8 Multiple choice questions on redemption of preference shares, reserves, issue of shares at a premium, Goodwill, debentures, collection period, rate variance, NPV, earnings per ordinary shares

Q1.A Company has decided to redeem its preference shares at a premium of
        $ 0.25. The preference shares were originally issued at $ 1.15 each.

        Prior to the redemption the company's Balance Sheet showed the following
                                                                                   $000

        Ordinary shares of $1.00                                       1000
         8% redeemable preference shares of $1.00            600
         Share premium                                                     100
         Retained Profit                                                      750
                                                                                    2450

How will the reserves appear in the Balance Sheet after the preference shares
Have been redeemed?


Q2 Y ltd purchases the business of J Brown by issuing $1 shares at a premium
        Of $0.20. Y ltd agrees to take over J Browns assets and liabilities at the date
        Of the acquisition as follows
Fixed assets                        $150,000
Current assets                    $ 75000
Creditors                             $ 5000
Bank loan                            $20,000

Goodwill is valued at $10,000

How many shares will J Brown receive from Y ltd?

A 158000  B  175000      C    200,000    D    210,000

Q3.  The following data is available for XYZ plc
        
Issued Ordinary shares              $1000,000
Nominal value per share             $ 1.00
Market value per share               $ 2.30
Net profit after taxation               $200,000
Retained earnings % of
Net profit after                                          50

What is the net dividend yield?

A 4.35% B 8.7% C 10% D 20%

Q4.The table shows the capital structure of a company
                                                                                 $

100,000 Ordinary shares of $ 1 each            100,000

10% debentures                                                50,000
Reserves                                                           100,000

It increases the debentures by $50,000 and makes a bonus issue of one share for
Every two held. It then makes a rights issue of a further 100,000 shares at $ 1.00

How will these transactions affect the Balance sheet?

                               Gearing                reserves                bank
A                          decrease                  decrease               decrease
B                           Increase                  decrease               decrease
C                           increase                   decrease               increase
D                           decrease                   increase              increase

Q5      A Company’s debtors total $27000. There is a collection period of 30 days.
          
             The budget for the coming year provides for an increased turnover of
              50% with the relevant collection period being increased to 60 days.

              What will the year-end debtors be?
               A$ 13500   B 27000 C 40500    D 81000

Q6   The standard time for a job is set at 50 hours. The standard direct labor rate
         Is $8.00 per hour? The job was completed in 65 hours at a direct lab our  
       Cost of  $455.

What is the direct lab our rate variance?

A.  $55 Adverse     B  $55 favorable     C $65 adverse D $65 favorable

Q7   A project has the following net present values
                        
                                         Discount factor             30% 50%
                                                NPV                      $52000         -$16000

What is the approximate internal rate of return for the project?

A 35% B 38% C 40% D 45%






Q8  A company's published profit and loss account fives the following    
       Information.
                                             $Million
       Operating profit               $ 4000
       Interest expense                200
       Taxation                            1150  
       Preference dividends          300
       Ordinary dividends             1200


What is the profit figure to be used in the calculation of earnings per ordinary
Share?

A $1150 Million   B $2350 million  C$ 2650 Million  D $ 3800 Million

(Please see attachment for full question)