Exam 2: Financing Company Operations

The Reserves accounts of a company are disclosed in the statement of financial position as liabilities.

According to the Corporations Act, when a company issues shares to the public, the issue price, terms and rights of the shares are determined by:

Section 124 of the Corporations Act places a restriction on the private placement of shares, limiting to 15% of existing capital the amount of capital that a company can issue in any one year without prior shareholder approval.

A company's share capital consists of 50 000 ordinary shares issued at $2 and paid to $1 per share. On 1 September, a first call of 50c was made on the ordinary shares. By 30 September, call money was received on 45 000 shares. On 31 October, the shares on which calls were outstanding were forfeited. The company's constitution provided for any surplus on resale to be returned to the shareholders whose shares were forfeited. The entry to record the forfeiture of shares is: Share capital 7500 First call - ordinary shares 2500 Forfeited shares 5000 Share capital 7500 First call - ordinary shares 5000 Forfeited shares 2500 Share capital 5000 Forfeited shares 5000 Forfeited shares 2500 Share capital 2500

The costs of issuing shares effectively:

The appropriate account to record any excess application money received and retained by a company to reduce allotment money due and in payment of future calls, is the:

The appropriate accounting entry to record the declaration of a bonus share issue out of the Revaluation Surplus account is which of the following?

Which of the following statements is correct in relation to the payment of dividends?

Before a company issues shares to the public, the company must:

In accordance with AASB 138/IAS 38 Intangible Assets, company formation costs such as professional legal and accounting advice qualifies for recognition as an asset.

After the completion of all steps in the issue of shares, the company's statement of financial position will show which of the following changes?

Underwriting and other share issue costs paid to a stockbroker or financial institution should be reported in the statement of financial position as a/an:

Smith Ltd was registered as a company on 1 July 2017. On 4 July 2017, Smith Ltd issued a prospectus offering 300 000 ordinary shares at an issue price of $4.00 each, payable $2.00 on application and $2.00 on allotment. Applications closed on 1 August 2017 with the company having received applications for 330 000 shares. The shares were allotted on 15 August 2017, with the over-subscription amount being refunded to unsuccessful applicants. All allotment money was received by 31 August 2017. Following the allotment, the amount transferred from the cash trust account to the cash account would be:

The journal entry to record further receipts of cash due on the allotment of shares will include which of the following line items?

When a company requests a further payment from shareholders of the unpaid amounts on their shares, it:

The statement of changes in equity shows the movement between the beginning and ending balance for the period for each equity account.

When shares are issued fully payable on application, the journal entries to record the issue (assuming the minimum subscription is reached) are Cash trust Application X Allotment Share capital Cash trust Dr X Application Cash Cash trust Cash Call Call Share capital X Cash trust Application Application Share capital Cash Cash trust

Reserves that are not required by accounting standards are known as:

It is possible for a company to issue different types of preference shares provided that the rights of each type are specified in its constitution.

Underwriting commission fees are treated as expenses as they are not considered to be an integral part of the equity issue transaction.