passwella.
Menu

UI Post-UTME Financial Accounting 2025 (Model questions) Question 21

Question 21

Company Accounts

The following balances appeared in the books of Fadekemi Plc as at 31 December 2024: Share capital (₦1 ordinary shares): ₦400,000 Share premium: ₦80,000 Retained earnings: ₦120,000 Revaluation reserve: ₦60,000. Which of the following statements are TRUE?
I. Total shareholders' equity = ₦660,000
II. Revaluation reserve is a distributable reserve
III. Share premium can be used to write off preliminary expenses
IV. Retained earnings represent cumulative undistributed profits

  1. A.I, III and IV only
  2. B.I and II only
  3. C.II and IV only
  4. D.All of the above
Show the answer and explanation

Answer: A (I, III and IV only)

Explanation

Equity = 400,000 + 80,000 + 120,000 + 60,000 = ₦660,000. A revaluation reserve is a capital reserve and cannot be paid out as dividends.