Page 318 - GMAT 2017b_Neatb

Accounting Practice Test

(A) Consistency, prudence, accruals, going concern 27. An ordinary share dividend is:
(B) Accruals, consistency, going concern
(C) Prudence, consistency, going concern. (A) Part of the company profits used to reward
(D) Prudence, accruals, going concern. the shareholders for their investment.
(B) Interest on money lent to the company by its
23. The double entry required to write off a specific bad shareholders.
debt is: (C) An expense of running the company.
(A) Debit sales, credit trade debtor. (D) The directors' remuneration.
(B) Debit profit and loss, credit trade debtor.
(C) Debit trade debtor, credit profit and loss. 28. XYZ Ltd has declared an ordinary share dividend of
(D) Debit profit and loss, credit provision for debts. £200 000 at 31.12.2001.Which of the following
correctly explains the accounting entries for the
24. A company has calculated that it has made a net loss of dividend at the year end?
£107 000 for the year before the following additional
adjustments: (A) Expense in profit and loss account, creditor on
£000 the balance sheet.
Depreciation of plant 15 (B) Appropriation of profit, reserve on the
Write off bad debts amounting to 3
balance sheet.
Reduce the provision for bad debts by 1
Accrue for outstanding wages amounting to 4 (C) Appropriation of profit, current liability on
Which is the corrected net loss taking account of the the balance sheet.
above adjustments? (D) Expense in profit and loss account, reserve
(A) £116 000. on the balance sheet.
(B) £127 000.
(C) £128 000. 29. Statements of Standard Accounting Practice and
(D) £130 000. Financial Reporting Standards should be complied
with when preparing the final accounts of a limited
25. XYZ Ltd has a net profit before tax of £267 000, company because:
taxation amounts to £87 000, a dividend on (A) The Companies Act 1985 demands that they are
ordinary share capital of £45 000 has been used.
declared and the company will transfer £50 000 to (B) The auditors will insist they are followed.
a capital reserve. What is the retained profit (C) The directors are under a legal obligation to
figure for the year? ensure they are followed.
(D) They ensure that the accounts present a 'true and
(A) £180 000.
fair view'.
(B) £135 000.
(C) £85 000.
30. Below is shown a draft summarized balance sheet of
(D) £267 000. XYZ Ltd at 31.12.2001 before certain adjustments
£000
26. XYZ Ltd issues 500 000 new ordinary £1 shares at an Net assets 880
issue price of £1.50 and makes a bonus issue of new Ordinary Share Capital ( £1 shares) 350
Share premium account 50
shares amounting to 50 000 £1 ordinary shares. The
Capital reserve 120
company also increases its authorized ordi- nary share
Profit and loss account 360
capital by 550 000 £1 ordinary shares. By how much 880
will the balance sheet ordinary share capital account The company decides to increase the value of its net
increase? assets by including an upward revaluation of its
(A) £800 000. buildings of £50 000, it also decides to transfer an
additional sum of £150 000 from its profit and loss
(B) £550 000.
account to capital reserves and, finally, a dividend of
(C) £750 000.
£60 000 is proposed.
(D) £1 350 000.
Which of the following is the correct net asset figure
as a result of including these transactions?

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