Question 1

Discuss the primary role of the statement of changes in equity,and what is included in such a statement.

Accepted Answer

The primary role of the statement of cha

Question 2

Which of the following share issue costs does not qualify as a deduction from share capital?

Accepted Answer

A)  advertising of share issue 
B)  costs of prospectus issue 
C)  administration overheads 
D)  audit expenses associated with the issue of a prospectus 
A)  advertising of share issue 
B)  costs of prospectus issue 
C)  administration overheads 
D)  audit expenses associated with the issue of a prospectus

Question 3

In the case of a share issue being oversubscribed,the common approaches include:

Accepted Answer

A)  Issue additional shares to meet the excess demand. 
B)  Allocate the shares on a pro rata basis. 
C)  Increase the issue price of the shares. 
D)  Issue additional shares to meet the excess demand and increase the issue price of the shares. 
A)  Issue additional shares to meet the excess demand. 
B)  Allocate the shares on a pro rata basis. 
C)  Increase the issue price of the shares. 
D)  Issue additional shares to meet the excess demand and increase the issue price of the shares.

Question 4

Ordinary shares receive low dividends because they do not perform very well.

Accepted Answer

A) True 
 B)False

Question 5

The AASB Framework defines equity as the remedial interest in the assets of the entity after the deduction of its liabilities.

Accepted Answer

A) True 
 B)False

Question 6

Signal Ltd called for subscriptions for 8 million shares.The issue price per share is $3.50 to be paid in three parts: the first payment of $1.00 is to be made on application,$1.50 is to be paid within 1 month of allotment and the remaining $1.00 is to be paid within 3 months of allotment.At the end of July,when applications close,applications for 10 million shares have been received.The shares are allotted on 1 August on a pro rata basis with the excess application money to be applied against the amount due on allotment.The first and final call on the shares is made on 1October.Assume all amounts on allotment and call are paid by the due date.What are the accounting entries to record these events?

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 7

If an entity performs a share split on a partly paid share,the split must be done in such a way as to divide the uncalled portion equally among the shares issued.

Accepted Answer

A) True 
 B)False

Question 8

Preference shares are often considered to be closer to debt as they:

Accepted Answer

A)  may be issued with the condition that they are redeemable by the company in the future. 
B)  may guarantee a regular or cumulative payment, similar to interest. 
C)  may be able to be converted into ordinary shares at a specific date in the future, indicating they are a liability until that time. 
D)  may guarantee a regular or cumulative payment, similar to interest and may be able to be converted into ordinary shares at a specific date in the future, indicating they are a liability until that time. 
A)  may be issued with the condition that they are redeemable by the company in the future. 
B)  may guarantee a regular or cumulative payment, similar to interest. 
C)  may be able to be converted into ordinary shares at a specific date in the future, indicating they are a liability until that time. 
D)  may guarantee a regular or cumulative payment, similar to interest and may be able to be converted into ordinary shares at a specific date in the future, indicating they are a liability until that time.

Question 9

Preference shares may be classified as a liability,an equity item,or have features of both.Explain with examples,how to determine such a classification.

Accepted Answer

Preference shares may be classified as a

Question 10

In the case of a share issue being oversubscribed,excess application monies:

Accepted Answer

A)  will always be refunded to applicants. 
B)  may be used to reduce future amounts owing on allotment if the shares are issued on a pro rata basis. 
C)  must be recorded as revenue in the current financial period. 
D)  must be placed in a trust account until a refund is requested by applicants. 
A)  will always be refunded to applicants. 
B)  may be used to reduce future amounts owing on allotment if the shares are issued on a pro rata basis. 
C)  must be recorded as revenue in the current financial period. 
D)  must be placed in a trust account until a refund is requested by applicants.

