Question 1

A mortgage is an example of a creditor secured by a circulating security interest.

Accepted Answer

A) True 
 B)False  False

Question 2

A declaration of solvency is required to be signed by directors of the company in order for the liquidation to be classified as a member's voluntary winding up.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following is a ground under s. 461 of the Corporations Act on which the court can order a winding up? I. The company has no members.
II) The company has not commenced business within one year of incorporation.
III) The court is of the opinion that it is just and equitable that the company be wound up.
IV) The company has resolved that it be wound up by the court.

Accepted Answer

A)  I and IV 
B)  I, II and III 
C)  II, III and IV 
D)  I, II, III and IV 
A)  I and IV 
B)  I, II and III 
C)  II, III and IV 
D)  I, II, III and IV D

Question 4

The liquidator must arrange for their statement of receipts and payment to be audited on the completion on the liquidation.

Accepted Answer

A) True 
 B)False

Question 5

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 above. 
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 above.

Question 6

The main purpose of the Liquidation account is to calculate the deficiency or surplus on liquidation to show how it is distributed between the shareholders.

Accepted Answer

A) True 
 B)False

Question 7

The details below were extracted from the accounting records of Great South East Ltd (a company in the process of liquidation).$ \begin{array}{ll}
&\$\
40000 \$ 1 \text { preference shares fully paid } & 40000 \ 120000 \$ 1 \text { ordinary shares paid to } 50 \text { cents } & \underline{60000} \ & \underline{100000}
\
\
 \text { Cash available (after payment of all creditors)}&10000
\end{array} $

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 8

The report as to affairs shows which of the following?

Accepted Answer

A)  Estimated realisable values of assets. 
B)  Potential payments to creditors. 
C)  Estimated surplus or deficiency for contributories. 
D)  All of the above. 
A)  Estimated realisable values of assets. 
B)  Potential payments to creditors. 
C)  Estimated surplus or deficiency for contributories. 
D)  All of the above.

Question 9

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 10

A liquidator is required to keep proper records, containing entries and proceedings of meetings.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Under a court ordered winding up, a liquidator does not have the power to:

Accepted Answer

A)  enter into legal proceedings on behalf of the company. 
B)  dispose of the property of the company. 
C)  use any legal methods to obtain money from a debtor. 
D)  pay the company's shareholders before paying the creditors. 
A)  enter into legal proceedings on behalf of the company. 
B)  dispose of the property of the company. 
C)  use any legal methods to obtain money from a debtor. 
D)  pay the company's shareholders before paying the creditors.

Question 13

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 14

It is the responsibility of the directors of the company to realise the assets, and pass the proceeds to the liquidator to enable distributions to be made to creditors.

Accepted Answer

A) True 
 B)False

Question 15

Debts may be admitted by a liquidator to a liquidation without formal proof of the debt.

Accepted Answer

A) True 
 B)False

Question 16

Winding up of a company only ever arises from the issuing of an order from the court.

Accepted Answer

A) True 
 B)False

Question 17

A court has the power to appoint a receiver to a company.

Accepted Answer

A) True 
 B)False

Question 18

Salaries and wages and employee entitlements owing to staff always rank above the payment of creditors secured by a circulating security interest.

Accepted Answer

A) True 
 B)False

Question 19

Claims against a company whereby the creditor has a charge against specific property is known as a:

Accepted Answer

A)  non-circulating security interest. 
B)  floating charge. 
C)  circulating security interest. 
D)  specific debt covenant. 
A)  non-circulating security interest. 
B)  floating charge. 
C)  circulating security interest. 
D)  specific debt covenant.

Question 20

Past holders of shares in a company are able to make an application to the court for an insolvent company to be would up.

Accepted Answer

A) True 
 B)False

A mortgage is an example of a creditor secured by a circulating security interest.

A declaration of solvency is required to be signed by directors of the company in order for the liquidation to be classified as a member's voluntary winding up.

The liquidator must arrange for their statement of receipts and payment to be audited on the completion on the liquidation.

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

The main purpose of the Liquidation account is to calculate the deficiency or surplus on liquidation to show how it is distributed between the shareholders.

The report as to affairs shows which of the following?

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?

A liquidator is required to keep proper records, containing entries and proceedings of meetings.

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

Under a court ordered winding up, a liquidator does not have the power to:

A voluntary winding up commences when:

It is the responsibility of the directors of the company to realise the assets, and pass the proceeds to the liquidator to enable distributions to be made to creditors.

Debts may be admitted by a liquidator to a liquidation without formal proof of the debt.

Winding up of a company only ever arises from the issuing of an order from the court.

A court has the power to appoint a receiver to a company.

Salaries and wages and employee entitlements owing to staff always rank above the payment of creditors secured by a circulating security interest.

Claims against a company whereby the creditor has a charge against specific property is known as a:

Past holders of shares in a company are able to make an application to the court for an insolvent company to be would up.

Nature and Regulation of Companies

Financing Company Operations

Business Combinations

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Financial Statements Into a Presentation Currency

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Joint Arrangements

Accounting for Company Income Tax

Property, Plant Equipment

Filters

Exam 16: Insolvency and Liquidation

A mortgage is an example of a creditor secured by a circulating security interest.

A declaration of solvency is required to be signed by directors of the company in order for the liquidation to be classified as a member's voluntary winding up.

The liquidator must arrange for their statement of receipts and payment to be audited on the completion on the liquidation.

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

The main purpose of the Liquidation account is to calculate the deficiency or surplus on liquidation to show how it is distributed between the shareholders.

The report as to affairs shows which of the following?

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?

A liquidator is required to keep proper records, containing entries and proceedings of meetings.

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

Under a court ordered winding up, a liquidator does not have the power to:

A voluntary winding up commences when:

It is the responsibility of the directors of the company to realise the assets, and pass the proceeds to the liquidator to enable distributions to be made to creditors.

Debts may be admitted by a liquidator to a liquidation without formal proof of the debt.

Winding up of a company only ever arises from the issuing of an order from the court.

A court has the power to appoint a receiver to a company.

Salaries and wages and employee entitlements owing to staff always rank above the payment of creditors secured by a circulating security interest.

Claims against a company whereby the creditor has a charge against specific property is known as a:

Past holders of shares in a company are able to make an application to the court for an insolvent company to be would up.

Nature and Regulation of Companies

Financing Company Operations

Business Combinations

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Financial Statements Into a Presentation Currency

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Joint Arrangements

Accounting for Company Income Tax

Property, Plant Equipment

Filters