Question 1

Proprietary companies must have at least two directors.

Accepted Answer

A) True 
 B)False

Question 2

A non-renounceable rights issue

Accepted Answer

A) means that shareholders who do not take up the right to purchase shares can not transfer the right to somebody else 
B) means that directors can not make any announcement about the price being offered by the company that is attempting the takeover. 
C) means that the right to purchase the shares can be sold to somebody else privately 
D) means that the right to purchase the shares can be sold to somebody else but only in public via a stock exchange 
A) means that shareholders who do not take up the right to purchase shares can not transfer the right to somebody else 
B) means that directors can not make any announcement about the price being offered by the company that is attempting the takeover. 
C) means that the right to purchase the shares can be sold to somebody else privately 
D) means that the right to purchase the shares can be sold to somebody else but only in public via a stock exchange

Question 3

During 20X5, KL Ltd issued new shares for $5 million, and it incurred $100 000 brokerage costs and $100 000 in stamp duty costs for this issue.In the 20X5 year, KL Ltd would most likely debit:

Accepted Answer

A) $200 000 to retained profits 
B) $200 000 to loss 
C) $200 000 to expense 
D) None of the above 
A) $200 000 to retained profits 
B) $200 000 to loss 
C) $200 000 to expense 
D) None of the above

Question 4

A trust account must be used for all applications to purchase shares.

Accepted Answer

A) True 
 B)False

Question 5

The constitution and replaceable rules of a company act as a contract between

Accepted Answer

A) the company and each member 
B) the company and each director 
C) the company and the company secretary 
D) all of the above 
A) the company and each member 
B) the company and each director 
C) the company and the company secretary 
D) all of the above

Question 6

An issue of shares called a rights issue

Accepted Answer

A) requires the shares to be first offered to existing members 
B) involves the right to purchase shares being offered in the first instance to any purchaser via a stock exchange 
C) gives directors the right to purchase shares before other members 
D) provides institutional investors with the right to purchase shares in large lots of a fixed size 
A) requires the shares to be first offered to existing members 
B) involves the right to purchase shares being offered in the first instance to any purchaser via a stock exchange 
C) gives directors the right to purchase shares before other members 
D) provides institutional investors with the right to purchase shares in large lots of a fixed size

Question 7

Broadbeach Ltd was registered on 28 December 20X0.Broadbeach Ltd has a financial year end of 31 March.On 29 December 20X0 it lodged a prospectus with ASIC inviting investors to acquire 3 000 000 shares.By the closing date of 28 February 20X1 applications for 9 000 000 shares had been received.During March 20X1 the directors allotted the 3 000 000 shares to the applicants in proportion to the number of shares originally applied for.The terms of the issue are as follows:
F1F1F1S1F1F1F10issue price of $10.00 per share
F1F1F1S1F1F1F10$4.00 payable on application
F1F1F1S1F1F1F10$4.00 payable on allotment
F1F1F1S1F1F1F10$1.00 payable on 30 June 20X1
F1F1F1S1F1F1F10$1.00 payable on 31 December 20X1
-How much money would the company hold from this subscription on 30 June 20X1, assuming that applications can be credited to calls in advance and that all call money was received?

Accepted Answer

A) $27 000 
B) $36 000 
C) $24 000 
D) $30 000 
A) $27 000 
B) $36 000 
C) $24 000 
D) $30 000

Question 8

A regulated issue of shares can not be made by a proprietary company to its own employees.

Accepted Answer

A) True 
 B)False

Question 9

The rights to new shares shares not taken up by existing shareholders can not be transferred to anybody else by those shareholders.

Accepted Answer

A) True 
 B)False

Question 10

Oceana Ltd issued 1 000 000 ordinary shares on 21 November 20X1 under the following terms:
Issue price: $2.50
Initial called up amount: $1.00
Call of $0.75 on 21 May 20X2
Final call of $0.75 on 21 November 20X2
Peter Smith was issued 10 000 shares and his friend Wilma Jones was issued 20 000 shares.
-At 31 December 20X1 the:

Accepted Answer

A) paid-up amount of Oceana Ltd's capital was $1 000 000 
B) issued amount of Oceana Ltd's capital was $1 500 000 
C) authorised capital of Oceana Ltd was $1 000 000 
D) uncalled amount of Oceana Ltd's capital was $750 000 
A) paid-up amount of Oceana Ltd's capital was $1 000 000 
B) issued amount of Oceana Ltd's capital was $1 500 000 
C) authorised capital of Oceana Ltd was $1 000 000 
D) uncalled amount of Oceana Ltd's capital was $750 000

Question 11

Share issue costs are an expense that must be included in determining total comprehensive profit.

Accepted Answer

A) True 
 B)False

Question 12

In a new regulated share issue (not a rights issue) company directors can issue shares to whichever applicants they like.

Accepted Answer

A) True 
 B)False

Question 13

Under common law, a company

Accepted Answer

A) may forfeit shares due to misconduct of a shareholder 
B) may forfeit shares due to misconduct of a shareholder but only if this is stated in the company's constitution 
C) may forfeit shares of a shareholder who is in arrears of payment of a call 
D) all of the above 
A) may forfeit shares due to misconduct of a shareholder 
B) may forfeit shares due to misconduct of a shareholder but only if this is stated in the company's constitution 
C) may forfeit shares of a shareholder who is in arrears of payment of a call 
D) all of the above

Question 14

Irridium Ltd had a share capital of 500 000 $1 ordinary shares fully paid.The company decided to make a new share issue of 100 000 $1 shares, payable in full on application.These shares had to be first offered to existing shareholders.Supposing that the issue was fully subscribed by the existing shareholders by 31 January 2010, what would be the correct journal entry?

