1.

Which of the following statements are TRUE of limited liability

companies?

(1) The companys exposure to debts and liability is limited

(2) Financial statements must be produced
(3) A company continues to exist regardless of the identity of its owners
A 1 and 2 only
2.

B 1 and 3 only

C 2 and 3 only

D 1, 2 and 3

Maura and Carrie have been in partnership sharing profits and losses equally. At
1 March 2013 the total value of their capital and current balances was $225,000.
At that date Delia was admitted to the partnership and it was agreed that:

The partners would share profits and losses equally

Goodwill in the business would be valued at $75,000 and is would not to be

maintained in the books of the partnership

Delia would introduce cash to ensure that her opening capital balance is nil

How much must Delia contribute?

A $25,000
3.

B $37,500

C $12,500

D $75,000

Which of the following should appear in a companys statement of

changes in equity?
(1) Total comprehensive income for the year
(2) Amortisation of capitalised development costs
(3) Surplus on revaluation of non-current assets
A 1, 2 and 3

4.

B 2 and 3 only

C 1 and 3 only

D 1 and 2 only

Which of the following are benefits of budgeting?

1 It helps coordinate the activities of different departments
2 It fulfils legal reporting obligations
3 It establishes a system of control
4 It is a starting point for strategic planning
A 1 and 4 only

B 1 and 3 only

C 2 and 3 only

D 2 and 4 only
Page 1 of 9

5.

At 31 December 2012 a companys capital structure was as follows:

$
125,000
100,000

Ordinary share capital of $0.25 each

Share premium account

In the year ended 31 December 2013 the company made a rights issue of 1
share for every 2 held at $1 per share and this was taken up in full. Later in the
year the company made a bonus issue of 1 share for every 5 held.
What was the companys capital structure at 31 December 2013?
Ordinary share capital
A
B
C
D
6.

$450,000
$225,000
$225,000
$212,500

Share premium account

$250,000
$250,000
$325,000
$262,500

Xena has the following working capital ratios:

Current ratio
Receivables days
Payables days
Inventory turnover

2013
1.2:1
75 days
30 days
42 days

2012
1.5:1
50 days
45 days
35 days

Which of the following statements is correct?

A Xenas liquidity and working capital has improved in 2013
B Xena is receiving cash from customers more quickly in 2013 than in 2012
C Xena is suffering from a worsening liquidity position in 2013
D Xena is taking longer to pay suppliers in 2013 than in 2012
7.

Under which heading should negative Goodwill be included in a

companys Statement of Financial position?
A Capital reserves
B Non current assets
C Revenue reserves
D Share capital
Page 2 of 9

8.

If a 3 for 2 bonus issue is made to a shareholder who originally paid $2 per

share for 10,000 shares, how much would the shareholder pay for the bonus
shares if the current market value is $4 per share?
A $30,000

9.

C $45,000

D NiL

A company has a P/E ratio that is 20% less than the average for this type
of business, which are 15 times. Its Earnings per share are $0.20. What will the
companys share price be?
A $0.60

10.

B $2.40

C $3.00

D $3.60

Which event reduces the interest cover (income gearing)?

A
B
C
D

11.

B $60,000

A decrease in dividend
A decrease in interest rates
An increase in dividend
An increase in interest rates

Which of the following would not be included in a cash budget?

(i) Depreciation
(ii) Allowance for Doubtful debts
(iii) Wages and salaries
A
B
C
D

(i) and (ii) only

(ii) and (iii) only
(iii) only
(i) only

12.

The following information relates to a company.

Profit after tax
Dividend cover
Number of ordinary shares
Market price of ordinary shares

$
240000
3 times
250000
$4

What is the dividend yield?

A 24%

B 8%

C 26%

D 32%

Page 3 of 9

13.

The table shows a Companys balance sheet.

Share Capital and Reserves
Ordinary shares of $1 each
10% Redeemable Preference Shares of $0.50 each
Share Premium Account
Revenue reserves

$000
500
300
150
480

Cash redemption of half of the Preference shares at a premium of 10% is now

proposed. What will the companys balance sheet include following the
redemption of shares?
10% Redeemable
Preference Shares
$000
300
600
150
300

A
B
C
D
14.

Share Premium
Account
$000
120
150
150
120

Capital redemption
reserve
$000
150
300
150
180

The following is an extract from a Companys balance sheet.

Share Capital and Reserves
Ordinary shares of $ 1 each
8% Redeemable Preference Shares of $1
Share Premium Account
General Reserve
Retained Earnings

$000
500
200
100
300
400

It has been decided to redeem all the Preference shares at par. The directors
propose to issue 100000 Ordinary shares of $1 at $1.10 each to finance
redemption. What would be the retained earnings balance after redemption?
A $200 000
15.

