ICAEW CFAB - Accounting - Chapter 11 Quiz

A company’s assets and liabilities at the beginning and end of a reporting period were as follows (refer image).

During the reporting period the company issued a further 25,000 shares at £1.20 each. £22,000 for tax expense was shown in the statement of profit or loss.

Requirement

The company’s profit before tax for the reporting period was..

• £17,000

• £20,000

• £27,000

• £39,000

You are supplied with the following extract from Niton plc’s statements of financial position at 31 January 20X9 and 20X8 (refer image).

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.

Requirement

What was the total amount received from the issue of shares for the year ended 31 January 20X9?

• £10m

• £20m

• £50m

• £60m

The figure for equity in an IAS 1 statement of financial position is represented by:

• Called-up share capital plus share premium

• Total assets less current liabilities

• Paid share capital plus retained earnings

• Total assets less total liabilities

Which of the following would cause a company’s profit for the period to increase?

• Issue of 100,000 £1 equity shares at £1.02

• Early settlement discount provided to a customer of £255

• Disposal for £8,500 of a fork-lift truck which originally cost £15,000 and has a carrying amount of £9,250

• Receipt of £25 in respect of a receivable previously written off as irrecoverable

Which two of the following transactions could affect a company’s retained earnings for the reporting period?

• Rights issue of shares

• Transfer to other reserves

• Purchase of land

• Repayment of debentures at their par value

• Increase in income tax due to HMRC

Raymond plc issues 135,000 equity shares with a par value of £3 each at a price of £5 each for cash.

Requirement

Which of the following journal entries would be made to record this transaction?

• Credit Bank £675,000, Debit Share capital £405,000, Debit Share premium £270,000

• Debit Bank £675,000, Credit Share capital £135,000, Credit Share premium £540,000

• Debit Bank £675,000, Credit Share capital £405,000, Credit Share premium £270,000

• Credit Bank £675,000, Debit Share capital £135,000, Debit Share premium £540,000

The following information is available in relation to the tax figures to be included in the financial statements of Godshill plc (refer image).

Requirement

What is the total tax paid during the year ended 31 December 20X7?

• £185,900

• £235,800

• £237,600

• £269,700

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.

Requirement

Which of the following statements is correct?

• Munch Co should not create a provision because payment of damages is not certain.

• Munch Co should create a provision for 70% of the expected award of £90,000.

• Munch Co should create a provision for the full amount of the expected award of £90,000.

• Munch Co should create a provision for £90,000 plus an additional amount in case other claimants launch similar legal claims.

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.

Requirement

What is the total dividend paid?

• £67,500

• £180,000

• £45,000

• £270,000

Clyde Co sold equipment to Forth Co for £10,000 on 28 January 20X8 and delivered that equipment to the customer on 4 February 20X8. Clyde Co retained control of the equipment until the point of delivery. In a separate contract with the same customer, Clyde 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.

Requirement

What is the total revenue that Clyde Co can recognise in the year ended 31 January 20X8 in respect of the transactions with Forth Co?

• Nil

• £10,000

• £12,000

• £16,000