Depending on its constitution and the terms of the prospectus, a company that

receives more than the required number of applications for its shares will
normally:
Select one:
a. Refund the excess to unsuccessful applicants or retain the excess in
satisfaction of future calls 
b. Retain the excess in satisfaction of future calls
c. Refund the excess to unsuccessful applicants

d. Issue the additional shares

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The correct answer is: Refund the excess to unsuccessful applicants or retain the
excess in satisfaction of future calls
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Question 2
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  It is true for a private company:

Select one:
a. It can raise funds from the public
b. It must have ‘Proprietary’ or ‘Pty’ as part of its name 
c. The shareholders must be family members

d. That the maximum number of shareholders is not restricted

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The correct answer is: It must have ‘Proprietary’ or ‘Pty’ as part of its name
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Question 3
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Which class of preference shares have the right to receive further dividends
above their fixed rate once ordinary shares have received a stated percentage?
Select one:
a. Participating preference shares 
b. Cumulative preference shares
c. Bonus preference shares

d. Redeemable preference shares

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The correct answer is: Participating preference shares

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Question 4
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Malaysia Company Ltd decided to issue 200 000 ordinary shares for  $2.10c
each, payable in instalments, 40c on application, $1 on allotment and the
balance payable at the discretion of the company.  Applications were received for
220 000 shares. The shares were allotted by the directors at a meeting held a
week after the close of applications. After refunding applications for 20 000
shares the correct journal entry to transfer the application money to the share
capital account is:
Select one:
a. Debit application $88 000; credit share capital $88 000
b. Debit application $80 000; credit share capital $80 000 
c. Debit application $88 000; credit trust bank account $88 000

d. Debit trust bank account $80 000; credit share capital account $80 000
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The correct answer is: Debit application $80 000; credit share capital $80 000
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Question 5
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  XYZ Ltd was incorporated on 1 January 2011. A private placement of 5000

shares at $1 a share was made and the public was invited to subscribe for
95 000 shares at the same price. The public issue called for payment in the
following instalments:
(a)        40 cents on application
(b)        30 cents on allotment
(c)        payment of the call for the balance outstanding  by 30 September 2013.
            Applications were received for 90 000 shares. All money due on
allotment was received by 30 May 2011.
            The balance of the Share Capital of XYZ Ltd at 30 June 2011 was:
Select one:
a. $100 000
b. $70 000
c. $71 500

d. $68 000 

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$5000 + (90 000 × 70c)

The correct answer is: $68 000
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Question 6
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Daisy and Wing each own 8,000 shares in the Texas Company Ltd.  If Daisy sells
her shares directly to Wing:
Select one:
a. The Texas Company share capital increases
b. The Texas Company share capital remains the same 
c. The Texas Company bank increases

d. The Texas Company share capital decreases

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The correct answer is: The Texas Company share capital remains the same
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Question 7
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Walker Ltd declared and distributed a 10% share dividend (bonus issue) when
share capital was $500 000. What is the effect on total shareholders’ equity?
Select one:
a. $50 000 decrease
b. $100 000 increase
c. $50 000 increase

d. No effect 

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Reserves and retained earnings go down by the same amount that share capital
goes up.
The correct answer is: No effect
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Question 8
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The statement concerning shares that is not true is:

Select one:
a. Directors may decide to issue ordinary shares, preference shares or both
b. Sometimes shares can be bought back by the company from its shareholders
c. Under changes to the Corporations Act shares can no longer be issued
payable in instalments 

d. The directors can issue shares at any price, the limiting factor is what the
market will pay

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The correct answer is: Under changes to the Corporations Act shares can no
longer be issued payable in instalments
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Question 9
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The basic journal entry to create a general reserve is:

Select one:
a. Dr general reserve, Cr retained earnings
b. Dr income, Cr general reserve
c. Dr retained earnings, Cr general reserve 

d. Dr profit loss summary, Cr general reserve

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The correct answer is: Dr retained earnings, Cr general reserve

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Question 10
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The primary purpose of a share split is to:

