Topic 10 Flashcards
Judith is a sole trader.
Her accounts show the following figures:
Turnover: £90,000
Basic materials for carrying out her day-to-day work: £30,000
Routine business expenses: £8,000
Personal drawings: £30,000
Based on these figures, her gross profit is:
a. £22,000.
b. £52,000.
c. £60,000.
d. £82,000.
c. £60,000.
Gross profit = turnover minus materials/goods.
Jason owns 100% of the shares in his own limited company and pays himself a very small salary and monthly dividends.
Which of the following is true?
a. As the sole shareholder, Jason’s dividends will be tax free.
b. HMRC may consider his dividends to be disguised pay and subject to National Insurance contributions.
c. Jason will have no control over the amount of the dividends he receives.
d. Mortgage lenders must base lending decisions on his salary only.
b. HMRC may consider his dividends to be disguised pay and subject to National Insurance contributions.
John is a sole trader. His accounts show the following figures:
Turnover: £70,000
Basic materials for carrying out his day-to-day work: £20,000
Routine business expenses: £10,000
Personal drawings: £35,000
Based on these figures, his net profit would be:
a. £5,000.
b. £40,000.
c. £50,000.
d. £60,000.
b. £40,000.
Net profit = turnover minus materials/goods minus business expenses.
Maria is the sole director of her limited company. The latest company accounts show a profit of £80,000, with Maria taking a salary of £50,000 and a dividend of £20,000. Maria has a credit of £20,000 in her director’s loan account.
Maria will pay income tax on:
a. her salary only.
b. her salary and dividends only.
c. her salary, dividends and the balance of her director’s account.
d. the company’s profit of £80,000.
b. her salary and dividends only.
Marion is the sole director and shareholder of a small limited company. She borrowed £5,000 from the company through a director’s loan three months ago and so far, she has paid back £2,000. Which of the following is true?
The director’s account is in:
a. advance.
b. arrears.
c. credit.
d. debit.
d. debit.
Jason owns 100% of the shares in his own limited company and pays himself a very small salary and monthly dividends.
Which of the following is true?
a. As the sole shareholder, Jason’s dividends will be tax free.
b. HMRC may consider his dividends to be disguised pay and subject to National Insurance contributions.
c. Jason will have no control over the amount of the dividends he receives.
d. Mortgage lenders must base lending decisions on his salary only.
b. HMRC may consider his dividends to be disguised pay and subject to National Insurance contributions.
Chris and Carol are looking to borrow the maximum amount possible to buy their first property, using a three-year fixed-rate mortgage at 3% then reverting to the lender’s standard variable rate (SVR), which is currently 5%.
Assuming there are no changes to the lender’s margin, and taking into account MCOB rules, what is the minimum interest rate the lender should use when applying the stress test to their affordability assessment?
4%.
5%.
6%.
No stress test is required.
6%.
The minimum is 1% above the current SVR.
According to the MCOB rules, which of the following would be included in the ‘basic essential expenditure’ category when assessing affordability?
Childcare.
Council tax.
Credit agreements.
Recreation costs.
Council tax.
Childcare and basic recreation are considered “Basic quality of life expenditure”.
Credit agreements are considered “committed expenditure”.
