Question

Question 1

XYZ Ltd issues 500,000 new ordinary N$1 shares at an issue price of N$1.50 and makes a bonus issue of new shares amounting to 50,000 N$1 ordinary shares. The company also increases its authorised ordinary share capital by 550,000 N$1 ordinary shares. By how much will the ordinary share capital account increase?

Select one:

a. N$1 350 000

b. N$800 000

c. N$750 000

d. N$550 000

Question 2

A company wishes to pay out all available profits as dividends. Net profit is N$26,600. There

are 20,000 8% Preference shares of N$1 each, and 50,000 Ordinary shares of N$1 each. N$5,000 is to be

transferred to General Reserve. What Ordinary dividends are to be paid, in percentage terms?

Select one:

a. 65%

b. 40%

c. 20%

d. 50%

Question 3

following balances are taken from the trial balance of the XYZ Manufacturing company:

	N$000
Raw material purchases	48
Direct labour	25
Direct expenses	8
Indirect labour	25
Indirect expenses	6
Transportation costs	4

The prime cost of production is:

Select one:

a. N$81 000

b. N$106 000

c. N$116 000

d. N$112 000

Question 4

Oovenya Ltd was incorporated on 01 September 2019 with authorized share capital consisting of 400 000 10% preference shares of N$ 1 each and 2 000 000 ordinary shares of 50c each.

On 05 September 2019, the subscribers to the memorandum took and paid for 100 000 ordinary shares at par.

During the year of 2019, the remaining shares were offered to the public as follows:

The full public offer is underwritten by Virtual Underwritters Ltd for a 2% underwritter’s commission. The offer for the subscription of shares opened on 01 November 2019 and closed on 25 November 2019. The ordinary shares were offered at a premium of 20c per share and the preference shares were offered at par. The public subscribed for 600 000 preference shares and 1 500 000 ordinary shares and the full amounts payable were received on the closing date of 25 November 2019. All shares were allotted on 15 December 2019, the necessary refunds were made and all transactions with the underwriter were also concluded on this date. All expenses regarding the issue of shares and incorporation must be written off against the share premium account.

The balance of the Bank account as at 15 December 2019 will be as follows:

Select one:

a. N$ 1 500 000

b. N$ 1 650 000

c. N$800 000

d. N$ 1 776 000

Question 5

The XYZ manufacturing company has the following balances in its trial balance at the year end:

	N$000
Prime cost of manufacture	3,450
Factory overheads	236
Work in progress at start of year	126
Selling overheads	56
Bank interest	89

In addition, work in progress at the end of the year is valued at N$267,000.

Which is the correct figure for the cost of manufactured goods?

Select one:

a.   N$3,690,000.

b. N$3,691,000.

c. N$3,545,000

d. N$3,831,000.

Question 6

XYZ Ltd has a net profit before tax of N$267,000, taxation amounts to N$87,000, a dividend on ordinary share capital of N$45,000 has been declared and the company will transfer N$50,000 to a capital reserve. What is the retained profit figure for the year?

Select one:

a. N$135 000

b. N$265 000

c. N$85 000

d. N$180 000

Question 7

elow is shown a draft summarised balance sheet of XYZ Ltd at 31.12.19 before certain adjustments

	$000
Net assets	880
Ordinary share capital (N$1 shares)	350
Share premium account	50
Capital reserve	120
Profit and loss account	360
	880

The company decides to increase the value of its net assets by including an upward revaluation of its buildings of N$50,000, it also decides to transfer an additional sum of N$150,000 from its profit and loss account to capital reserves and, finally, a dividend of N$60,000 is proposed. Which of the following is the correct net asset figure as a result of including these transactions?

Select one:

a. N$988 000

b. N$1 020 000

c. N$870 000

d. N$1 090 000

Question 8

Oovenya Ltd was incorporated on 01 September 2019 with authorized share capital consisting of 400 000 10% preference shares of N$ 1 each and 2 000 000 ordinary shares of 50c each.

On 05 September 2019, the subscribers to the memorandum took and paid for 100 000 ordinary shares at par.

During the year of 2019, the remaining shares were offered to the public as follows:

The full public offer is underwritten by Virtual Underwritters Ltd for a 2% underwritter’s commission. The offer for the subscription of shares opened on 01 November 2019 and closed on 25 November 2019. The ordinary shares were offered at a premium of 20c per share and the preference shares were offered at par. The public subscribed for 600 000 preference shares and 1 500 000 ordinary shares and the full amounts payable were received on the closing date of 25 November 2019. All shares were allotted on 15 December 2019, the necessary refunds were made and all transactions with the underwriter were also concluded on this date. All expenses regarding the issue of shares and incorporation must be written off against the share premium account.

The underwritters commission payable is recorded as follows:

Select one:

a. Dr Underwriting commission 39 000 and Cr Virtual Underwritters Ltd N$ 39 000

b. Dr Bank N$ 92 000 and Cr Underwritters expense N$ 92 000

c. None of the above

d. Dr Virtual Underwritters Ltd N$ 39 000 and Cr Bank N$ 39 000

Question 9

Oovenya Ltd was incorporated on 01 September 2019 with authorized share capital consisting of 400 000 10% preference shares of N$ 1 each and 2 000 000 ordinary shares of 50c each.

On 05 September 2019, the subscribers to the memorandum took and paid for 100 000 ordinary shares at par.

During the year of 2019, the remaining shares were offered to the public as follows:

The full public offer is underwritten by Virtual Underwritters Ltd for a 2% underwritter’s commission. The offer for the subscription of shares opened on 01 November 2019 and closed on 25 November 2019. The ordinary shares were offered at a premium of 20c per share and the preference shares were offered at par. The public subscribed for 600 000 preference shares and 1 500 000 ordinary shares and the full amounts payable were received on the closing date of 25 November 2019. All shares were allotted on 15 December 2019, the necessary refunds were made and all transactions with the underwriter were also concluded on this date. All expenses regarding the issue of shares and incorporation must be written off against the share premium account.

The subscription of the preference shares will be recorded as follows:

Select one:

a. Dr Bank N$ 1 050 000 and Cr Application and allotment: preference shares N$ 1 050 000

b. Dr Bank N$ 600 000 and Cr Preference share capital N$ 600 000

c. Dr Bank N$ 650 000 and Cr Application and allotment: ordinary shares N$ 600 000      and Cr Share     premium N$ 50 000

d. Dr Bank N$ 600 000and Cr Application and allotment: ordinary shares N$ 600 000       

Answer 1

Answer-1:

Option d is the correct answer.

Ordinary share capital account after bonus issue will be = (500,000 + 50,000) * N$1 = N$550,000

Answer-2:

Option b is the correct answer.

Ordinary dividend percentage = [N$26,600 - (N$20,000 * 8%) – N$5,000] / N$50,000 * 100 = 40%

Answer-3:

Option a is the correct answer.

Prime cost = Raw material + Direct labor + Direct expenses

                    = N$48,000 + 25,000 + 8,000 = N$81,000

Answer-4:

Option b is the correct answer.

Balance of bank account = (1,500,000 * N$0.70) + (600,000 * N$1) = N$1,650,000

Answer-5:

Option c is the correct answer.