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Niton plc issued additional shares between 31 January 20X8 and 31 January 20X9 which increased equity shares from £100 to £120 and share premium from £220 to £260. The total amount received from share issues for the year ended 31 January 20X9 was £60m. Several questions provide multiple choice answers regarding accounting transactions and their impact on financial statements.

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19 views

c11 Selftest

Niton plc issued additional shares between 31 January 20X8 and 31 January 20X9 which increased equity shares from £100 to £120 and share premium from £220 to £260. The total amount received from share issues for the year ended 31 January 20X9 was £60m. Several questions provide multiple choice answers regarding accounting transactions and their impact on financial statements.

Uploaded by

hvu65291
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1.

You are supplied with the following extract from Niton plc's statements of
financial position at 31 January 20X9 and 20X8
31 January 20X9 31 January 20X8
£ £
Equity shares of £1 each 120 100
Share premium 260 220

Notes
(1) On 1 July 20X8 there was a 1 for 10 bonus issue
(2) On 30 September 20X8 there was a rights issue
(3) There are no other reserve balances
What was the total amount received from the issue of shares for the year ended 31
January 20X9?
A. £10m
B. £20m
C. £50m
D. £60m
Answer: D
2. The figure for equity in the IAS 1 statement of financial position is represented by:
A. Called-up share capital plus share premium
B. Total assets less current liabilities
C. Paid share capital plus retained earnings
D. Total assets less total liabilities
Answer: D

3. Which of the following would cause a company's profit for the period to increase?
A. Issue of 100,000 £1 equity shares at £1.02
B. Early settlement discount provided to a customer of £255
C. Disposal for £8,500 of a fork-lift truck which originally cost £15,000 and has a
carrying amount of £9,250
D. Receipt of £25 in respect of a receivable previously written off as irrecoverable
Answer: D
4. Which two of the following transactions could affect a company's retained
earnings for the reporting period?
A. Rights issue of shares
B. Transfer to other reserves
C. Purchase of land
D. Repayment of debentures at their par value
E. Increase in income tax due to HMRC
Answer: B and E

5. Raymond plc issues 135,000 equity shares with a par value of £3 each at a price of
£5 each for cash.
Which of the following journal entries would be made to record this transaction?
A. Credit Bank £675,000, Debit Share capital f405,000, Debit Share premium
£270,000
B. Debit Bank £675,000, Credit Share capital £135,000, Credit Share premium
£540,000
C. Debit Bank £675,000, Credit Share capital £405,000, Credit Share premium
£270,000
D. Credit Bank £675,000, Debit Share capital £135,000, Debit Share premium
£540,000
Answer: C

6. The following information is available in relation to the tax figures to be included


in the financial statements of Godshill plc.
31 December 31 December
20X7 20X6
£ £
Tax payable 271,500 237,600
Statement of profit or loss tax 269,700 219,800
expense

What is the total tax paid during the year ended 31 December 20X7?
A. £185,900
B. £235,800
C. £237,600
D. £269,700
Answer: B
7. Munch Co is a fast food retailer. One of its customers has started a legal claim for
damages after contracting food poisoning at a Munch Co restaurant. Munch Co's lawyers
believe that there is a 70% chance that the claim will be successful and they estimate that
the award to the customer will be £90,000.
Which of the following statements is correct?
A. Munch Co should not create a provision because payment of damages is not
certain.
B. Munch Co should create a provision for 70% of the expected award of £90,000.
C. Munch Co should create a provision for the full amount of the expected award of
£90,000.
D. Munch Co should create a provision for £90,000 plus an additional amount in case
other claimants launch similar legal claims
Answer: C

8. In the year to 31 December 20X6, Coisty had the following capital structure:

£
400,000 equity shares of 25p each 100,000
Share premium account 50,000

During the year, Coisty paid an equity dividend of 45p per share. What is the total
dividend paid?
A. £67,500
B. £180,000
C. £45,000
D. £270,000
Answer: B

9. Ava Co sold equipment to Orla Co for £10,000 on 28 January 20X8 and delivered
that equipment to the customer on 4 February 20X8. Ava Co retained control of the
equipmers until the point of delivery. In a separate contract with the same customer, Ava
Co agreed to service the equipment on an annual basis for the next three years,
commencing 31 January 20X9 at a cost of £2,000 per annum.
What is the total revenue that Ava Co can recognise in the year ended 31 January 20X8
in respect of the transactions with Orla Co?
A. Nil
B. £10,000
C. £12,000
D. £16,000
Answer: A

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