Question 1

Explain why a company may hold excess money from an applicant for securities.

Accepted Answer

An investor may have applied for more shares than were allotted to that investor.In such case the company will be holding an excess of money received from the applicant.Also,an applicant for partly paid shares may pay the future calls in advance in the hope that the application will receive favourable treatment in the allotment process.

Question 2

The entry to record the forfeiture of shares is:

Accepted Answer

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

Question 3

When a public share issue is made,the offer comes from:

Accepted Answer

A) the company issuing the shares 
B) the Australian Securities and Investments Commission once it has reviewed the prospectus documentation 
C) the broker handing the share issue for the company 
D) the applicant. 
A) the company issuing the shares 
B) the Australian Securities and Investments Commission once it has reviewed the prospectus documentation 
C) the broker handing the share issue for the company 
D) the applicant. D

Question 4

Underwriting and other share issue costs paid to a broker or a financial institution should be reported in a balance sheet as:

Accepted Answer

A) a liability 
B) an asset 
C) an increase in retained earnings 
D) a reduction of share capital. 
A) a liability 
B) an asset 
C) an increase in retained earnings 
D) a reduction of share capital.

Question 5

If the balance in a forfeited shares account is refundable to the owners of those shares,then the forfeited shares account is classified as a component of:

Accepted Answer

A) income 
B) liabilities 
C) equity 
D) expense. 
A) income 
B) liabilities 
C) equity 
D) expense.

Question 6

Without the prior approval of shareholders a company is restricted to private placements of shares,in any one year,of no more than:

Accepted Answer

A) 5% of existing capital 
B) 10% of existing capital 
C) 15% of existing capital 
D) 20% of existing capital. 
A) 5% of existing capital 
B) 10% of existing capital 
C) 15% of existing capital 
D) 20% of existing capital.

Question 7

After application,and prior to allotment,the balance in the Application account would be:

Accepted Answer

A) $150 000 Debit 
B) $150 000 Credit 
C) $165 000 Debit 
D) $165 000 Credit. 
A) $150 000 Debit 
B) $150 000 Credit 
C) $165 000 Debit 
D) $165 000 Credit.

Question 8

Which of the following journal entries demonstrates the appropriate accounting treatment for share issue costs?

Accepted Answer

A) Dr Deferred asset: Cr Cash 
B) Dr Cash: Cr Deferred asset 
C) Dr Share capital: Cr: Cash 
D) Dr Cash: Cr Share capital. 
A) Dr Deferred asset: Cr Cash 
B) Dr Cash: Cr Deferred asset 
C) Dr Share capital: Cr: Cash 
D) Dr Cash: Cr Share capital.

Question 9

The entry to record the reissue of forfeited shares is:

Accepted Answer

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

Question 10

The appropriate account to record any excess proceeds received and retained (not refunded)by a company from an oversubscription to a share offer application,is the:

Accepted Answer

A) Share issue costs account 
B) Forfeited Shares account 
C) Share capital account 
D) Calls in advance account. 
A) Share issue costs account 
B) Forfeited Shares account 
C) Share capital account 
D) Calls in advance account.

Question 11

Bonacurso Limited issued 10 000 share options to subscribe for ordinary shares.The exercise price on the options was $3 per share.If all options were exercised on due date the following journal entry would be recorded:

Accepted Answer

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

Question 12

The costs of issuing equity effectively:

Accepted Answer

A) reduce the proceeds from the equity issue 
B) increase the proceeds from the equity issue 
C) are borne by the underwriters of the equity issue 
D) are recognised as a deferred asset and carried forward in the balance sheet. 
A) reduce the proceeds from the equity issue 
B) increase the proceeds from the equity issue 
C) are borne by the underwriters of the equity issue 
D) are recognised as a deferred asset and carried forward in the balance sheet.

Question 13

In respect to the issue of shares by a company,what is an IPO?

