Question 1

Which of the following is the journal entry recorded on realisation of the assets by the liquidator?

Accepted Answer

A)  Dr Liquidator's receipts and payments Cr Liquidation 
B)  Dr Liquidation Cr Liquidator's receipts and payments 
C)  Dr Liquidator's receipts and payments Cr Revenue from sale of assets 
D)  Dr Shareholders' distribution Cr Liquidator's receipts and payments 
A)  Dr Liquidator's receipts and payments Cr Liquidation 
B)  Dr Liquidation Cr Liquidator's receipts and payments 
C)  Dr Liquidator's receipts and payments Cr Revenue from sale of assets 
D)  Dr Shareholders' distribution Cr Liquidator's receipts and payments

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)  none of the above. 
A)  the company's members or creditors. 
B)  the company's directors or creditors. 
C)  ASIC or the company's members. 
D)  none of the above.

Question 3

The administrator of a company under administration has power to do any of the following:

Accepted Answer

A)  remove from office a director of the company. 
B)  appoint a person as director. 
C)  execute a document, bring or defend proceedings, or do anything else, in the company's name and on its behalf. 
D)  all the options are correct. 
A)  remove from office a director of the company. 
B)  appoint a person as director. 
C)  execute a document, bring or defend proceedings, or do anything else, in the company's name and on its behalf. 
D)  all the options are correct.

Question 4

Which of the following is a task of a liquidator under the Corporations Act?

Accepted Answer

A)  To determine the creditors and order of priority of payment. 
B)  To bring about the dissolution of the company. 
C)  To take possession of the company's assets. 
D)  All of the options are correct. 
A)  To determine the creditors and order of priority of payment. 
B)  To bring about the dissolution of the company. 
C)  To take possession of the company's assets. 
D)  All of the options are correct.

Question 5

Which of the following statements is incorrect:

Accepted Answer

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

Question 6

A voluntary winding up commences when:

Accepted Answer

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

Question 7

Which of the following statements is incorrect:

Accepted Answer

A)  once a receiver is appointed, the company is required to submit to them a report as to affairs of the company within 14 days. 
B)  a receiver is required to open a special bank account and lodge a statement of receipts and payments every 6 months. 
C)  wages, superannuation contributions, the superannuation guarantee change, long service leave, sick leave and retrenchment payments are to be given priority over circulating security interests when the company is in receivership, but not yet in the process of being wound up. 
D)  a receiver is required to obtain permission from the company before selling any assets. 
A)  once a receiver is appointed, the company is required to submit to them a report as to affairs of the company within 14 days. 
B)  a receiver is required to open a special bank account and lodge a statement of receipts and payments every 6 months. 
C)  wages, superannuation contributions, the superannuation guarantee change, long service leave, sick leave and retrenchment payments are to be given priority over circulating security interests when the company is in receivership, but not yet in the process of being wound up. 
D)  a receiver is required to obtain permission from the company before selling any assets.

Question 8

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

Accepted Answer

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

Question 9

Which of the following is not a general ground under s. 461 of the Corporations Act on which the court can order a winding up?

Accepted Answer

A)  The company has no members. 
B)  The company has not commenced business within three months of its incorporation. 
C)  The court is of the opinion that it is just and equitable that the company be wound up. 
D)  The company has by special resolution resolved that it be wound up by the court. 
A)  The company has no members. 
B)  The company has not commenced business within three months of its incorporation. 
C)  The court is of the opinion that it is just and equitable that the company be wound up. 
D)  The company has by special resolution resolved that it be wound up by the court.

Question 10

Which of the following statements is correct?

Accepted Answer

A)  all creditors' claims are admissible to proof against the company in liquidation 
B)  debts may be admitted by the liquidator without formal proof 
C)  the size of any debts is calculated for the purpose of the winding up as at the day on which the winding up is taken to have begun 
D)  all the options are correct. 
A)  all creditors' claims are admissible to proof against the company in liquidation 
B)  debts may be admitted by the liquidator without formal proof 
C)  the size of any debts is calculated for the purpose of the winding up as at the day on which the winding up is taken to have begun 
D)  all the options are correct.

