Financial Accounting V Question Bank: Underwriter

FINANCIAL ACCOUNTING V QUESTION BANK
1. Mr. X has underwritten 40,000 Shares, but the public applied for 50,000 shares. Therefore, Mr. B
will get commission on the issue price of
a) Rs. 4,000
b) Rs. 40,000
c) Rs. 50,000
d) Rs. 5,000
2. P Ltd. issued shares of Rs.100 each at Rs.95.The Underwriting Commission will be paid on
a) 100
b) 95
c) 105
d) 195
3. Unmarked applications are known as

a) Direct application
b) Applications issued by the company
c) Firm underwriting
d) Applications bearing the stamp of underwriter
4. If the half of the issue of shares or debentures is underwritten it is known as

a) Complete or Full Underwriting
b) Sole Underwriting
c) Firm Underwriting
d) Partial Underwriting
5. In order to spread risk of under subscription, the principal underwriters may appoint
a) Sub Underwriter
b) Sole Underwriter
c) Partial Underwriter
d) Principal Underwriter
6. How many individuals or institutions companies can appoint to manage the issue of its shares
a) One or more
b) Only one
c) Only five
d) Cannot appoint anyone.
7. Unmarked application refer to

a) Firm under
b) Applications issued by the company
c) Applications bearing the stamp of underwriter
d) Applications from the public received directly by the company without bearing any stamp of
underwriter
8. The underwriting commission is calculated on

a) Net liability of the share value
b) Firm underwriting value of the shares
c) Marked application of the share value
d) Issue price of the shares underwritten
9. Which of the following statement is false?
a) Buy back must be authorised by Articles of Association
b) A special resolution must be passed for buy-back
c) Shares can be partly paid up
d) The ratio of debt owed by the company is not more than twice the capital and free reserves after
such buy-back.
10. For cancellation of shares at the time of buy back:

a) Equity share capital a/c is debited and shareholders a/c is credited
b) Shareholders a/c is debited and Equity share capital a/c is credited
c) Equity share capital a/c is debited and CRR a/c is credited
d) Equity share capital a/c is debited and Share Surrendered a/c is credited
11. When two or more companies carrying on similar business decide to combine, a new company is
formed, it is known as
a) Amalgamation
b) Absorption
c) Internal reconstruction
d) External reconstruction
12. When one of the existing companies take over business of another company or companies, it is
known as
a) Amalgamation
b) Absorption
c) Internal reconstruction
d) External reconstruction
13. While calculating purchase price, the following values of assets are considered
a) Book value
b) Revised Value
c) Average values
d) Market values
14. Which of the following statement is correct?

a) The amount of Goodwill or Capital Reserve is recorded in the books of purchasing company only
b) The amount of Goodwill or Capital Reserve is recorded in the books of Vendor Company only.
c) Goodwill = Net Assets – Purchase price
d) The face value of shares of purchasing company will be taken in to account while calculating
purchase consideration.
15. The Amalgamation Adjustment Account appears in the books, it is shown under the heading
of ......... in the balance sheet.
a) Reserve and Surplus
b) Fixed Assets
c) Investments
d) Miscellaneous Expenditure
16. In case of amalgamation, miscellaneous expenses are shown as

a) New Company Account
b) Equity Shareholders Account
c) Cash Account
d) Realization Account
17. If the intrinsic values of shares exchanged are not equal, the difference is paid in ...........
a) Cash
b) Debenture
c) Preference share
d) Assets
18. The assets which is not taken under the net assets method of calculating Purchase Consideration
is:
a) Loose Tools
b) Bills Receivable
c) Machinery
d) Share issued expenses
19. Himanshi Ltd. purchase consideration is Rs.22,345 and Net Assets Rs.6,568, then ______
a) Goodwill Rs. 15,777
b) Capital Reserve Rs. 15,777
c) Goodwill Rs. 28,913
d) Capital Reserve Rs. 28,913
20. Kirti Co’s Balance Sheet shows Fixed Asset Rs. 3,60,000. At the time of absorption calculation of
Net Assets is 10% less than the market value, then market value of such fixed assets is _______
a) Rs. 3,24,000
b) Rs. 4,00,000
c) Rs. 4,20,000
d) Rs. 3,60,000
21. Net Assets of R.D.Co. for Purchase Consideration worth Rs. 2,00,000. At the time of absorption,
the company has paid 16,000 equity shares each of Rs.10 each at 10% premium, then remaining
cash will be –
a) Rs. 24,000
b) Rs. 42,000
c) Rs. 40,000
d) Rs. 60,000
22. When a company is wound-up, all persons who ceased to be the shareholders within a year
before the winding-up are placed in the
(a) 'A' List of Contributories
b) 'B' List of Contributories
c) 'C' List of Contributories
d) 'D' List of Contributories
23. Following is treated as over-riding preferential creditor

