Question 1

For the financial year ended 30 November 2021, Pedro Limited reports revenue of £1,000,000, operating profit of £350,000, finance income of £15,000, finance expense of £50,000 and a taxation charge of £63,000. What is Pedro Limited's profit before tax % for the financial year ended 30 November 2021?

A) 22.20%
B) 25.20%
C) 28.50%
D) 31.50%

31.50%

Accepted Answer

31.50%&#10;

Question 2

In the financial statements for the year ended 30 September 2021 Ines Limited reports revenue of £600,000, cost of sales of £270,000, administration expenses of £80,000, finance income of £12,000, finance expense of £24,000 and selling and distribution costs of £76,000. What is Ines Limited's profit before tax % for the financial year ended 30 September 2021?

A) 23%
B) 27%
C) 29%
D) 55%

27%

Accepted Answer

27%&#10;

Question 3

Jorge Limited has current assets of &#163;4.5m and non-current assets of &#163;12.5m. In the year ended 31 December 2021, Jorge Limited generated revenue of &#163;25.5m. What is Jorge Limited's non-current asset turnover?&#10;A) &#163;0.49&#10;B) &#163;1.50&#10;C) &#163;2.04&#10;D) &#163;5.67

Accepted Answer

Non-current asset turnover is calculated by dividing revenue by non-current assets. For Jorge Limited, this is £25.5m / £12.5m = 2.04.

Question 4

Tammy Plc has made a rights issue of 2 million new ordinary shares for cash. Each ordinary share of the company has a par value of 50 pence. The current share price is 450 pence and the rights issue price is 320 pence. What is the correct double entry required to record this transaction in the company's books of account?

A) Debit cash £1,000,000
Credit share capital £1,000,000
B) Debit cash £6,400,000
Credit share capital £1,000,000
Credit share premium £5,400,000
C) Debit cash £7,400,000
Credit share capital £1,000,000
Credit share premium £6,400,000
D) Debit cash £9,000,000

Accepted Answer

The correct double entry to record the transaction is to debit cash for the total amount received from the rights issue (£6,400,000, calculated as 2 million shares at £3.20 each) and credit share capital for the par value of the new shares issued (£1,000,000, calculated as 2 million shares at £0.50 each). The difference between the cash received and the par value of the shares (£5,400,000) is credited to share premium.

Question 5

Frannie Plc has made a rights issue of 5 million new ordinary shares to raise cash. Each ordinary share of the company has a par value of 20 pence and the shares were issued at a premium of 280 pence. The current share price is 500 pence. What is the correct double entry required to record this transaction in the company's books of account?

A) Debit cash £14,000,000
Credit share premium £14,000,000
B) Debit cash £14,000,000
Credit share capital £1,000,000
Credit share premium £13,000,000
C) Debit cash £15,000,000
Credit share capital £1,000,000
Credit share premium £14,000,000
D) Debit cash £25,000,000

Accepted Answer

The answer of Frannie Plc has made a rights issue...

Question 6

Debit retained earnings, credit share capital, credit share premium account is the correct double entry to record an issue of bonus shares.

Accepted Answer

The correct double entry to record an issue of bonus shares is to debit retained earnings and credit share capital. There is no credit to the share premium account in this transaction because bonus shares are issued by converting retained earnings or other equity reserves into share capital, not by receiving new funds or premiums.

Question 7

Dither Limited has an issued share capital of £1,450,000. Share capital consists of 800,000 preference shares of 50 pence each and £1,050,000 of ordinary share capital made up of 25 pence shares. During the financial year ended 30 November 2021, Dither Limited paid total dividends of £335,000. 7.50 pence dividend per ordinary share was paid during the year. What is the dividend rate on the preference shares?

A) 2.50%
B) 5.00%
C) 6.70%
D) 30.00%

Accepted Answer

First, calculate the total number of ordinary shares: £1,050,000 / £0.25 = 4,200,000 shares. The total dividend paid on ordinary shares is 7.50 pence per share, so total ordinary dividends = 4,200,000 shares * £0.075 = £315,000. Total dividends paid were £335,000, so preference share dividends = £335,000 - £315,000 = £20,000. Preference shares have a total nominal value of 800,000 shares * £0.50 = £400,000. The dividend rate on preference shares = (£20,000 / £400,000) * 100 = 5.00%.

Question 8

Debit retained earnings, credit share capital, credit share premium account is the correct double entry to record a rights issue of shares.

Accepted Answer

The correct double entry for a rights issue of shares typically involves debiting the bank account (to reflect the inflow of cash from shareholders) and crediting share capital (for the nominal value of the shares issued) and share premium account (for the amount received in excess of the nominal value). Retained earnings are not affected by a rights issue.

Deck 5: Ratio Analysis 1: Profitability, Eef ficiency, and Performance, and the Financing of Business