Chapter 6 Multiple-choice questions

. Which of the following is not deducted in arriving at a company's operating profit?

Taxation.

Cost of sales.

Administration expenses.

Distribution costs.

. Which of the following items would not form part of the shareholders' equity of a company on the statement of financial position?

Ordinary share capital.

Trade payables.

Share premium.

Retained profits.

. Which one of the following would not be included in a full set of company financial statements?

The cash budget.

The statement of financial position.

The statement of changes in equity.

The statement of profit or loss.

. Which of the following statements is likely to be true, for a company making profits?

The operating profit will be less than the profit for the year.

The profit for the year will be greater than the gross profit.

Retained profits at the year end will be greater than shareholders' equity.

Retained profits at the year end will be greater than retained profits at the beginning of the year.

. Issa plc issues 30,000 £1 shares at £1.30 for each share. Which of the following statements is true?

Ordinary share capital will increase by £30,000 and share premium will increase by £39,000.

Ordinary share capital will increase by £39,000 and share premium will increase by £9,000.

Ordinary share capital will increase by £39,000 and share premium will be unaffected.

Ordinary share capital will increase by £30,000 and share premium will increase by £9,000.

. Sheba Ltd's statement of financial position shows ordinary share capital of £150,000 and share premium of £50,000 at the beginning of a financial year. If the ordinary share capital is £250,000 and share premium is £120,000 at the end of the financial year, how much did the ordinary share issue raise?

£250,000

£100,000

£370,000

£170,000

. Twisters Ltd made a profit for the year ended 31 March 2023 of £30,000. During that year the company had paid preference dividends on 100,000 5% preference shares. In addition, an ordinary dividend of 4 pence per share was paid on 200,000 ordinary shares. What was the retained profit for the year ended 31 March 2023?

£22,000

£17,000

£25,000

£30,000

. Junior plc is a company that, during the year ended 31 December 2023, paid £25,000 debenture interest and paid an ordinary dividend of 8 pence per share on 1 million £1 ordinary shares. The retained profit for the year was £160,000. What was Junior plc's profit for the year?

£215,000

£80,000

£265,000

£240,000

. Which of the following would be an entry in the statement of changes in equity?

Revaluation gain.

Revaluation reserve.

Taxation.

Long term loans.

. During the year ended 30 June 2024, a company's revaluation reserve increased from £300,000 to £380,000 as a result of a property revaluation. At the start of that financial year, the company's property had been valued at £810,000. Assuming that no property was disposed of during the year, which of the following statements is true?

The property's revalued amount was £890,000.

The property's revalued amount was £1,190,000.

The property's revalued amount was £380,000.

The property's revalued amount was £1,310,000.

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