a) Retirement benefits of employees
b) Retirement benefits to workers
c) Salary due to employees exceeding ` 20,000
d) Remuneration to investigator
24. Remuneration to investigator upon investigation of the affairs of company is treated as

a) Secured creditor
b) Over-riding preferential creditor
c) Preferential creditor
d) Unsecured creditor
25. Amount of Govt. dues that arose within 12 months before the date of winding up is treated as
a) Secured creditor
26. Amount of Retirement benefits of employees exceeding ` 20,000 per employee is treated as
a) Secured creditor
27. Preference dividend in arrears on the date of winding up is

a) treated as Secured creditor
b) treated as Over-riding preferential creditor
c) treated as Preferential creditor
d) added to Preference Share Capital
28. Accrued holiday remuneration becoming payable to any workman is treated as

a) Secured creditor
(d) Unsecured creditor
29. If the remuneration to liquidator is payable as a percentage of collection

a) include opening cash and bank balance
b) exclude closing cash and bank balance
c) exclude opening cash and bank balance
d) exclude both opening and closing cash and bank balance
30. If the remuneration to liquidator is payable on distribution

a) exclude distribution to preferential and unsecured creditors and contributories
b) include distribution to preferential and unsecured creditors but exclude distribution to
contributories
c) exclude distribution to preferential creditors but include distribution to unsecured creditors and
contributories
d) include distribution to preferential and unsecured creditors and contributories
31. The proceeds of assets not specifically pledged and the surplus of the assets specifically pledged
is first available for :
a) Preferential creditors
b) Unsecured creditors
c) Legal charges, liquidator's remuneration and liquidation expenses
d) Preference shareholders
32. Bills were discounted to the extent of ` 10,000 of which bills of ` 4,000 are likely to be
dishonoured. Hence, the liability to rank in respect of these bills will be
a) Rs. 10,000
b) Rs. 4,000
c) Rs. 6,000
d) Rs. 14,000
33. XYZ Ltd. had on 31st December, 2019; 80,000 equity share at Rs.10 each. It was decided to
reduce shares to Rs.8 each. The reduction is _______
a) Rs.1,60,000
b) Rs.80,000
c) Rs.2,00,000
d) Rs.1,50,000
34. The preference shareholders agree to forego arrears of preference dividend of Rs.72,000. The
amount transferred to Capital Reduction Account is ____
a) Nil
b) Rs.72,000
c) Rs.36,000
d) Rs.70,000
35. Investment costing of Rs.24,000 given to Bank for bank overdraft of Rs.16,800. The capital
reduction is debited by
a) Rs.4,000
b) Rs.8,000
c) Rs.7,200
d) Rs.4,500
36. Y Ltd. has Rs.8,000 equity shares of Rs.100 each fully paid. Each share is sub-divided into 10
equity shares of Rs.10 each. The number of shares after sub-division will be ____
a) Rs.8,000
b) Rs.80,000
c) Rs.75,000
d) Rs.60,000
37. Provision of taxation is Rs.1,00,000. The tax liability of the company is settled at Rs.80,000 & it is
paid immediately. Account credited to capital reduction is --------- a) Rs.80,000 b) Rs.1,00,000 c)
Rs.20,000 d) Rs.60,000

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FINANCIAL ACCOUNTING V QUESTION BANK

3. Unmarked applications are known as

4. If the half of the issue of shares or debentures is underwritten it is known as

7. Unmarked application refer to

8. The underwriting commission is calculated on

10. For cancellation of shares at the time of buy back:

14. Which of the following statement is correct?

16. In case of amalgamation, miscellaneous expenses are shown as

23. Following is treated as over-riding preferential creditor

24. Remuneration to investigator upon investigation of the affairs of company is treated as

27. Preference dividend in arrears on the date of winding up is

28. Accrued holiday remuneration becoming payable to any workman is treated as

29. If the remuneration to liquidator is payable as a percentage of collection

30. If the remuneration to liquidator is payable on distribution

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