MAN1110 Week 5

A company issues 60,000 £1 shares at a price of £1.50 per share. How much should be credited to the share premium account?

• £30,000

• £90,000

• £60,000

• £40,000

Answer explanation

=60,000 x (£1.50-£1)

= 60,000 x £0.5

= £30,000

In the published accounts of ZYX Co, the profit for the period is £4,500,000. The balance of retained profits at the beginning of the year is £1,500,000. If dividends of £2,500,000 were paid, what is the closing balance of retained profit?

• £4,000,000

• £1,500,000

• £3,500,000

• £3,000,000

Answer explanation

Profit – Dividends = Retained profits at the end of the year

4,500,000-2,500,000=2,000,000

Retained profit at the start of the year + at the end of year

1,500,000+2,000,000=3,500,000

If shares are sold for more than par value, the stock is sold at a:

• Discount

• Gain

• Premium

• Loss

Exteriors PLC issues 5,000 ordinary shares of £2 for £2.80 per share. The amount credited to share premium account is:

• £10,000

• £14,000

• £6,000

• £4,000

Answer explanation

= 5,000 x (£2.80-£2)

= 5,000 x £0.8

= £4,000

Earnings that a stockholder receives from a company is an example of which stockholder right?

• Vote

• Dividends

• Liquidation

• Preemption