Question 1

Which of the following statements is incorrect?

Accepted Answer

A)  Most liquidations in Australia do not have sufficient funds to pay creditors. 
B)  Past members must contribute money for company debts, which have been incurred after they cease to be members. 
C)  In the absence of any guidance in the company's constitution, calls in advance with related interest will be repaid before any payments are made to shareholders. 
D)  If the company is limited by shares, members do not have to contribute more than the amount unpaid on the shares for which each is liable as a past or present member. 
A)  Most liquidations in Australia do not have sufficient funds to pay creditors. 
B)  Past members must contribute money for company debts, which have been incurred after they cease to be members. 
C)  In the absence of any guidance in the company's constitution, calls in advance with related interest will be repaid before any payments are made to shareholders. 
D)  If the company is limited by shares, members do not have to contribute more than the amount unpaid on the shares for which each is liable as a past or present member. B

Question 2

A voluntary winding up may be put in place by either:

Accepted Answer

A)  the company's members or creditors. 
B)  the company's directors or creditors. 
C)  ASIC or the company's members. 
D)  ASIC or the company's creditors. 
A)  the company's members or creditors. 
B)  the company's directors or creditors. 
C)  ASIC or the company's members. 
D)  ASIC or the company's creditors. A

Question 3

Which of the following statements is incorrect?

Accepted Answer

A)  receivers have power to do whatever is necessary to achieve the objectives for which they were appointed. 
B)  receivers are normally appointed by the court or by secured creditors. 
C)  secured creditors have a 'charge' over some or all of the company's assets. 
D)  receivers are responsible to the company. 
A)  receivers have power to do whatever is necessary to achieve the objectives for which they were appointed. 
B)  receivers are normally appointed by the court or by secured creditors. 
C)  secured creditors have a 'charge' over some or all of the company's assets. 
D)  receivers are responsible to the company. D

Question 4

Which of the following is an example of a preferential unsecured creditor?

Accepted Answer

A)  Trade creditors. 
B)  Liquidator's fee. 
C)  Arrears of preference dividends. 
D)  Audit fees payable for normal year-end audit prior to insolvency. 
A)  Trade creditors. 
B)  Liquidator's fee. 
C)  Arrears of preference dividends. 
D)  Audit fees payable for normal year-end audit prior to insolvency.

Question 5

Which of the following is not grounds under s. 461 of the Corporations Act on which the court can order a winding up? I. $\quad$$\quad$The comparyy has no members.
III. $\quad$The compary has resolved that it be wourd up by the court.
III. $\quad$The compary has not commenced business within three months of its incorporation.
IV. $\quad$The court is of the opirion that it is just and equitable that the compary be wourd up.

Accepted Answer

A)  III only 
B)  IV only 
C)  I and II only 
D)  III and IV only 
A)  III only 
B)  IV only 
C)  I and II only 
D)  III and IV only

Question 6

Which of the following is not one of the main accounts used for liquidation?

Accepted Answer

A)  Liquidation. 
B)  Liquidator's distribution. 
C)  Shareholders' distribution. 
D)  Liquidator's receipts and payments. 
A)  Liquidation. 
B)  Liquidator's distribution. 
C)  Shareholders' distribution. 
D)  Liquidator's receipts and payments.

Question 7

Under a voluntary winding up, a liquidator cannot:

Accepted Answer

A)  make concessions on any debts except as under s. 477(2
A)  of the Corporation Act. 
B)  exercise the power of the court of fixing a time when debts and claims must be proved. 
C)  exercise any power the Corporation Act confers on a liquidator in a winding up by the court. 
D)  convene a general meeting of the company to obtain agreement for matters as the liquidator thinks fit. 
A)  make concessions on any debts except as under s. 477(2
A)  of the Corporation Act. 
B)  exercise the power of the court of fixing a time when debts and claims must be proved. 
C)  exercise any power the Corporation Act confers on a liquidator in a winding up by the court. 
D)  convene a general meeting of the company to obtain agreement for matters as the liquidator thinks fit.

