Question 1

Which of the following is NOT true with respect to bonus shares? They:

Accepted Answer

A)  increase net assets. 
B)  have no effect on cash balances. 
C)  give directors the opportunity to signal future dividend policy to current and future shareholders. 
D)  total shareholders' equity increases. 
A)  increase net assets. 
B)  have no effect on cash balances. 
C)  give directors the opportunity to signal future dividend policy to current and future shareholders. 
D)  total shareholders' equity increases. A

Question 2

A debit balance in the retained profits account indicates that the company has:

Accepted Answer

A)  made a loss in the current period. 
B)  made a loss in at least one period. 
C)  never made a profit. 
D)  paid a dividend. 
A)  made a loss in the current period. 
B)  made a loss in at least one period. 
C)  never made a profit. 
D)  paid a dividend. B

Question 3

P Limited has control over another entity called Q Limited. Q Limited is referred to as the:

Accepted Answer

A)  subsidiary entity. 
B)  economic entity. 
C)  associate entity. 
D)  minority interest. 
A)  subsidiary entity. 
B)  economic entity. 
C)  associate entity. 
D)  minority interest. A

Question 4

Briar Ltd acquired short-term investments for $100 000 on 31 March 2016. By 30 June 2016 (balance sheet date), the market value had slipped to $85 000. Briar Ltd uses the lower of cost or net realisable value rule. How would the reduction in value of $15 000 be recorded in the accounts for year ended 30 June 2016?

Accepted Answer

A)  As an expense 
B)  As a charge against retained profits 
C)  As a reduction in share capital 
D)  The transaction would not be recorded 
A)  As an expense 
B)  As a charge against retained profits 
C)  As a reduction in share capital 
D)  The transaction would not be recorded

Question 5

R Limited has control over another entity, S Limited. R Limited is referred to as:

Accepted Answer

A)  an associate entity. 
B)  a parent entity. 
C)  a consolidated entity. 
D)  a minority shareholder. 
A)  an associate entity. 
B)  a parent entity. 
C)  a consolidated entity. 
D)  a minority shareholder.

Question 6

LMN Ltd declared an interim dividend on 12 February 2016 of 5 cents per share (500 000 issued shares) and paid it on 3 March 2016. The journal entry on 3 March 2016 would include:

Accepted Answer

A)  Dr Interim dividend declared, $25 000. 
B)  Cr Cash, $25 000. 
C)  Cr Interim dividend payable, $25 000. 
D)  Cr Retained profits, $25 000. 
A)  Dr Interim dividend declared, $25 000. 
B)  Cr Cash, $25 000. 
C)  Cr Interim dividend payable, $25 000. 
D)  Cr Retained profits, $25 000.

Question 7

On 1 January 2016, Sky-High Ltd acquired 100 000 shares (30 per cent of the voting interest) in Down Ltd for $600 000 cash. On 30 June 2016, Down Ltd announced its earnings per share for the first six months of 2016 at $1.50 per share. On 20 November, Down Ltd paid dividends to shareholders at $0.90 per share. On 31 December 2016, Down Ltd announced its earnings per share for 2016 at $2.80 per share (i.e., $1.30 additional since 30 June). If Sky-High Ltd used the equity basis, what would the balance sheet value of investment in Down Ltd be at 31 December 2016?

Accepted Answer

A)  $880 000 
B)  $600 000 
C)  $510 000 
D)  $790 000 
A)  $880 000 
B)  $600 000 
C)  $510 000 
D)  $790 000

Question 8

On 1 January 2016, Sky-High Ltd acquired 100 000 shares (30 per cent of the voting interest) in Down Ltd for $600 000 cash. On 30 June 2016, Down Ltd announced its earnings per share for the first six months of 2016 at $1.50 per share. On 20 November, Down Ltd paid dividends to shareholders at $0.90 per share. On 31 December 2016, Down Ltd announced its earnings per share for 2016 at $2.80 per share (i.e., $1.30 additional since 30 June). If Sky-High Ltd used the cost basis, what was the balance sheet value of investment in Down Ltd at 31 December 2016?

Accepted Answer

A)  $510 000 
B)  $600 000 
C)  $690 000 
D)  $880 000 
A)  $510 000 
B)  $600 000 
C)  $690 000 
D)  $880 000

Question 9

When bonus shares are issued:

Accepted Answer

A)  total assets increase. 
B)  total liabilities increase. 
C)  retained profits increase. 
D)  shareholders may receive more dividends. 
A)  total assets increase. 
B)  total liabilities increase. 
C)  retained profits increase. 
D)  shareholders may receive more dividends.

Question 10

On 1 January 2016, Sky-High Ltd acquired 100 000 shares (30 per cent of the voting interest) in Down Ltd for $600 000 cash. On 30 June 2016, Down Ltd announced its earnings per share for the first six months of 2016 at $1.50 per share. On 20 November, Down Ltd paid dividends to shareholders at $0.90 per share. On 31 December 2016, Down Ltd announced its earnings per share for 2016 at $2.80 per share (i.e., $1.30 additional since 30 June). If Sky-High Ltd used the cost basis, what dividend revenue did it record for the year ended 31 December 2016 in respect of its investment in Down Ltd?