Question 11

When an administrator is appointed to a company they must give an opinion as to the best of three options available to creditors. Which of the following is not one of the options available?

Accepted Answer

A)  To end the voluntary administration and return the company to the director's control. 
B)  To end the voluntary administration and appoint a receiver. 
C)  To 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. 
D)  To wind up the company and appoint a liquidator. 
A)  To end the voluntary administration and return the company to the director's control. 
B)  To end the voluntary administration and appoint a receiver. 
C)  To 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. 
D)  To wind up the company and appoint a liquidator.

Question 12

The journal entry to record the distribution of cash to shareholders includes which of the following?

Accepted Answer

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

Question 13

The details below were extracted from the accounting records of Great South East Ltd (a company in the process of liquidation).
 
Assume that the constitution of Great South East 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, what is the amount of the actual refund or call?

Accepted Answer

A)  A refund of $17 500. 
B)  A call of $17 500. 
C)  A refund of $10 000. 
D)  A call of $22 500. 
A)  A refund of $17 500. 
B)  A call of $17 500. 
C)  A refund of $10 000. 
D)  A call of $22 500.

Question 14

When a company is unable to pay its debts when they fall due and payable, this is referred to as:

Accepted Answer

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

Question 15

In relation to the order of priority of payment of debts upon liquidation, which statement is correct?

Accepted Answer

A)  Ordinary unsecured creditors are paid before preferential unsecured creditors. 
B)  Preferential unsecured creditors are paid before deferred creditors. 
C)  Deferred creditors are paid before ordinary unsecured creditors. 
D)  Deferred creditors are paid before secured creditors. 
A)  Ordinary unsecured creditors are paid before preferential unsecured creditors. 
B)  Preferential unsecured creditors are paid before deferred creditors. 
C)  Deferred creditors are paid before ordinary unsecured creditors. 
D)  Deferred creditors are paid before secured creditors.

Question 16

A declaration of solvency is required to be signed by the directors of the company in order for:

Accepted Answer

A)  the company to issue more shares to its shareholders. 
B)  the liquidation to proceed as a members' voluntary winding up. 
C)  the court to make an order for liquidation. 
D)  the company to borrow more money from a bank. 
A)  the company to issue more shares to its shareholders. 
B)  the liquidation to proceed as a members' voluntary winding up. 
C)  the court to make an order for liquidation. 
D)  the company to borrow more money from a bank.

Question 17

Which of the following is not a way in which a receivership can end?

Accepted Answer

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

Question 18

The details below were extracted from the accounting records of Great South East Ltd (a company in the process of liquidation).
 
Assume that the constitution of Great South East 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 ordinary shareholders, what is the amount of the actual refund or call?

Accepted Answer

A)  A refund of $10 000. 
B)  A refund of $7 500. 
C)  A call of $7 500. 
D)  A call of $60 000. 
A)  A refund of $10 000. 
B)  A refund of $7 500. 
C)  A call of $7 500. 
D)  A call of $60 000.

Question 19

A receiver should be:

Accepted Answer

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

Question 20

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

Accepted Answer

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

Exam 33: Insolvency and Liquidation

Which of the following is the journal entry recorded on realisation of the assets by the liquidator?

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

The administrator of a company under administration has power to do any of the following:

Which of the following is a task of a liquidator under the Corporations Act?

Which of the following statements is incorrect:

A voluntary winding up commences when:

Which of the following statements is incorrect:

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

Which of the following is not a general ground under s. 461 of the Corporations Act on which the court can order a winding up?

Which of the following statements is correct?

When an administrator is appointed to a company they must give an opinion as to the best of three options available to creditors. Which of the following is not one of the options available?

The journal entry to record the distribution of cash to shareholders includes which of the following?

When a company is unable to pay its debts when they fall due and payable, this is referred to as:

In relation to the order of priority of payment of debts upon liquidation, which statement is correct?

A declaration of solvency is required to be signed by the directors of the company in order for:

Which of the following is not a way in which a receivership can end?

A receiver should be:

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

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 Reporting

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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