Accounting Online Program Certification Practice Test

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the Accounting Online Program Certification Test. Use flashcards and multiple choice questions with detailed explanations. Ace your accounting certification exam with confidence!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

After conducting several share issues, what is the balance on Watchet Ltd's share premium account?

£200,000
£235,000
£250,000
£150,000

The correct answer is: £235,000

To determine the balance on Watchet Ltd's share premium account, it's essential to understand what a share premium account represents. This account records the excess amount received from shareholders over the nominal (or par) value of the shares issued. If option B, £235,000, is selected as the balance on the share premium account, it implies that the total amount received from the share issues, beyond the nominal value, sums to this amount. In practice, this could occur if Watchet Ltd issued shares at a premium, which would be common in situations where the company is perceived as valuable or for strategic fundraising. To ascertain the correctness of this answer, details from share issues must support that share premiums have been generated during the issuance process, the totals of which align to provide a correct aggregate. For instance, if the company issued shares at £1 nominal value for £2 per share, the share premium would be £1 per share. If a total of 235,000 shares were issued at this premium, it would yield £235,000 in share premiums. Therefore, it is important to verify the details of previous share issues and their nominal versus issued prices to confirm that the cumulative share premiums do indeed amount to £235,000.