IGCSE Accounting Paper-2: Specimen Questions with Answers 40 - 42 of 189

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Passage

King and Queen commenced business as partners on April 1st 2006. King contributed £ 80000 and Queen contributed £ 50000 as capital. Their profit sharing ratio was decided as 2: 1. During the year King withdrew £ 8000 and Queen withdrew £ 16000. King was also entitled for salary amounting to £ 12000. Interest on capital was paid@6 % . The profit of the firm after providing for salary and interest on capital was £ 24000.

Question 40 (5 of 5 Based on Passage)

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Short Answer▾

What will be the capital of King and Queen on 31st March 2007, if fluctuating capital accounts were maintained by the firm?

Explanation

On 31st March 2007, capital of King is £ 104800 and capital of Queen is £ 45000 when the firm maintains fluctuating capital accounts.

Fluctuating Capital Accounts of King and Queen as on March 31st 2007
DATEPARTICULARSJFKINGQUEENDATEPARTICULARSJFKINGQUEEN
Drawings800016000Cash8000050000
Balance C/F10480045000Salary12000
Interest on capital@6 %48003000
Profit & Loss appropriation in the ratio 2: 1160008000
1128006100011280061000

Profit = King =

Profit = Queen =

Passage

Turbo & Co. forfeited 100 equity shares of £ 100 each held by Mr. Andy on 20th December 2011, for nonpayment of first call of £ 20 per share and final call of £ 30 per share. These shares were reissued to Mr. Candy on 31st December 2011, at a discount of £ 35 per share.

Question 41 (1 of 5 Based on Passage)

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Short Answer▾

What does Turbo & Co. do with the excess of amount in the share forfeiture account?

Explanation

The amount in excess remaining in the share forfeiture account will be transferred to an account called as Capital Reserve account by Turbo & Co. The amount present in this account cannot be used by the company to distribute dividends to its share holders.

Question 42 (2 of 5 Based on Passage)

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Short Answer▾

What does Turbo & Co. mean by forfeiture of shares?

Explanation

The term forfeiture of shares means the cancellation of shares which have been issued to Mr. Andy, due to nonpayment of the first and final call money. The amount which has already been received on these shares will be seized or forfeited by Turbo & Co. These shares can later be reissued by the company.

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