Accepted Answer

A) Investment in Preference and Ordinary shares 
B) Initial Public Offering of shares 
C) Investment Prospectus for an issue of Options 
D) Instruments Providing Options to ordinary shareholders. 
A) Investment in Preference and Ordinary shares 
B) Initial Public Offering of shares 
C) Investment Prospectus for an issue of Options 
D) Instruments Providing Options to ordinary shareholders.

Question 14

Discuss the effect that a bonus issue of shares may have on the share price of a company.

Accepted Answer

Discuss the effect that a bonus issue of

Question 15

The appropriate journal entry to record the cash collected from applicants for shares before the shares are issued is:

Accepted Answer

A) Increase Cash account: Increase Issued Share Capital account 
B) Increase Application account: Decrease Issued Share Capital account 
C) Increase Issued Share Capital account: Decrease Cash Trust account 
D) Increase Cash Trust account: Increase Application account. 
A) Increase Cash account: Increase Issued Share Capital account 
B) Increase Application account: Decrease Issued Share Capital account 
C) Increase Issued Share Capital account: Decrease Cash Trust account 
D) Increase Cash Trust account: Increase Application account.

Question 16

The bonus issue of shares has the following impact on the equity of a company

Accepted Answer

A) total equity increases 
B) total equity decreases 
C) one equity account increases and another equity account decreases by an equal amount 
D) only the amount of issued share capital changes. 
A) total equity increases 
B) total equity decreases 
C) one equity account increases and another equity account decreases by an equal amount 
D) only the amount of issued share capital changes.

Question 17

The amount of the surplus payable to the shareholders whose shares were forfeited is:

Accepted Answer

A) $5 000 
B) $500 
C) $2 500 
D) $3 000. 
A) $5 000 
B) $500 
C) $2 500 
D) $3 000.

Question 18

Summarise the steps involved in the issue of securities to the public.

Accepted Answer

When a company decides to issue securiti

Question 19

Following the allotment,the amount transferred from the Cash Trust account to the Cash account would be:

Accepted Answer

A) $150 000 
B) $110 000 
C) $100 000 
D) $15 000. 
A) $150 000 
B) $110 000 
C) $100 000 
D) $15 000.

Question 20

Identify 5 common differences between ordinary and preference shares.

Accepted Answer

Some of the common areas in which there

Exam 2: Financing Company Operations

Explain why a company may hold excess money from an applicant for securities.

The entry to record the forfeiture of shares is:

When a public share issue is made,the offer comes from:

Underwriting and other share issue costs paid to a broker or a financial institution should be reported in a balance sheet as:

If the balance in a forfeited shares account is refundable to the owners of those shares,then the forfeited shares account is classified as a component of:

Without the prior approval of shareholders a company is restricted to private placements of shares,in any one year,of no more than:

After application,and prior to allotment,the balance in the Application account would be:

Which of the following journal entries demonstrates the appropriate accounting treatment for share issue costs?

The entry to record the reissue of forfeited shares is:

The appropriate account to record any excess proceeds received and retained (not refunded)by a company from an oversubscription to a share offer application,is the:

Bonacurso Limited issued 10 000 share options to subscribe for ordinary shares.The exercise price on the options was $3 per share.If all options were exercised on due date the following journal entry would be recorded:

The costs of issuing equity effectively:

In respect to the issue of shares by a company,what is an IPO?

Discuss the effect that a bonus issue of shares may have on the share price of a company.

The appropriate journal entry to record the cash collected from applicants for shares before the shares are issued is:

The bonus issue of shares has the following impact on the equity of a company

The amount of the surplus payable to the shareholders whose shares were forfeited is:

Summarise the steps involved in the issue of securities to the public.

Following the allotment,the amount transferred from the Cash Trust account to the Cash account would be:

Identify 5 common differences between ordinary and preference shares.

Nature and Regulation of Companies

Company Operations

Fundamental Concepts of Corporate Governance

Fair Value Measurement

Accounting for Company Income Tax

Property, Plant and Equipment

Leases

Intangible Assets

Business Combinations

Impairment of Assets

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Accounting for Investments in Associates

Insolvency and Liquidation

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