Chapter 11 Extra

ICAEW 2024 Question bank 1
Chapter 11: Company financial statements

1 Alto plc's share capital consists of 400,000 25p equity shares all of which were issued at a premium of 25%.
The market value of the shares is currently 70p each.
What is the balance on the share capital ledger account?
A £100,000
B £200,000
C £300,000
D £400,000 LO 1d, e; 3a, c
2 At 30 June 20X6 Ollie plc's equity contained the following balances:

£m
Equity shares of £1 each 80
Share premium account 40
During the year ended 30 June 20X7, the following transactions took place:
(1) 1 September 20X6 A 1 for 2 bonus issue, using the share premium account.
(2) 1 January 20X7 A fully subscribed 1 for 3 rights issue at £1.80 per share.
What are the balances on each account at 30 June 20X7?
Share Share
capital premium
£m £m
A 160 72
B 160 32
C 192 72
D 192 32 LO 1d, e; 3a, c
3 A company made an issue of shares for cash of 500,000 50p shares at a premium of 20p per share. Which of
the following journal entries correctly records the issue?
Debit Credit
£ £
A Share capital 250,000
Share premium 100,000
Cash at bank 350,000
B Cash at bank 350,000
Share capital 250,000
C Cash at bank 700,000
Share capital 500,000
D Share capital 500,000
Cash at bank 200,000
LO 1d, e; 2c

4 At 30 June 20X6, a company's capital structure included the following items:
£
500,000 equity shares of 50p each 250,000
Share premium account 80,000
In the year ended 30 June 20X7 the company made a rights issue of 1 share for every 5 held at £1.20 per share
and this was taken up in full. Later in the year the company made a bonus issue of 1 share for every 5 held,
using the share premium account for the purpose.
What was the company's capital structure at 30 June 20X7?
Equity share Share
capital premium
£ £
A 400,000 90,000
B 360,000 90,000
C 360,000 150,000
D 400,000 150,000
LO 1d, e; 3a, c
5 A company has the following capital structure:

£
Equity share capital 300,000 shares of 25p 75,000
It makes a 1 for 6 rights issue at £1.25, which is fully subscribed.
The balance on share premium following the rights issue is:
A £12,500
B £50,000
C £62,500
D £100,000 LO 1d, e; 3a, c
6 A company has a balance of £5,000 (debit) on its income tax account at 31 December 20X1 relating to the
income tax payable on the 20X0 profits. The company's estimated income tax liability for the year to 31
December 20X1 is £30,000.
The income tax expense in the statement of profit or loss for the year ended 31 December 20X1 is:
A £5,000
B £25,000
C £30,000
D £35,000 LO 1d; 3a, c

7 A company is preparing its financial statements for the year ending 31 March 20X4. The initial trial balance
has the following figures relating to income tax:
£
Income tax payable at 1 April 20X3 21,200
Income tax agreed with HMRC and paid during the year ended 31 March 20X4 19,500
The estimated income tax liability for the year ended 31 March 20X4 is £26,700.
The figure for income tax expense in the company's statement of profit or loss will be:
A £19,500
B £25,000
C £26,700
D £28,400 LO 1d; 3a, c
8 Which three of the following would be included in current liabilities in a company's financial statements?
A Allowance for receivables
B Bank overdraft
C Tax payable
D Share capital
E Accrued interest charges LO 1d, e; 3a, c
9 Which of the following accounting treatments derive from the accounting concept of accruals?
(1) Annual depreciation charges for non-current assets
(2) Opening and closing inventory adjustments
(3) Capitalisation and amortisation of development expenditure
A (1) and (2) only
B (1) and (3) only
C (2) and (3) only
D (1), (2) and (3) LO 1d; 3a, c

10 The following transactions occurred during a company's reporting period:
(1) A non-current liability was paid in full.
(2) A substantial amount was written off as irrecoverable debts.
(3) Depreciation was charged on non-current assets.
(4) A non-current asset was sold at its carrying amount.
Which of these transactions result in expense items appearing in the company's draft statement of profit or
loss?
A (1) and (2) only
B (2) and (3) only
C (3) and (4) only
D (1) and (4) only LO 1d; 3a, c
11 At 31 January 20X5, Watchet Ltd had issued share capital of £250,000 in 25p shares. All shares were issued at
par several years ago. During the year the following transactions took place.
1 May 20X5 500,000 shares issued at 75p
30 September 20X5 1 for 25 bonus issue
What is the balance on share premium after these transactions, assuming that share premium is used wherever
possible?
A £182,500
B £220,000
C £235,000
D £360,000 LO 1d, e; 3a, c
12 Wanda Ltd provides a warranty on goods sold which allows customers to return faulty goods within one year
of purchase. At 30 November 20X5, Wanda Ltd had a warranty provision of £6,548. During the year to 30
November 20X6, the cost of warranty claims was £3,720. At 30 November 20X6, the warranty provision was
calculated as £7,634.
What is the amount of the warranty expense that should be included in Wanda Ltd's statement of profit or loss
for the year to 30 November 20X6?
A £7,634
B £1,086
C £4,806
D £2,634 LO 1d

13 Mobiles Ltd sells goods with a one year standard warranty under which customers are covered for any defect
that becomes apparent within a year of purchase. In calendar year 20X4, Mobiles Ltd sold 100,000 units.
The company expects warranty claims for 5% of units sold. Half of these claims will be for a major defect,
with an average claim value of £50. The other half of these claims will be for a minor defect, with an average
claim value of £10.
What amount should Mobiles Ltd include as a provision in the statement of financial position for the year
ended 31 December 20X4?
A £125,000
B £25,000
C £300,000
D £150,000 LO 1d
14 Doggard Ltd is a business that sells cars. It offers a standard warranty under which, if a car develops a fault
within one year of the sale, Doggard Ltd will repair it free of charge.
At 30 April 20X4 Doggard Ltd had a warranty provision of £52,500. At 30 April 20X5 Doggard Ltd calculated
that the provision should be £48,700.
What is the journal entry to record the warranty provision at 30 April 20X5?
A DR Warranty expense £48,700; CR Warranty provision £48,700
B DR Warranty provision £48,700; CR Warranty expense £48,700
C DR Warranty provision £3,800; CR Warranty expense £3,800
D DR Warranty expense £3,800; CR Warranty provision £3,800 LO 1d; 2c

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ICAEW 2024 Question bank 1

Chapter 11: Company financial statements

2 At 30 June 20X6 Ollie plc's equity contained the following balances:

ICAEW 2024 Question bank 2

5 A company has the following capital structure:

ICAEW 2024 Question bank 3

ICAEW 2024 Question bank 4

ICAEW 2024 Question bank 5

ICAEW 2024 Question bank 6

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