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Multiple Choice Questions

7) A business is purchased for $ 125,00 satisfied by
a cash payment of $50,000
and a debenture loan of $15,000
and an issue of 30,000 $1 ordinary shares at a premium of 100%

Prior to the acquisition the company had the following capital and reserves.

ordinary shares of $1 each 100,000
share premium 20,000
profit and loss account 10,000

What will be the shareholders' funds following the acquisition?
A $160,000
B $180,000
C $190,000
D $205,000

8) What item does not need to be included in the director's report of a limited company?
A a director's emoluments
B directors' names
C directors' shareholdings
D dividend recommendation by directors

9) Which item in the cash flow statement required by the Financial Reporting Standard 1 (FRS1) gives an indication of the company's long term capital investment policy
A capital expenditures
B increase in borrowings
C level of dividend paid
D total cash generated from operating activities.

10) Which event, occuring after the Balance Sheet date, should be adjusted in the Balance Sheet?
A amounts received in respect of insurance claims which were in course of negotiation at the balance sheet date
B a debtor in the Balance Sheet subsequently becoming bankrupt
C a property valuation which provides evidenceof permanent diminution in value
D negotiation of amounts owing by debtors

11) The accounts of limited companies must disclose changes in the methods of providing for depreciation of fixed assets.
Why is this important to users of corporate reports?
A It allows the market value of assets to be shown
B It enables comparison with previous year's accounts
C It helps to asess company liquidity
D It helps assess future dividends.

12) An extract from the final account of a company shows
(please see attachment)
What are the interest cover and the dividend cover

interest cover ordinary dividend cover
A 4 2
B 4 2.5
C 5 2
D 5 2.5


Solution Preview

Question 7
Answer: c $190,000
Shareholders' funds prior to purchase= $130,000 =100000+20000+10000

Value of business purchased:
Cash payment= $50,000
Term Loan= $15,000
issue of shares= $60,000

Shareholders' funds following the acquisition =Shareholders' funds prior to purchase + Value of business purchased - Term loan - Cash outflow
$190,000 =130000+125000-15000-50000

Question 8
Answer: B Directors' names

Question ...

Solution Summary

Answers Multiple Choice Questions relating to: Capital and Reserves; Limited Company; Long-Term Investment Policy; Balance Sheet; Interest Cover and Dividend Cover.