These are ACCA F7 (FR) Financial Reporting MCQs for Part-B of the Syllabus “Accounting for transactions in financial statements”.

These multiple-choice questions (MCQs) are designed to help ACCA F7 students to better understand the exam format. We aim to instill in students the habit of practicing online for their CBE exams. By doing so, students can reduce exam stress and prepare more effectively.

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Students should not attempt these MCQs until they have finished the entire chapter.
All questions are compulsory, so please do not skip any.

We hope that these MCQs will be a valuable resource for students preparing for the ACCA F7 (FR) exam.

INFORMATION ABOUT THESE CBE MCQs Test/Quiz

Course:	ACCA – Association of Chartered Certified Accountants
Fundamental Level:	Applied Skills
Subject:	Financial Reporting
Paper:	F7 – FR
Chapter and Topic	18 – Earnings per share
Syllabus Area:	B – “Accounting for transactions in financial statements”
Questions Type:	CBE MCQs
Exam Section:	Section A

Syllabus Area

These Multiple Choice Questions (MCQs) cover the Syllabus Area Part-B of the Syllabus; “Accounting for transactions in financial statements” of ACCA F7 (FR) Financial Reporting Module.

Time

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Types of Questions

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Multiple choice: Choose all those answers which seem correct/ or incorrect to you, as per the requirement of the question. Keep your eye on the wording “(select all those which are correct/ or incorrect)“.
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F7 (FR) - Chapter 18 - Part B - MCQs - Taxation

Course: ACCA - Association of Chartered Certified Accountants
Subject: F7 (FR) - Financial Reporting
Syllabus Area: B - Accounting for transactions in financial statements
Chapter: 18 - Earnings per share
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

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1 / 7

At 30 September 20X2 the trial balance of Cavern Co includes the following balances:

	$'000
Equity shares of 20c each	50,000
Share premium	15,000

Cavern Co has accounted for a fully subscribed rights issue of equity shares made on 1 April 20X2 of one new share for every four in issue at 42 cents each. This was the only share issue made during the year.

What balances will be shown on the share capital and share premium accounts at 30 September 20X1?

Share capital: $40,000,000 , Share premium: $4,000,000

Share capital: $8,000,000 , Share premium: $27,000,000

Share capital: $28,000,000 , Share premium: $6,000,000

Share capital: $4,000,000 , Share premium: $40,000,000

2 / 7

Waffle Co had share capital of $7.5 million in 50c equity shares at 1 October 20X6. On 1 January 20X7 it made an issue of 4 million shares at full market price immediately followed by a 1 for 3 bonus issue.

The financial statements at 30 September 20X7 showed profit for the year of $12 million.

What was the earnings per share for the year? State your answer to two decimal places i.e 100.00.

Note. You are not required to put $ sign nor any coma.

3 / 7

Plumstead Co had 4 million equity shares in issue throughout the year ended 31 March 20X7. On 30 September 20X7 it made a 1 for 4 bonus issue. Profit for the year ended 31 March 20X8 was $3.6 million, out of which an equity dividend of 20c per share was paid. The financial statements for the year ended 31 March 20X7 showed earnings per share (EPS) of $0.70.

What is the EPS for the year ended 31 March 20X8 and the restated EPS for the year ended 31 March 20X7?

EPS for 20X8 $0.72 | EPS for 20X7 $0.56

EPS for 20X8 $0.72 | EPS for 20X7 $0.72

EPS for 20X8 $0.56 | EPS for 20X7 $0.56

EPS for 20X8 $0.56 | EPS for 20X7 $0.72

4 / 7

Aqua Co has correctly calculated its basic earnings per share (EPS) for the current year.

Which of the following items need to be additionally considered when calculating the diluted EPS of Aqua Co for the year?

A 1 for 5 rights issue of equity shares during the year at $1.20 when the market price of the equity shares was $2.00
The issue during the year of a convertible (to equity shares) loan note
The granting during the year of directors' share options exercisable in three years' time
Equity shares issued during the year as the purchase consideration for the acquisition of a new subsidiary company

(i) and (ii) only

(ii) and (iii) only

(iii) and (iv) only

All four

5 / 7

Many commentators believe that the trend of earnings per share (EPS) is a more reliable indicator of underlying performance than the trend of net profit for the year.

Which of the following statements supports this view?

The comparative EPS is restated where a change of accounting policy affects the previous year's profits

The disclosure of a diluted EPS figure is a forecast of the future trend of profit

EPS takes into account the additional resources made available to earn profit when new shares are issued for cash, whereas net profit does not

Net profit can be manipulated by the choice of accounting policies but EPS cannot be manipulated in this way

6 / 7

Barwell Co had 10 million ordinary shares in issue throughout the year ended 30 June 20X3. On 1 July 20X2 it had issued $2 million of 6% convertible loan stock, each $5 of loan stock convertible into 4 ordinary shares on 1 July 20X6 at the option of the holder.

Barwell Co had profit for the year ended 30 June 20X3 of $1,850,000. It pays tax on profits at 30%.

What was diluted earnings per share for the year?

$0.167

$0.17

$0.161

$0.185

7 / 7

At 1 January 20X8 Artichoke Co had 5 million $1 equity shares in issue. On 1 June 20X8 it made a 1 for 5 rights issue at a price of $1.50. The market price of the shares on the last day of quotation with rights was $1.80.

Total earnings for the year ended 31 December 20X8 was $7.6 million.

What was the earnings per share for the year?

$1.36

$1.27

$1.06

$1.35

Your score is

	Share capital	Share premium
	$'000	$'000
Balance 30 September X2 (250m shares)	50,000	15,000
Rights issue:
‎ ‎ Share capital (50m × 20c)	(10,000)
‎ ‎ Share premium (50m × 22c)	–	(11,000)
‎Balance 30 September X1 (200m shares)	40,000	‎ ‎ 4,000‎ ‎

	Number of shares	Time apportioned	Bonus fraction	Weighted average
1/10/X6	15,000,000	3/12	4/3	5,000,000
1/1/X7	4,000,000
	19,000,000
Bonus issue (18,000 / 3)	6,333,333
	25,333,333	9/12		19,000,000
				24,000,000

	Shares
	$'000
B/f	4,000
Bonus issue	1,000
	5,000

Earnings on dilution:	$'000
Basic	1,850
Add back interest (2,000 × 6% × 70%)	84
	1,934

Shares on dilution:	$'000
Existing	10,000
Conversion (2m × 4/5)	1,600
	11,600

F7 (FR) – Chapter 18 – PART B – CBE MCQs – ACCA