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ACCTN202-25A (HAM) - Intermediate Financial Accounting

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Abby and Bill are in partnership

sharing profits and losses equally. A new partner Cathy is admitted. Profits

will now be shared Abby 40%, Bill 40% and Cathy 20%. The capital balances

before Cathy was admitted were Abby $25,000 and Bill $25,000. There were no

goodwill and revaluation arising from the change in the partnership. Cathy is

to contribute capital in cash so that the capital balances of Abby, Bill and

Cathy is in proportion to the profit sharing ratio for Abby, Bill and Cathy.

How much Cathy’s cash capital contribution to the partnership?

$12,500

100%

$35,000

$50,000

$25,000

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Which one of the following statements is incorrect?

winding up, ordinary shareholders rank last in any distribution of assets or surpluses

some types of ordinary shares have debt like characteristics

100%

Preference shareholders have preferential treatment over ordinary shareholders in relation to receipt of dividends and ranking in asset distribution in winding up

Shareholders of ordinary shares have voting rights but are not assured of dividends

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The following bank ledger account indicates that shareholders have contributed towards equity of:

Bank A/C

Date	Details	Debit	Date	Details	Credit
	Trust Bank	2,000,000		Balance c/d	7,500,000
	Equity Receivable	1,000,000
	Equity Receivable	4,500,000
		7,500,000			7,500,000

$5,500,000

100%

$7,500,000

$2,000,000

$1,000,000

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The following ledger accounts indicate:

Application A/C

Date	Details	Debit	Date	Details	Credit
	Contributed Equity	11,000,00		Trust Bank	12,000,000
	Equity receivable	1,000,000
		12,000,000			12,000,000

Equity Receivable A/C

Date	Details	Debit	Date	Details	Credit
	Contributed Equity	20,000,000		Application	1,000,000
				Bank	14,500,000
				Bank	4,500,000
		20,000,000			20,000,000

over subscription of shares

100%

under subscription of shares

call in arrears

forfeiture of shares

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Every company registered under the Companies Act 1993 will need to

satisfy the solvency test before:

I. making payments of dividends to shareholders

II. making payments for repurchasing its own shares from shareholders

III. redemption of its shares

IV. forgiveness of debt owed to the company by a shareholder

II, III and IV only

I, II and III only

I, II, III and IV

100%

I, II and IV only

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Over subscriptions of shares is where:

the

number of shares allotted exceeds the number of shares applied for

the

number of shares issued exceeds the number of shares applied for

the

number of shares applied for exceeds the number of shares issued

100%

the

number of shares applied for is the same as the number of shares issued

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In the case of forfeiture of shares by the issuing company:

company

may forfeit shares on which the calls are not in arrears

power

to forfeit and circumstances of forfeiture need not be provided in the company’s

constitution

forfeited

shares may be reissued to a new shareholder

100%

power

to forfeit and circumstances of forfeiture is provided in the Companies Act 1993

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One of the following statements in not true regarding solvency test:

The trading solvency test requires that a company is able

to pay its debts as they become due in the normal course of business

The balance sheet solvency test requires that value

of a company’s assets is greater than the value of its liabilities

Companies

are required to satisfy solvency test contained in section 4 of Companies Act 1993.

Before making distributions to shareholders, companies are required to satisfy either the Trading Solvency test or the Balance sheet solvency test

100%

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The following ledger account indicates that the amount payable on application is:

Application A/C

Date	Details	Debit	Date	Details	Credit
	Contributed Equity	2,000,000		Trust Bank	3,000,000
	Call Paid In Adv	1,000,000
		3,000,000			3,000,000