B $100 000

C $110 000

D $400 000

What should a company prepare to forecast its state as a going concern at

the end of next year?
A
B
C
D

Cash budget
Statement of cash flows
Forecast Balance Sheet
Forecast Income Statement

Page 4 of 9

16.

A new business has an opening bank balance of $10000 and makes the
following forecasts for the next three months:
Credit sales
Cash sales
Expenses
Depreciation of non current assets

$2000 per month

$5000 per month
$1000 per month
$1000 per month

Debtors pay in the month following the sale. Expenses are paid one month in arrears.
What will be the forecast net profit for the three months and the closing bank balance?

17.

Forecast net profit

$
15 000

Closing bank balance

$
24 000

15 000

27 000

18 000

17 000

18 000

26 000

X, Y & Z are partners in a firm, with fixed capital balances of $ 40000, $

60000 & $100000 respectively, their agreement for partnership provides the
following.
X

14000

20000

Interest on capital

10%

10%

10%

Profit shared

30%

40%

30%

Salary

Z is entitled to a guaranteed minimum profit of $12000, besides interest on

capital. If the profit for the year was $80000, what shall be credited to Ys
account as total share of profits?
A $25800 CR
18.

B $22000 CR

C $34000 CR

D$36400 CR

A company converts $1000000 convertible loan stock into $0.50 ordinary

shares. The conversion rate is 60 ordinary shares per $100 of stock. What
amount is credited to the Share Premium account?
A $600000

B $1000000

C $400000

D $300000

Page 5 of 9

19.

The business of a sole trader is acquired by a limited company.

Net assets at valuation
Agreed purchase price
Cash paid in part settlement

$
167000
137000
50000

Ordinary shares of $1 each

60000

What is the premium per ordinary share?

A $0.45
20.

C $1.28

D $1.78

A company has just acquired a business in exchange for 1 million ordinary

shares of $1.00 each (market value $1.50 each). The business had net assets of
$0.5 million (fair value $0.7 million) at the date of acquisition. How much is the
goodwill on acquisition?
A $300000

21.

B $0.95

B $500000

C $800000

D $1 000000

A companys capital reduction scheme is as follows.

Reduce the $2 preference shares by 50 %.
Reduce the $4 ordinary shares to shares of $1 each.
The balance sheet of the company immediately before the scheme was
approved was:
Number of Preference shares of $2 each

200 000

Number of Ordinary shares of $4 each

90 000

By how much has the total share capital been reduced?

A $560000
22.

B $470000

C $290000

D $760000

In partnership, any loss on revaluation is:

(A) Credited to old partners in old profit and loss sharing ratios.
(B) Credited to new partner in new profit and loss sharing ratios.
(C) Debited to old partners in old profit and loss sharing ratios.
(D) Debited to new partner in new profit and loss sharing ratio.

Page 6 of 9

23.

During the year ended 31 December, a company bought a new motor

vehicle. The cost price was $43 000. The company paid $37 000 by cheque and
also traded in an old vehicle for which it was allowed $6000. The depreciated
book value of the old vehicle was $4200. The company sold another vehicle for
$3750 cash. This vehicle had a net book value of $4925.
What is the effect of these transactions on the cash flow of the company?
Cash inflow
$
4 925
3 750
9 750
10 925

A
B
C
D
24.

A statement of cash flows must be analysed between operating, investing

and financing activities. What is a financing activity?
A
B
C
D

25.

Cash outflow
$
33 250
37 000
43 000
43 000

Acquisition of non-current assets

Issue of shares
Sale of goods
Sale of non-current assets
The table shows an extract from the draft statement of financial position.

Freehold buildings are to be revalued to $950 000. Plant and machinery is to be

written down to $250 000.
How much will be credited to the asset revaluation reserve?
A $50 000
26.

B $150 000

C $250 000

D $450 000

A company has 100 000 ordinary shares of $1 each. During the year the
following takes place.
Page 7 of 9

1 The company pays an interim dividend of $0.10 per share.

2 The directors declare a final dividend of $0.20 per share to be paid after the
end of the financial year.
How are these reported in the financial statements?

27.

Indicate which of the following accounting points for a partnership is not

permitted by the partnership act:
A No partner is entitled to a salary
B No interest is to be charged on drawings.
C Profit & loss are to be shared in proportion of capital.
D No partners is entitled to interest on capital

28.

A private limited company is considering purchasing some of its own

shares
1
2
3
4

The shares must have been issued as redeemable.

After the purchase, the company must have other shares in issue.
After the purchase, the company must have at least one shareholder.
The purchase cannot be financed by a new issue of shares.

Which statements are correct?

A 1 and 2

B 1 and 4

C 2 and 3

D 3 and 4

29.
Page 8 of 9

30.

Which shareholder ratio calculates the expected return on investment?

A
B
C
D

Dividend cover
Dividend yield
Earnings per share
Price earnings ratio

Page 9 of 9