues 50000 ordinary shares of $5 each at a premium of $15. It also issues a 4% debenture, $300 000.
By which amount do the net assets of the company increase?
A $250000
B $550000
C $1000000
D $1300000
ANSWER C
➡️QUESTION⬅️
A company has ordinary share capital of $250 000. The ordinary shares have a nominal value of $0.25 each.
A rights issue is made on the basis of 2 shares for every 5 shares held at a premium of $0.15.
What is the total amount of capital raised from the rights issue of shares?
A $15000
B $40000
C $60000
D $160000
ANSWER D
➡️QUESTION⬅️
A shareholder sells some shares for less than he paid for them.
What happens to the share capital of the company?
A decreases by the nominal value of the shares sold
B decreases by the sales proceeds of the shares sold
C increases by the amount received from the sale of the shares
D remains the same as before
ANSWER D
➡️QUESTION⬅️
Which statement about ordinary shares is correct?
A dividends on ordinary shares are an appropriation of profit
B dividends on ordinary shares are paid at the same rate each year
C ordinary shares are never issued at a premium
D the holders of ordinary shares are creditors of a company
ANSWER A
➡️QUESTION⬅️
What could be used to fund a bonus issue of shares?
1 general reserve
2 retained earnings
3 share premium
A 1,2and3
B 1 and 2 only
C 1 and 3 only
D 2 and3 only
ANSWER C
➡️QUESTION⬅️
Which statements describe a capital reserve?
1 It is areserve arising from a gain which is not yet realised.
2 ltis areserve created by transferring an amount from profit for the year.
3. It is a reserve which can be credited back to retained earnings if not used.
A 1,2and3
B 1and2only
C 1only
D 2and3 only
ANSWER C
➡️QUESTION⬅️
Which company reserves may not be used to pay dividends?
1 general reserve
2 retained earnings
3. revaluation reserves
4 share premium
A 1,2 and 3 B iand2only C 2and3onlyy D 3and4
ANSWER D
➡️QUESTION⬅️
From which accounts can a company pay dividends?
1 general reserve
2 retained earnings
3 revaluation reserve
4 share capital
A 1 and 2
B 1and3
C 2and3
D 2and4
ANSWER A
➡️QUESTION⬅️
Which statement describes the treatment of purchased goodwill for a limited company?
A a tangible non-current asset that can be amortised
B a tangible non-current asset that can be depreciated
C an intangible non-current asset that can be amortised
Dan intangible non-current asset that can be depreciated
ANSWER C
➡️QUESTION⬅️
What would not result in goodwill?
A good reputation of a business
B selling high quality products
C selling products above market value
D skill of the workforce
ANSWER C➡️QUESTION⬅️
How would a transfer to general reserve and the issue of shares at a premium affect the revenue reserves of a limited company?
A transfer to general reserve: decrease, issue of shares at a premium: decrease
B transfer to general reserve: decrease, issue of shares at a premium: increase
C transfer to general reserve:no effect, issue of shares at a premium: increase
D transfer to general reserve:no effect, issue of shares at a premium: no effect
Answer: D
Transfer to general reserve increases general reserves and decreases retained earnings, But overall revenue reserves remains unchanged. Issue of shares involve share premium i.e. capital reserve.
➡️QUESTION⬅️
A company had an issued share capital of 400000 ordinary shares of $1 each. It then made a bonus issue of one share for every five held.
This was later followed by a rights issue of one share for every three held.
What was the balance on the share capital account after these transactions?
A $480 000
B $533 333
C $613 333
D $640 000
Answer: D
Share capital ($400,000) + Bonus Issue (400, 000 x 4) + Right issue (480, 000 4) = $640,000
➡️QUESTION⬅️
Which action will increase the equity of a limited company?
A creating a general reserve
B issuing bonus. shares
C issuing debentures
D issuing non-redeemable preference shares
Answer: D
Non redeemable shares are part of equity