Accepted Answer

A)  Nil 
B)  $90 000 
C)  $190 000 
D)  $280 000 
A)  Nil 
B)  $90 000 
C)  $190 000 
D)  $280 000

Question 11

On 1 January 2016, Yu Ltd acquired 100 000 shares (30 per cent of the voting interest) in Ping Ltd for $900 000 cash. On 30 June 2016, Ping Ltd announced its earnings per share for the first six months of 2016 at $2.00 per share. On 20 November, Ping Ltd paid dividends to shareholders at $1.20 per share. On 31 December 2016, Ping Ltd announced its earnings per share for 2016 at $3.50 per share (i.e., $1.50 additional since 30 June). If Yu Ltd used the cost basis, what would be the balance sheet value of its investment in Ping Ltd at 31 December 2016?

Accepted Answer

A)  $900 000 
B)  $1 100 000 
C)  $1 170 000 
D)  $1 250 000 
A)  $900 000 
B)  $1 100 000 
C)  $1 170 000 
D)  $1 250 000

Question 12

On 1 January 2016, Sky-High Ltd acquired 100 000 shares (30 per cent of the voting interest) in Down Ltd for $600 000 cash. On 30 June 2016, Down Ltd announced its earnings per share for the first six months of 2016 at $1.50 per share. On 20 November, Down Ltd paid dividends to shareholders at $0.90 per share. On 31 December 2016, Down Ltd announced its earnings per share for 2016 at $2.80 per share (i.e., $1.30 additional since 30 June). If Sky-High Ltd used the equity basis, which of the following accounting records would it make on 31 December 2016 in response to Down Ltd's earnings announcement?

Accepted Answer

A)  It would increase investment in Down Ltd by $130 000. 
B)  It would increase cash by $130 000. 
C)  It would increase dividend revenue by $130 000. 
D)  It would increase investment in Down Ltd by $130 000 and increased dividend revenue by $130 000. 
A)  It would increase investment in Down Ltd by $130 000. 
B)  It would increase cash by $130 000. 
C)  It would increase dividend revenue by $130 000. 
D)  It would increase investment in Down Ltd by $130 000 and increased dividend revenue by $130 000.

Question 13

The entry to create a general reserve is usually:

Accepted Answer

A)  Dr General reserve
Cr Retained profits. 
B)  Dr Retained profits
Cr General reserve. 
C)  Dr Profit and loss
Cr General reserve. 
D)  Dr Expense
Cr General reserve. 
A)  Dr General reserve
Cr Retained profits. 
B)  Dr Retained profits
Cr General reserve. 
C)  Dr Profit and loss
Cr General reserve. 
D)  Dr Expense
Cr General reserve.

Question 14

On 1 January 2016, Yu Ltd acquired 100 000 shares (30 per cent of the voting interest) in Ping Ltd for $900 000 cash. On 30 June 2016, Ping Ltd announced its earnings per share for the first six months of 2016 at $2.00 per share. On 20 November, Ping Ltd paid dividends to shareholders at $1.20 per share. On 31 December 2016, Ping Ltd announced its earnings per share for 2016 at $3.50 per share (i.e., $1.50 additional since 30 June). If Yu Ltd used the equity basis, what would be the balance sheet value of its investment in Ping Ltd at 31 December 2016?

Accepted Answer

A)  $780 000 
B)  $1 130 000 
C)  $1 250 000 
D)  $900 000 
A)  $780 000 
B)  $1 130 000 
C)  $1 250 000 
D)  $900 000

Question 15

When the cost method of accounting for long-term investment in shares is employed, the receipt of a dividend on those shares is recorded as a credit to:

Accepted Answer

A)  the investment asset. 
B)  dividend revenue. 
C)  dividend declared. 
D)  retained profits. 
A)  the investment asset. 
B)  dividend revenue. 
C)  dividend declared. 
D)  retained profits.

Question 16

On 1 January 2016, Yu Ltd acquired 100 000 shares (30 per cent of the voting interest) in Ping Ltd for $900 000 cash. On 30 June 2016, Ping Ltd announced its earnings per share for the first six months of 2016 at $2.00 per share. On 20 November, Ping Ltd paid dividends to shareholders at $1.20 per share. On 31 December 2016, Ping Ltd announced its earnings per share for 2016 at $3.50 per share (i.e., $1.50 additional since 30 June). If Yu Ltd used the equity basis, what dividend revenue would it record for year ended 31 December 2016 in respect of its investment in Ping Ltd?

Accepted Answer

A)  $120 000 
B)  $150 000 
C)  $350 000 
D)  None of the answers provided 
A)  $120 000 
B)  $150 000 
C)  $350 000 
D)  None of the answers provided

Question 17

Share splits increase:

Accepted Answer

A)  total assets. 
B)  total liabilities. 
C)  total shareholders' equity. 
D)  the number of shares on issue. 
A)  total assets. 
B)  total liabilities. 
C)  total shareholders' equity. 
D)  the number of shares on issue.