Question 8

A receiver should be:

Accepted Answer

A)  a registered liquidator. 
B)  a secured party in relation to any property of the corporation 
C)  an auditor or a director, secretary, senior manager or employee of the corporation. 
D)  an auditor or a director, secretary, senior manager or employee of the body corporate related to the corporation. 
A)  a registered liquidator. 
B)  a secured party in relation to any property of the corporation 
C)  an auditor or a director, secretary, senior manager or employee of the corporation. 
D)  an auditor or a director, secretary, senior manager or employee of the body corporate related to the corporation.

Question 9

Claims against a company whereby the creditor has a charge against specific property is known as a:

Accepted Answer

A)  floating charge. 
B)  specific debt covenant. 
C)  circulating security interest. 
D)  non-circulating security interest. 
A)  floating charge. 
B)  specific debt covenant. 
C)  circulating security interest. 
D)  non-circulating security interest.

Question 10

An administrator's role is to:
I. control the company's business, property and affairs.
II. carry on the business and manage the property and the affairs of the company.
III. terminate or dispose of all or part of the business or the property of the company.

Accepted Answer

A)  I, II and III 
B)  I and II only 
C)  I and III only 
D)  II and III only 
A)  I, II and III 
B)  I and II only 
C)  I and III only 
D)  II and III only

Question 11

Which of the following is not an example of how a receivership can end.

Accepted Answer

A)  The receiver can resign. 
B)  A voluntary administrator can be appointed to take over from the receiver. 
C)  The receivership can progress to liquidation and the receiver can be appointed as liquidator. 
D)  The receivership can progress to liquidation and a separate party can be appointed as liquidator. 
A)  The receiver can resign. 
B)  A voluntary administrator can be appointed to take over from the receiver. 
C)  The receivership can progress to liquidation and the receiver can be appointed as liquidator. 
D)  The receivership can progress to liquidation and a separate party can be appointed as liquidator.

Question 12

Which of the following is an example of a deferred creditor?

Accepted Answer

A)  Trade creditors. 
B)  Audit fees payable. 
C)  Liquidator's remuneration. 
D)  Arrears of preference dividends. 
A)  Trade creditors. 
B)  Audit fees payable. 
C)  Liquidator's remuneration. 
D)  Arrears of preference dividends.

Question 13

The details below were extracted from the accounting records of Capricorn Ltd (a company in the process of liquidation). $\begin{array}{ll}
\text {$ 100000 \$ 1 $ preference shares fully paid  }&\$ 100,000\
\text {$ 200000 \$ 1 $ ordinary shares paid to 50 cents }&100,000\
&\$200,000\
\text { Cash available (after payment of all creditors) }&\$20,000
\end{array}$
 Assume that the constitution of Capricorn Ltd states that in the event of liquidation, all shares are to rank equally, based on the number of shares held, in distributing any surplus or deficiency.
For preference shareholders, the amount of the actual refund or call is:

Accepted Answer

A)  A call of $20 000. 
B)  A call of $100 000. 
C)  A refund of $20 000. 
D)  A refund of $40 000. 
A)  A call of $20 000. 
B)  A call of $100 000. 
C)  A refund of $20 000. 
D)  A refund of $40 000.

Question 14

Under a members' voluntary winding up, the directors of the company are required to prepare which of the following documents?
I. Summary of affairs
II. Statement of affairs
III. Declaration of solvency
IV. Preliminary liquidation report

Accepted Answer

A)  II and III. 
B)  I, II and III. 
C)  I, II and IV. 
D)  I, III and IV. 
A)  II and III. 
B)  I, II and III. 
C)  I, II and IV. 
D)  I, III and IV.

Question 15

When an administrator is appointed to a company they must give an opinion as to the best of three options available to creditors. These three options are:
I. Wind up the company and appoint a liquidator.
II. End the voluntary administration and appoint a receiver.
III. End the voluntary administration and return the company to the director's control.
IV. Approve a deed of company arrangement through which the company will pay all or part of its debts and then be free of those debts.

Accepted Answer

A)  I, II and III 
B)  I, II and IV 
C)  I, III and IV 
D)  II, III and IV 
A)  I, II and III 
B)  I, II and IV 
C)  I, III and IV 
D)  II, III and IV

Question 16

Under the Corporations Act, tasks of a liquidator include which of the following?
I. Determine the creditors and order of priority of payment.
II. Bring about the dissolution of the company.
III. Take possession of the company's assets.

