Introduction to Company Accounting

A company issues 50,000 $1 shares at a price of $1.25 per share.

How much should be posted to the share premium account?

• $60,000

• 
  $50,000

• $12,500

• $62,500

A company has a balance on share premium account of $50,000 and on retained earnings of $75,000. Issued share capital is 400,000 25c shares. The company decides to make a bonus issue of 1 for 1.

What are the closing balances on share premium and retained earnings?

• Share premium  : $25,000

  Retained Earnings : Nil

• Share Premium : Nil

  Retained Earnings : $(275,000)

• Share Premium : Nil

  Retained Earnings : $25,000

• Share Premium : $10,000

  Retained Earnings : $15,000

Which of the following should appear in a company's statement of changes in equity?

1. 1. Profit for the financial year

1. 2. Dividends proposed during the year

2. 3. Surplus on revaluation of non-current assets

• 1 and 2 only

• 
  All three items

• 
  2 and 3 only

• 
  1 and 3 only

Should dividends paid appear on the face of a company’s statement of profit or loss?

• Yes

• No

Which of these transactions would not increase a company’s retained earnings for the year ?

• Revaluation of a freehold factory from $140,000 to $250,000

• Receipt of $5,000 from a receivable previously written of

• Receive discounts of $1,000 from a supplier

• Sell a car for $6,000 which cost $10,000 and has been depreciated by $4,500

A company has authorised share capital of 1,000,000 50c ordinary shares and an issued share capital of 800,000 50c ordinary shares

If an ordinary dividend of 5% is declared, what is the amount payable to shareholders ?

• $50,000

• $20,000

• $40,000

• $25,000

Which of the following statements are TRUE?

1) The par value of shares will usually differ from their market value

2) Share price of private companies are usually more difficult to estimate as compare to public companies

3) Shareholders are members of a company while providers of loan capital are creditors

4) Loan notes are secured on company assets whereas shares are not

• 1,2 and 3

• 1 and 3

• 2&3

• 1,2,3,4

Which TWO of the following are benefits of a bonus issue

• Increases the company's funds

• Does not cause a dilution of shareholders power

• Cannot be distributed as dividends

• Gives creditors greater protection