Question 18

On 1 January 2016, Yu Ltd acquired 100 000 shares (30 per cent of the voting interest) in Ping Ltd for $900 000 cash. On 30 June 2016, Ping Ltd announced its earnings per share for the first six months of 2016 at $2.00 per share. On 20 November, Ping Ltd paid dividends to shareholders at $1.20 per share. On 31 December 2016, Ping Ltd announced its earnings per share for 2016 at $3.50 per share (i.e., $1.50 additional since 30 June). If Yu Ltd used the equity method, what would have been the impact of Ping Ltd's 31 December 2016 earnings announcement?

Accepted Answer

A)  Investment in Ping Ltd would have increased by $150 000. 
B)  Dividend revenue would have increased by $150 000. 
C)  Investment in Ping Ltd would have increased by $150 000 and dividend revenue would have increased by $150 000. 
D)  There would be no impact. 
A)  Investment in Ping Ltd would have increased by $150 000. 
B)  Dividend revenue would have increased by $150 000. 
C)  Investment in Ping Ltd would have increased by $150 000 and dividend revenue would have increased by $150 000. 
D)  There would be no impact.

Question 19

Which of the following are NOT eliminated in the preparation of consolidated financial statements?

Accepted Answer

A)  Intercompany receivables 
B)  The account for the parent company's investment in the subsidiary 
C)  Intercompany sales and expenses 
D)  Assets of the subsidiary 
A)  Intercompany receivables 
B)  The account for the parent company's investment in the subsidiary 
C)  Intercompany sales and expenses 
D)  Assets of the subsidiary

Question 20

On 1 January 2016, Sky-High Ltd acquired 100 000 shares (30 per cent of the voting interest) in Down Ltd for $600 000 cash. On 30 June 2016, Down Ltd announced its earnings per share for the first six months of 2016 at $1.50 per share. On 20 November, Down Ltd paid dividends to shareholders at $0.90 per share. On 31 December 2016, Down Ltd announced its earnings per share for 2016 at $2.80 per share (i.e., $1.30 additional since 30 June). If Sky-High Ltd used the cost basis, which of the following accounting records would it make on 30 June 2016 in response to Down Ltd's earnings announcement?

Accepted Answer

A)  It would increase dividend revenue by $150 000. 
B)  It would increase investment in Down Ltd by $150 000. 
C)  It would decrease investment in Down Ltd by $150 000. 
D)  No record would have been made. 
A)  It would increase dividend revenue by $150 000. 
B)  It would increase investment in Down Ltd by $150 000. 
C)  It would decrease investment in Down Ltd by $150 000. 
D)  No record would have been made.

Which of the following is NOT true with respect to bonus shares? They:

A debit balance in the retained profits account indicates that the company has:

P Limited has control over another entity called Q Limited. Q Limited is referred to as the:

R Limited has control over another entity, S Limited. R Limited is referred to as:

LMN Ltd declared an interim dividend on 12 February 2016 of 5 cents per share (500 000 issued shares) and paid it on 3 March 2016. The journal entry on 3 March 2016 would include:

When bonus shares are issued:

The entry to create a general reserve is usually:

When the cost method of accounting for long-term investment in shares is employed, the receipt of a dividend on those shares is recorded as a credit to:

Share splits increase:

Which of the following are NOT eliminated in the preparation of consolidated financial statements?

Introduction to Financial Accounting

Measuring and Evaluating Financial Position and Financial Performance

The Double-Entry System

Record-Keeping

Accrual Accounting Adjustments

Financial Reporting Principles, Accounting Standards and Auditing

Internal Control and Cash

Accounts Receivable and Further Record-Keeping

Inventory

Noncurrent Assets

Liabilities

Revenue and Expense Recognition: Additional Concepts

The Statement of Cash Flows

Financial Statement Analysis

Accounting Policy Choices

Sustainability Reporting

Filters

Exam 12: Completing the Balance Sheet

Which of the following is NOT true with respect to bonus shares? They:

A debit balance in the retained profits account indicates that the company has:

P Limited has control over another entity called Q Limited. Q Limited is referred to as the:

R Limited has control over another entity, S Limited. R Limited is referred to as:

LMN Ltd declared an interim dividend on 12 February 2016 of 5 cents per share (500 000 issued shares) and paid it on 3 March 2016. The journal entry on 3 March 2016 would include:

When bonus shares are issued:

The entry to create a general reserve is usually:

When the cost method of accounting for long-term investment in shares is employed, the receipt of a dividend on those shares is recorded as a credit to:

Share splits increase:

Which of the following are NOT eliminated in the preparation of consolidated financial statements?

Introduction to Financial Accounting

Measuring and Evaluating Financial Position and Financial Performance

The Double-Entry System

Record-Keeping

Accrual Accounting Adjustments

Financial Reporting Principles, Accounting Standards and Auditing

Internal Control and Cash

Accounts Receivable and Further Record-Keeping

Inventory

Noncurrent Assets

Liabilities

Revenue and Expense Recognition: Additional Concepts

The Statement of Cash Flows

Financial Statement Analysis

Accounting Policy Choices

Sustainability Reporting

Filters