Select one:
a. Decrease the total capital of the company
b. Reduce retained earnings
c. Increase the total capital of the company

d. Reduce the market value of the company's shares 

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The correct answer is: Reduce the market value of the company's shares
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Question 11
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  Which type of company has the right to advertise share issues to the general
public?
Select one:
a. Public company 
b. Proprietary company
c. Both a proprietary and a public company

d. A company limited by guarantee

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The correct answer is: Public company

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Question 12
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At the end of the year a company declared a final cash dividend out of its
retained earnings. The journal entry to record the declaration is:
Select one:
a. Debit Cash; credit Final Dividend Payable
b. Debit Final Dividend Payable; credit Cash
c. Debit Retained Earnings; credit Final Dividend Payable 

d. Debit Share Capital; credit Final Dividend Payable

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The correct answer is: Debit Retained Earnings; credit Final Dividend Payable
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Question 13
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Question text

 When a newly established company issues shares for the first time the directors
will issue the shares:
Select one:
a. at the highest price that they expect that the shareholders will be prepared to
pay 
b. at the price of $1 per share
c. at a price established in consultation with ASIC

d. at the market price

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The correct answer is: at the highest price that they expect that the
shareholders will be prepared to pay
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Question 14
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 If total liabilities are $120 000, total assets are $280 000 and total paid-up
capital is $140,000, the amount of retained earnings is:
Select one:
a. $20 000 
b. $110 000
c. $160 000

d. $140 000

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Assets – Liabilities = paid up capital + retained earnings =   $280,000 - $120

000 = $140 000 + $20 000.
The correct answer is: $20 000
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Question 15
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On 1 January 2011 XYZ Ltd decided to issue 100 000 shares to the public,
payable as follows:
            50 cents initially on application
            20 cents payable within one month of allotment
            30 cents payable in calls due 30 September 2012
       Assuming the issue was fully subscribed and all amounts due were received
by 30 June 2011. The balance of the Share Capital account on that date was:
Select one:
a. $105 000
b. $70 000 
c. $100 000

d. $75 000

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(100 000 shares × 70c per share)

The correct answer is: $70 000
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Question 16
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DT Ltd was incorporated on 1 January 2011 and on that date issued:

5% Preference shares for $1                           4000 shares
Ordinary shares for $10                                  5000 shares
            During December 2014 DT Ltd declared a total of $2000 in dividends.
This was the first dividend declared by DT Ltd, that is, no dividends were
declared or paid during the first two years of operations. If the preference shares
are cumulative and non-participating the total amount of the $2000 dividend
that will be available for payment to the ordinary shareholders is:
Select one:
a. $2000
b. $1600
c. $1400 

d. $1000

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The correct answer is: $1400

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Question 17
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If a dividend of 10c per share is declared how much will a shareholder who owns
1000 shares receive if the shares were issued for $2 each and are currently
selling on the stock market at $5.40 each?
Select one:
a. $200
b. $100 
c. $1000

d. $540

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The correct answer is: $100

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Question 18
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 Flag question

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When accounting for the issue of shares placing application monies in a separate
Cash Trust account is required:
Select one:
a. before the share issue is finalised the money does not belong to the company
and some or all of it may need to be refunded 
b. it is administratively easier for the company if the money is placed in a
separate account
c. because the bank requires it

d. to meet the obligation by the company to remit the funds to ASIC.

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The correct answer is: before the share issue is finalised the money does not
belong to the company and some or all of it may need to be refunded
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Question 19
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The true statement concerning preference shares is:

Select one:
a. Preference shareholders face a greater risk of loss than ordinary shareholders
b. Preference shares normally have voting rights attached
c. Preference shares normally receive a fixed rate of dividend 

d. Preference shares cannot be listed on the stock exchange

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The correct answer is: Preference shares normally receive a fixed rate of
dividend
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Question 20
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   Under current accounting standards share issue expenses must be treated as:
Select one:
a. An asset
b. A liability
c. A deduction from the proceeds of the share issue

d. An expense 

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The correct answer is: An expense

Correct
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