Question 1

The statement of changes in equity:

Accepted Answer

A)  presents, either on the face of the statement or in the notes, the amounts of dividends recognised as distributions to owners during the period and the related amount per share. 
B)  is identical to the statement of recognised income and expense. 
C)  is the same as that required under the former AASB 1018. 
D)  provides a reconciliation between the expenses outstanding at the start of the period and those outstanding at the end of the period. 
A)  presents, either on the face of the statement or in the notes, the amounts of dividends recognised as distributions to owners during the period and the related amount per share. 
B)  is identical to the statement of recognised income and expense. 
C)  is the same as that required under the former AASB 1018. 
D)  provides a reconciliation between the expenses outstanding at the start of the period and those outstanding at the end of the period.

Question 2

The 'participating' in participating preference shares means that the shareholders may:

Accepted Answer

A)  vote at annual meetings. 
B)  vote at annual meetings if preference dividends have not been paid. 
C)  participate in a conversion of preference shares into ordinary shares. 
D)  receive a share of any further profits that are to be distributed to ordinary shareholders after the payment of the preference dividend. 
A)  vote at annual meetings. 
B)  vote at annual meetings if preference dividends have not been paid. 
C)  participate in a conversion of preference shares into ordinary shares. 
D)  receive a share of any further profits that are to be distributed to ordinary shareholders after the payment of the preference dividend.

Question 3

Under The Corporations Law as amended in 1998 companies now issue shares at:

Accepted Answer

A)  any price they determine is appropriate in the market. 
B)  the price determined by the Australian Stock Exchange as the appropriate issue price for the shares. 
C)  the ASIC-specified level of price relative to a moving average of sales over the preceding 6 months. 
D)  the average price at which shares have been issued over the last 5 years. 
A)  any price they determine is appropriate in the market. 
B)  the price determined by the Australian Stock Exchange as the appropriate issue price for the shares. 
C)  the ASIC-specified level of price relative to a moving average of sales over the preceding 6 months. 
D)  the average price at which shares have been issued over the last 5 years.

Question 4

Which of the following is ­not a required disclosure to be made in relation to each class of share capital?

Accepted Answer

A)  number of shares authorised 
B)  number of shares issued and fully paid and issued but not fully paid 
C)  par value per share or that the shares have no par value 
D)  None of the given answers are correct. 
A)  number of shares authorised 
B)  number of shares issued and fully paid and issued but not fully paid 
C)  par value per share or that the shares have no par value 
D)  None of the given answers are correct.

Question 5

The effect of a bonus issue to all shareholders on (a)net asset backing per share,(b)each shareholder's share of net assets and (c)market capitalisation is:

Accepted Answer

A)  (a) The net asset backing per share will decrease; (b) each shareholder's share of net assets will remain the same; (c) evidence suggests that on average the market capitalisation will increase. 
B)  (a) The net asset backing per share will increase; (b) each shareholder's share of net assets will increase; (c) evidence suggests that on average the market capitalisation will remain the same. 
C)  (a) The net asset backing per share will decrease; (b) each shareholder's share of net assets will decrease; (c) evidence suggests that on average the market capitalisation will remain the same. 
D)  (a) The net asset backing per share will remain the same; (b) each shareholder's share of net assets will decrease; (c) evidence suggests that on average the market capitalisation will decrease. 
A)  (a) The net asset backing per share will decrease; (b) each shareholder's share of net assets will remain the same; (c) evidence suggests that on average the market capitalisation will increase. 
B)  (a) The net asset backing per share will increase; (b) each shareholder's share of net assets will increase; (c) evidence suggests that on average the market capitalisation will remain the same. 
C)  (a) The net asset backing per share will decrease; (b) each shareholder's share of net assets will decrease; (c) evidence suggests that on average the market capitalisation will remain the same. 
D)  (a) The net asset backing per share will remain the same; (b) each shareholder's share of net assets will decrease; (c) evidence suggests that on average the market capitalisation will decrease.

Question 6

When shares are allotted,or a call made on them,allotment and call accounts are created respectively.What is the nature of these accounts and how are they to be disclosed in the financial statements?

Accepted Answer

A)  The accounts are similar in nature to an account receivable and are to be disclosed in the statement of financial position as a current asset. 
B)  The accounts are similar to a future income benefit and are to be separately disclosed as assets in the statement of financial position. 
C)  The accounts are similar to an account receivable and are disclosed in the statement of financial position as a reduction against share capital. 
D)  The accounts are in the nature of a deferred income and are disclosed as a provision for future cash inflows in the statement of financial position. 
A)  The accounts are similar in nature to an account receivable and are to be disclosed in the statement of financial position as a current asset. 
B)  The accounts are similar to a future income benefit and are to be separately disclosed as assets in the statement of financial position. 
C)  The accounts are similar to an account receivable and are disclosed in the statement of financial position as a reduction against share capital. 
D)  The accounts are in the nature of a deferred income and are disclosed as a provision for future cash inflows in the statement of financial position.