Question 11

Holders of ordinary shares:

Accepted Answer

A)  are assured of dividends each year. 
B)  may not receive a cash dividend each year but the dividend will accrue and eventually be paid. 
C)  will always receive a dividend if the company has made a profit in that financial year. 
D)  receive dividends at the discretion of the board. 
A)  are assured of dividends each year. 
B)  may not receive a cash dividend each year but the dividend will accrue and eventually be paid. 
C)  will always receive a dividend if the company has made a profit in that financial year. 
D)  receive dividends at the discretion of the board.

Question 12

Explain the various possible outcomes when there is a forfeiture of shares,due to non-payment of amounts owing when a call is made.

Accepted Answer

When there is a forfeiture of shares due

Question 13

Retained earnings can be used (reduced)for the purpose of a bonus issue of shares.

Accepted Answer

A) True 
 B)False

Question 14

Shares may be issued for consideration other than cash including:

Accepted Answer

A)  promissory notes. 
B)  contracts for future services. 
C)  real or personal property. 
D)  all of the given answers. 
A)  promissory notes. 
B)  contracts for future services. 
C)  real or personal property. 
D)  all of the given answers.

Question 15

Companies undertake share splits in order to increase their shareholders' funds.

Accepted Answer

A) True 
 B)False

Question 16

It is a requirement of the Corporations Act 2001 that companies hold capital contributed on the issue of shares in trust until the application is made.

Accepted Answer

A) True 
 B)False

Question 17

When an entity issues shares,until such time as the shares are allotted,the amount received must be held in trust.It remains in trust (refer s.722 of the Corporations Act)until:

Accepted Answer

A)  so directed by ASIC. 
B)  the shares are issued or transferred; or the money is returned to the applicants. 
C)  options are issued over the shares. 
D)  the Board of Directors indicate that the received monies are required by the entity. 
A)  so directed by ASIC. 
B)  the shares are issued or transferred; or the money is returned to the applicants. 
C)  options are issued over the shares. 
D)  the Board of Directors indicate that the received monies are required by the entity.

Question 18

An allotment account,being a receivable account from the subscribers in a share issue,is presented under current assets in the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 19

Explain the differences between a rights issue and share options.

Accepted Answer

A rights issue and share options are bot

Question 20

When a company sells shares,various costs are incurred.Discuss why these costs are classified as equity and the circumstance that would allow these costs to be expensed.

Accepted Answer

When a company sells shares, various cos

Exam 13: Share Capital and Reserves

Discuss the primary role of the statement of changes in equity,and what is included in such a statement.

Which of the following share issue costs does not qualify as a deduction from share capital?

In the case of a share issue being oversubscribed,the common approaches include:

Ordinary shares receive low dividends because they do not perform very well.

The AASB Framework defines equity as the remedial interest in the assets of the entity after the deduction of its liabilities.

If an entity performs a share split on a partly paid share,the split must be done in such a way as to divide the uncalled portion equally among the shares issued.

Preference shares are often considered to be closer to debt as they:

Preference shares may be classified as a liability,an equity item,or have features of both.Explain with examples,how to determine such a classification.

In the case of a share issue being oversubscribed,excess application monies:

Holders of ordinary shares:

Explain the various possible outcomes when there is a forfeiture of shares,due to non-payment of amounts owing when a call is made.

Retained earnings can be used (reduced)for the purpose of a bonus issue of shares.

Shares may be issued for consideration other than cash including:

Companies undertake share splits in order to increase their shareholders' funds.

It is a requirement of the Corporations Act 2001 that companies hold capital contributed on the issue of shares in trust until the application is made.

When an entity issues shares,until such time as the shares are allotted,the amount received must be held in trust.It remains in trust (refer s.722 of the Corporations Act)until:

An allotment account,being a receivable account from the subscribers in a share issue,is presented under current assets in the statement of financial position.

Explain the differences between a rights issue and share options.

When a company sells shares,various costs are incurred.Discuss why these costs are classified as equity and the circumstance that would allow these costs to be expensed.

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Employee Benefits

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Share-Based Payments

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

Filters