AAT L4 Financial Statements of Limited Companies

Question 1

Under FRS 102, which of the following is NOT a component of a complete set of financial statements for a limited company?

Accepted Answer

Tax computation schedule

Answer

FRS 102 requires a statement of financial position, statement of comprehensive income, statement of changes in equity, statement of cash flows, and notes. A tax computation schedule is prepared for HMRC but is not part of the financial statements.

Question 2

A limited company has issued 500,000 ordinary shares of £1 each at £1.40 per share. What amount should be credited to the share premium account?

Accepted Answer

£200,000

Answer

The share premium is the excess over nominal value. 500,000 shares x (£1.40 - £1.00) = 500,000 x £0.40 = £200,000. The nominal value of £500,000 is credited to the share capital account.

Question 3

Under the Companies Act 2006, which of the following reserves is distributable to shareholders as dividends?

Accepted Answer

Retained earnings

Answer

Retained earnings (revenue reserves) are distributable profits under the Companies Act 2006. Share premium, capital redemption reserve, and unrealised revaluation gains are all non-distributable capital reserves.

Question 4

When consolidating a subsidiary's financial statements, goodwill arising on acquisition is calculated as:

Accepted Answer

Fair value of consideration paid minus the fair value of the subsidiary's identifiable net assets

Answer

Under FRS 102 Section 19, goodwill on acquisition equals the cost of the business combination (consideration paid) less the acquirer's share of the fair value of identifiable net assets acquired. Net book values are adjusted to fair values for this calculation.

Question 5

A company revalues its property from £300,000 to £450,000. The original cost was £400,000 with accumulated depreciation of £100,000. What is the revaluation gain recognised in other comprehensive income?

Accepted Answer

£150,000

Answer

The carrying amount before revaluation was £400,000 - £100,000 = £300,000. The revaluation surplus is £450,000 - £300,000 = £150,000. This gain is recognised in other comprehensive income and credited to the revaluation reserve.

AAT Level 4 Practice Test

AAT Level 4 Practice Test

AAT L4 Financial Statements of Limited Companies