Question 7

The term 'reserves' in the statement of financial position is used to identify:

Accepted Answer

A)  a decline in the fair value of a non-current asset. 
B)  an amount of retained earnings that is allocated for a specific purpose. 
C)  the allowance for uncollectible receivables. 
D)  an amount that is being accumulated to reduce the financial effect of a litigation lawsuit. 
A)  a decline in the fair value of a non-current asset. 
B)  an amount of retained earnings that is allocated for a specific purpose. 
C)  the allowance for uncollectible receivables. 
D)  an amount that is being accumulated to reduce the financial effect of a litigation lawsuit.

Question 8

Share capital is also referred to as:

Accepted Answer

A)  equity 
B)  contributed equity 
C)  owners contribution 
D)  shareholder equity 
A)  equity 
B)  contributed equity 
C)  owners contribution 
D)  shareholder equity

Question 9

A public issue of shares involves:

Accepted Answer

A)  compiling and then issuing a prospectus that outlines the details of the share issue so those interested can make an informed decision. 
B)  making the general public aware that shares are available for sale at a set price. 
C)  only issuing a limited number of shares to ensure there is sufficient demand for a full subscription. 
D)  issuing ordinary shares to all members of the public who are interested. 
A)  compiling and then issuing a prospectus that outlines the details of the share issue so those interested can make an informed decision. 
B)  making the general public aware that shares are available for sale at a set price. 
C)  only issuing a limited number of shares to ensure there is sufficient demand for a full subscription. 
D)  issuing ordinary shares to all members of the public who are interested.

Question 10

A residual interest is:

Accepted Answer

A)  a claim to a fixed percentage return on the amount invested. 
B)  a priority claim over the assets of the entity as the right of an owner. 
C)  a claim or right to the net assets of the reporting entity. 
D)  the minimum entitlement of the holder of the interest. 
A)  a claim to a fixed percentage return on the amount invested. 
B)  a priority claim over the assets of the entity as the right of an owner. 
C)  a claim or right to the net assets of the reporting entity. 
D)  the minimum entitlement of the holder of the interest.

Question 11

Accounts that make up owners' equity may include:

Accepted Answer

A)  preference shares. 
B)  debentures. 
C)  general reserves. 
D)  preference shares and general reserves. 
A)  preference shares. 
B)  debentures. 
C)  general reserves. 
D)  preference shares and general reserves.

Question 12

Which of the following statements correctly describes this journal entry: $$\begin{array} { | c | l | c | r | } 
\hline \mathrm { Dr } & \text { Cash at bank } & 30000000 & \
\hline \mathrm { Cr } & \text { Share capital } & & 30000000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Share options (1 } 000000 \text { options) } & 3500000 & \
\hline \mathrm { Cr } & \text { Share capital } & & 3500000 \
\hline
\end{array}$$

Accepted Answer

A)  The issue of options, costing $3.50 each. 
B)  The issue of options, costing $30 each. 
C)  The exercise of options, with a current market value per share of $3.50. 
D)  The exercise of options, initially costing $3 500 000 to issue and with an exercise price for each option of $30. 
A)  The issue of options, costing $3.50 each. 
B)  The issue of options, costing $30 each. 
C)  The exercise of options, with a current market value per share of $3.50. 
D)  The exercise of options, initially costing $3 500 000 to issue and with an exercise price for each option of $30.

Question 13

Explain how an entity could handle excess monies in a share issue that is oversubscribed.

Accepted Answer

When a share issue is oversubscribed, it

Question 14

The process for issuing shares is that:

Accepted Answer

A)  They are offered for sale, allotments are received and an assignment made. Monies received on allotment must be held in trust until the assignment is made. 
B)  They are offered for sale, applications are received and an allotment made. Monies received on application must be held in trust until the allotment is made. 
C)  Applications are received for the issue of shares and an offer of shares is made. Applicants contribute capital that is returned to them if their application is unsuccessful when the shares are assigned. 
D)  A notice of intention to purchase shares is registered with the stock exchange, which the company receives. The company then offers shares. The applicant may then be allotted shares and at that point must make the cash contribution. 
A)  They are offered for sale, allotments are received and an assignment made. Monies received on allotment must be held in trust until the assignment is made. 
B)  They are offered for sale, applications are received and an allotment made. Monies received on application must be held in trust until the allotment is made. 
C)  Applications are received for the issue of shares and an offer of shares is made. Applicants contribute capital that is returned to them if their application is unsuccessful when the shares are assigned. 
D)  A notice of intention to purchase shares is registered with the stock exchange, which the company receives. The company then offers shares. The applicant may then be allotted shares and at that point must make the cash contribution.

