Partnership and other topics

Partnership and other topics

1) Fela and Sven are in partnership. They share profits equally. On 28 February 2012 the balances on their accounts were as follows.
Partners’ accounts as at 28 February 2012
Capital Current Total
£ £ £
Fela 25,000 12,000 37,000
Sven 28,000 7,000 35,000
Totals 53,000 19,000 72,000
Fela and Sven decide to revalue their non-current assets before Anna joins the partnership from 1 March 20X2. The revaluation is as follows.
Revaluation of assets
Value at Revaluation at Difference
28/02/2012 01/03/2012
£ £ £
Property 150,000 172,000 22,000
Machinery 82,000 75,000 (7,000)
Fixtures and fittings 16,000 21,000 5,000
Totals 248,000 268,000 20,000
Anna pays £40,000 for one third of the goodwill and will share equally in the profits earned by the partnership.
Calculate the total of the partners’ fixed and current capital as at 1 March 2012. Assume that goodwill will be included as an asset on the balance sheet.
2) When asking students to list some of the advantages and disadvantages of organising a business as a public limited company, a teacher obtained the following four answers. Which of the answers requires qualification?
Select one:
a) Disadvantage – depending on size and listing status, financial reporting requirements are more stringent and financial statements may need to be audited.
b) Advantage – the business can grow faster if it attracts more capital.
c) Advantage – the maximum amount which the owners of the business could lose if the business became insolvent is limited to their share of the capital in the business.
d) Disadvantage – there is a minimum capital requirement before the company can start trading.
3) At 31 December 20X2 the capital section of The Business plc’s balance sheet showed capital comprising 4,800,000 ordinary shares of 25p each and a share premium account of £800,000.
On 30 June The Business plc made a 1 for 8 bonus issue, using the share premium account.
Calculate the balances on the share capital and share premium accounts of The Business plc as at 31 December 20X3.
Select one:
a) Share capital: £1,500,000 and Share premium: £400,000.
b) Share capital: £1,150,000 and Share premium: £600,000.
c) Share capital: £1,350,000 and Share premium: £720,000.
d) Share capital: £1,350,000 and Share premium: £650,000.
4) An accountant is making end of year adjustments in order to prepare the financial statements for Daweh Ltd. During 20X7, a machine which had cost £520,000 and which had an accumulated depreciation of £416,000, was sold for £100,000. At the end of 20X6, Daweh Ltd’s balance sheet shows a total machinery cost of £1,625,000 with a total accumulated depreciation on machinery of £675,000. Daweh Ltd depreciates its machines using the straight-line method over 10 years with no residual value. No depreciation is charged on a machine for the year in which that machine is sold.
Calculate the gain or loss on the disposal of the machine, and calculate the annual depreciation on machinery expense for 20X7.
Select one:
a) Loss £4000. Annual depreciation expense: £110,500.
b) Loss £3500. Annual depreciation expense: £105,000.
c) Gain £3000. Annual depreciation expense: £110,000.
d) Gain £4000. Annual depreciation expense: £105,000.
5) A company had the following capital and non-current liabilities.
Ordinary share capital: £20 million, irredeemable preference share capital: £10 million, reserves £1.2 million, debentures: £45 million. Its total assets were £80 million, and its current liabilities were £3.8 million.
Calculate this company’s gearing ratio.

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