FF025 Capital structure and Finance Cost Quiz

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Name

Class

1. Which of the following would cause a company’s profit for the year increase?

2 points

Issue of 100,000 ordinary shares at a premium of 2%

Revaluation of a freehold property from $70,000 to $100,00

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

Receipts of $25 from customer previously written off as irrecoverable

Clear selection

A company has 50,000 $1 cumulative 8% preferred shares and 100,000 50 cent ordinary shares. As at 1 January 2014 its preferred shareholders have not received any dividend for previous five years, and only half their entitlement in the year preceding that. For the year ended 31 December 2014, the company wishes to pay a dividend of $20,000 to its ordinary shareholders.

2. What will be the total amount of dividends declared for the year?

2 points

$26,000

$40,000

$42,000

$46,000

Clear selection

The carrying amount of non-current assets of a company at 1 July 2014 was $260,000 and at 30 June 2015 was $281,000. During the year ended 30 June 2015 assets which had cost $20,000 on 31 December 2013, were sold for $9,000.

Non-current assets are depreciated at 10% per annum on the reducing balance basis, with no charge in the year of acquisition and full year’s charge in the year of disposal.

3. What was the cost of non-current assets acquired during the year to June 2015?

2 points

$23,000

$63,000

$65,000

$67,000

Clear selection

4. The correct journal entry to record the issue of 100,000 50c shares (fully paid) at an issue price of $2.50 a share is:

2 points

$250,000

$200,000

$50,000

Share capital account

Share premium account

A company’s assets and liabilities at the beginning and end of a year were:

During the year the company issued a further 25,000 shares at $1.20 whilst cash payment of $20,000 for dividends and $22,000 for taxation were made.

5. What was the company’s profit before taxation for the year?

2 points

$36,000

$39,000

$42,000

$48,000

Clear selection

The following share capital information is available for accompany:

In addition to providing for the preferred dividend for a financial year, an ordinary dividend of 2¢ per share is payable.

6. What is the total amount of dividends for the year?

2 points

$35,000

$95,000

$110,000

$190,000

Clear selection

7. Which of the following would result in an increase in cash flow?

2 points

Issue of bonus shares

Depreciation charge

Revaluation of an asset

Right issue

Clear selection

A company has the following share capital:

In addition to providing for the year’s preference dividend, an ordinary dividend of 2c per share is to be paid before the year end.

8. What are total dividends for the year?

2 points

$140,000

$380,000

$440,000

$760,000

Clear selection

9. Which of the following statements is/are correct in relation to a rights issue made by an entity?

2 points

Correct

Incorrect

Statement 1

Statement 2

Clear selection

MEtz Co is a limited liability company with 400,000 50c shares in issue. At 1 January the balance on the share premium account is $400,000. The following transactions occur in the year ended 31 December 20X6:

31 January There is a fully taken-up 2 for 5 rights issue. The issue price is $2.20.

12 August There is a 1 for 10 bonus issue made using the share premium account.

10. What are the balances on the share capital and share premium accounts of METz Co at 31 December 20X6?

2 points

Share Capital : $264,000 , Share Premium : $512,000

Share Capital : $308,000 , Share Premium : $644,000

Share Capital : $308,000 , Share Premium : $700,000

Share Capital : $308,000 Share Premium : $699,200

Clear selection

11. Retained earnings are:

2 points

accumulated and undistributed profits of a company

amounts which cannot be distributed as dividends

amounts set aside out of profits to replace revenue items

amounts set aside out of profits for a specific purpose

Clear selection

On 1 April 2004 the balance on B’s retained earnings was $50,000 credit. The balance on 31 March 2005 was $100,000 credit. On 10 March 2005 dividends of $50,000 were declared in respect of the year ended 31 March 2005, payable on 31 May 2005.

12. Based on this information, profit after tax (but before dividends) for the year ended 31 March 2005 was:

2 points

Nil

$50,000

$100,000

$150,000

Clear selection

13. Which TWO items within the statement of financial position would change immediately following an issue of redeemable preference shares?

2 points

(i) and (iv)

(i) and (v)

(ii) and (iv)

(iii) and (v)

Clear selection

An entity, Taylor, has issued equity share capital of 250,000 shares with a nominal value of $0.50 each and a share premium account balance of $100,000.

14. What accounting entries are required if Taylor was to make a bonus issue of one share for four held?

2 points

$62,500

$31,250

Share capital

Share premium

15. Which of the following items would you exclude from the statement of changes in equity?

2 points

Issued share capital

Bank loans

Revaluation surplus

Dividends paid

Clear selection

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