Question 15

Double entry accounting requires that:

Accepted Answer

A)  the claims held by external parties equal the claims held by the owners. 
B)  the total assets of an entity equal the total of the claims held by external parties plus those claims held by the owners. 
C)  the liabilities of the entity equal its total assets plus the claims held by the owners. 
D)  the recognition of the claims held by owners will match the entity's total assets. 
A)  the claims held by external parties equal the claims held by the owners. 
B)  the total assets of an entity equal the total of the claims held by external parties plus those claims held by the owners. 
C)  the liabilities of the entity equal its total assets plus the claims held by the owners. 
D)  the recognition of the claims held by owners will match the entity's total assets.

Question 16

The Corporations Law was amended in 1998 in relation to the par value of shares.That amendment has the effect of:

Accepted Answer

A)  making the use of par values optional for companies. 
B)  requiring companies not to issue shares with a par value. 
C)  requiring the calculation of the share premium or discounts to be based on an average of the market price for the share over the current reporting period. 
D)  making the use of par values optional for companies and requiring the calculation of the share premium or discounts to be based on an average of the market price for the share over the current reporting period. 
A)  making the use of par values optional for companies. 
B)  requiring companies not to issue shares with a par value. 
C)  requiring the calculation of the share premium or discounts to be based on an average of the market price for the share over the current reporting period. 
D)  making the use of par values optional for companies and requiring the calculation of the share premium or discounts to be based on an average of the market price for the share over the current reporting period.

Question 17

When a rights issue is tradeable it is often referred to as:

Accepted Answer

A)  reducable. 
B)  rightful. 
C)  redeemable. 
D)  renounceable. 
A)  reducable. 
B)  rightful. 
C)  redeemable. 
D)  renounceable.

Question 18

A statement of changes in equity:

Accepted Answer

A)  is identical to a statement of comprehensive income. 
B)  is required to include only the components listed in paragraph 106 of AASB 101. 
C)  includes the effects of changes in accounting policies recognised in accordance with AASB 108. 
D)  is required to include only the components listed in paragraph 106 of AASB 101 and includes the effects of changes in accounting policies recognised in accordance with AASB 108. 
A)  is identical to a statement of comprehensive income. 
B)  is required to include only the components listed in paragraph 106 of AASB 101. 
C)  includes the effects of changes in accounting policies recognised in accordance with AASB 108. 
D)  is required to include only the components listed in paragraph 106 of AASB 101 and includes the effects of changes in accounting policies recognised in accordance with AASB 108.

Question 19

Discuss,with examples,how the recognition criteria for assets and liabilities provide the criteria for the recognition of equity.

Accepted Answer

The recognition criteria for assets and

Question 20

TheCorporations Act 2001 requires that where a company redeems preference shares it must do so out of profits that would otherwise be available for dividends or out of the proceeds of a fresh issue of shares made for the purpose of the redemption.

Accepted Answer

A) True 
 B)False

Exam 13: Share Capital and Reserves

The statement of changes in equity:

The 'participating' in participating preference shares means that the shareholders may:

Under The Corporations Law as amended in 1998 companies now issue shares at:

Which of the following is ­not a required disclosure to be made in relation to each class of share capital?

The effect of a bonus issue to all shareholders on (a)net asset backing per share,(b)each shareholder's share of net assets and (c)market capitalisation is:

When shares are allotted,or a call made on them,allotment and call accounts are created respectively.What is the nature of these accounts and how are they to be disclosed in the financial statements?

The term 'reserves' in the statement of financial position is used to identify:

Share capital is also referred to as:

A public issue of shares involves:

A residual interest is:

Accounts that make up owners' equity may include:

Which of the following statements correctly describes this journal entry: Cash at bank 30000000 Share capital 30000000 Share options (1 000000 options) 3500000 Share capital 3500000

Explain how an entity could handle excess monies in a share issue that is oversubscribed.

The process for issuing shares is that:

Double entry accounting requires that:

The Corporations Law was amended in 1998 in relation to the par value of shares.That amendment has the effect of:

When a rights issue is tradeable it is often referred to as:

A statement of changes in equity:

Discuss,with examples,how the recognition criteria for assets and liabilities provide the criteria for the recognition of equity.

TheCorporations Act 2001 requires that where a company redeems preference shares it must do so out of profits that would otherwise be available for dividends or out of the proceeds of a fresh issue of shares made for the purpose of the redemption.

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

Which of the following is not a required disclosure to be made in relation to each class of share capital?