Accepted Answer

A) 
$\begin{array}{lll}
\text { Dr Bank } & \$ 100000 & \
\text { Cr Bonus issue } & & \$ 100000 \

\end{array}$ 
B) 
Dr Bank $\quad \$ 100000$
Cr Paid up capital—ordinary $\quad \$ 100000$ 
C) 
$\begin{array}{llcc}
  \text { Dr Trust account } & \$ 100000  \
 \text {  Cr Application} && \$ 100000\

\end{array}$ 
D) 
$\begin{array}{llcc}
  \text { Dr Bank } & \$ 100000  \
 \text {  Cr Allotment} && \$ 100000\
\end{array}$ 
A) 
$\begin{array}{lll}
\text { Dr Bank } & \$ 100000 & \
\text { Cr Bonus issue } & & \$ 100000 \

\end{array}$ 
B) 
Dr Bank $\quad \$ 100000$
Cr Paid up capital—ordinary $\quad \$ 100000$ 
C) 
$\begin{array}{llcc}
  \text { Dr Trust account } & \$ 100000  \
 \text {  Cr Application} && \$ 100000\

\end{array}$ 
D) 
$\begin{array}{llcc}
  \text { Dr Bank } & \$ 100000  \
 \text {  Cr Allotment} && \$ 100000\
\end{array}$

Question 15

'When a public company is formed it must have its shares listed on the Australian Securities Exchange (ASX)'.This statement is:

Accepted Answer

A) Correct, because a public company is limited by shares 
B) Incorrect, because a public company that is limited by shares need not list those shares on the ASX 
C) Correct, because if the company did not wish to have its shares listed it must be formed as a proprietary company 
D) Incorrect, because the company must have its shares listed on any stock exchange, not just the ASX 
A) Correct, because a public company is limited by shares 
B) Incorrect, because a public company that is limited by shares need not list those shares on the ASX 
C) Correct, because if the company did not wish to have its shares listed it must be formed as a proprietary company 
D) Incorrect, because the company must have its shares listed on any stock exchange, not just the ASX

Proprietary companies must have at least two directors.

A non-renounceable rights issue

During 20X5, KL Ltd issued new shares for $5 million, and it incurred $100 000 brokerage costs and $100 000 in stamp duty costs for this issue.In the 20X5 year, KL Ltd would most likely debit:

A trust account must be used for all applications to purchase shares.

The constitution and replaceable rules of a company act as a contract between

An issue of shares called a rights issue

A regulated issue of shares can not be made by a proprietary company to its own employees.

The rights to new shares shares not taken up by existing shareholders can not be transferred to anybody else by those shareholders.

Share issue costs are an expense that must be included in determining total comprehensive profit.

In a new regulated share issue (not a rights issue) company directors can issue shares to whichever applicants they like.

Under common law, a company

'When a public company is formed it must have its shares listed on the Australian Securities Exchange (ASX)'.This statement is:

Companies and Corporate Regulation

Objectives of Company Reporting, Conceptual Elements and Terminology

Profits, Reserve and Distributions to Owners

Reorganisation of Share Capital

Debt Securities

Foreign Currency Transactions and an Introduction to Hedging

Advanced Asset and Liability Issues

Income Tax

Reports and Disclosures I: Overview

Reports and Disclosures Ii: the Financial Statements

Receivership and Voluntary Administration

Liquidations

External Administration Reports and Accounts

Investments in New Assets; Introduction to Business Combinations and Associates

The Corporate Group

Acquisition Method Introduction and Substitution

Acquisition Method Application After Control Date

Intra-Group Transactions

Direct Non-Controlling Interest

Changes to Parent Investment in Subsidiaries

Indirect Interest

Translation of Foreign Currency Statements

Consolidated Cash Flow Statements

Equity Accounting Expanded and Joint Ventures

Segment Reporting

Filters

Exam 3: Forming a Company and Issuing Shares

Proprietary companies must have at least two directors.

A non-renounceable rights issue

During 20X5, KL Ltd issued new shares for $5 million, and it incurred $100 000 brokerage costs and $100 000 in stamp duty costs for this issue.In the 20X5 year, KL Ltd would most likely debit:

A trust account must be used for all applications to purchase shares.

The constitution and replaceable rules of a company act as a contract between

An issue of shares called a rights issue

A regulated issue of shares can not be made by a proprietary company to its own employees.

The rights to new shares shares not taken up by existing shareholders can not be transferred to anybody else by those shareholders.

Share issue costs are an expense that must be included in determining total comprehensive profit.

In a new regulated share issue (not a rights issue) company directors can issue shares to whichever applicants they like.

Under common law, a company

'When a public company is formed it must have its shares listed on the Australian Securities Exchange (ASX)'.This statement is:

Companies and Corporate Regulation

Objectives of Company Reporting, Conceptual Elements and Terminology

Profits, Reserve and Distributions to Owners

Reorganisation of Share Capital

Debt Securities

Foreign Currency Transactions and an Introduction to Hedging

Advanced Asset and Liability Issues

Income Tax

Reports and Disclosures I: Overview

Reports and Disclosures Ii: the Financial Statements

Receivership and Voluntary Administration

Liquidations

External Administration Reports and Accounts

Investments in New Assets; Introduction to Business Combinations and Associates

The Corporate Group

Acquisition Method Introduction and Substitution

Acquisition Method Application After Control Date

Intra-Group Transactions

Direct Non-Controlling Interest

Changes to Parent Investment in Subsidiaries

Indirect Interest

Translation of Foreign Currency Statements

Consolidated Cash Flow Statements

Equity Accounting Expanded and Joint Ventures

Segment Reporting

Filters