Accepted Answer

A)  I, II and III 
B)  I and II only 
C)  I and III only 
D)  II and III only 
A)  I, II and III 
B)  I and II only 
C)  I and III only 
D)  II and III only

Question 17

Which of the following journal entries will be recorded upon realisation of the assets by the liquidator?

Accepted Answer

A)  DR Liquidation; CR Liquidator's receipts and payments 
B)  DR Liquidator's receipts and payments; CR Liquidation 
C)  DR Shareholders' distribution; CR Liquidator's receipts and payments 
D)  DR Liquidator's receipts and payments; CR Revenue from sale of assets 
A)  DR Liquidation; CR Liquidator's receipts and payments 
B)  DR Liquidator's receipts and payments; CR Liquidation 
C)  DR Shareholders' distribution; CR Liquidator's receipts and payments 
D)  DR Liquidator's receipts and payments; CR Revenue from sale of assets

Question 18

Which of the following is not a form of external administration prescribed by the Corporation Act?

Accepted Answer

A)  insolvency. 
B)  liquidation. 
C)  receivership. 
D)  administration. 
A)  insolvency. 
B)  liquidation. 
C)  receivership. 
D)  administration.

Question 19

Under s. 461 of the Corporations Act, general grounds on which the court can order a winding up include:
I. The company has no members.
II. The court is of the opinion that it is just and equitable that the company be wound up.
III. The company has not commenced business within twelve months of its incorporation.

Accepted Answer

A)  I, II and IV 
B)  II, III and IV 
C)  II and III only 
D)  I, II, III and IV 
A)  I, II and IV 
B)  II, III and IV 
C)  II and III only 
D)  I, II, III and IV

Question 20

A voluntary winding up commences when:

Accepted Answer

A)  the company is unable to pay its debts. 
B)  ASIC applies to the court for the winding up. 
C)  the members of the company pass a special resolution to wind up. 
D)  an application is filed with the court by the company's external auditor. 
A)  the company is unable to pay its debts. 
B)  ASIC applies to the court for the winding up. 
C)  the members of the company pass a special resolution to wind up. 
D)  an application is filed with the court by the company's external auditor.

Exam 33: Insolvency and Liquidation

Which of the following statements is incorrect?

A voluntary winding up may be put in place by either:

Which of the following statements is incorrect?

Which of the following is an example of a preferential unsecured creditor?

Which of the following is not one of the main accounts used for liquidation?

Under a voluntary winding up, a liquidator cannot:

A receiver should be:

Claims against a company whereby the creditor has a charge against specific property is known as a:

An administrator's role is to: I. control the company's business, property and affairs. II. carry on the business and manage the property and the affairs of the company. III. terminate or dispose of all or part of the business or the property of the company.

Which of the following is not an example of how a receivership can end.

Which of the following is an example of a deferred creditor?

Under a members' voluntary winding up, the directors of the company are required to prepare which of the following documents? I. Summary of affairs II. Statement of affairs III. Declaration of solvency IV. Preliminary liquidation report

Under the Corporations Act, tasks of a liquidator include which of the following? I. Determine the creditors and order of priority of payment. II. Bring about the dissolution of the company. III. Take possession of the company's assets.

Which of the following journal entries will be recorded upon realisation of the assets by the liquidator?

Which of the following is not a form of external administration prescribed by the Corporation Act?

A voluntary winding up commences when:

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Fair Value Measurement

Inventories

Property, Plant and Equipment

Intangible Assets

Impairment of Assets

Provisions, Contingent Liabilities and Contingent Assets

Employee Benefits

Leases

Financial Instruments

Income Taxes

Share Capital and Reserves

Share Based Payment

Revenue

Presentation of Financial Statements

Statement of Cash Flows

Accounting Policies and Other Disclosures

Earnings Per Share

Operating Segments

Related Party Disclosures

Sustainability and Corporate Social Responsibility Recording

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Foreign Currency Financial Statements

Business Combinations

Consolidation: Controlled Entities

Consolidation: Wholly Owned Entities

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Joint Arrangements

Accounting for Mineral Resources

Agriculture

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