Question 1

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 2

An issue of 50 000 shares at $3 required $2.20 per share to be paid at the time of application.On allotment,another $0.30 was due and a further $0.50 when determined by the board of directors.The application money in respect of the 50 000 shares was received on 8 July.On 26 July,the shares were issued with the amount due on allotment received on 15 August.The remaining $0.50 was called up on 20 September and received on 10 October
- The journal entry to record the cash received on application would include:

Accepted Answer

A)  Dr Cash at bank,$110 000. 
B)  Cr Share capital,$110 000. 
C)  Cr Application,$110 000. 
D)  Dr Application,$110 000. 
A)  Dr Cash at bank,$110 000. 
B)  Cr Share capital,$110 000. 
C)  Cr Application,$110 000. 
D)  Dr Application,$110 000.

Question 3

Which of the following statements about a 2:1 share split is NOT true?

Accepted Answer

A)  The number of shares is doubled. 
B)  The unit market price of each share is reduced. 
C)  The value of share capital is doubled. 
D)  No journal entry is required. 
A)  The number of shares is doubled. 
B)  The unit market price of each share is reduced. 
C)  The value of share capital is doubled. 
D)  No journal entry is required.

Question 4

An issue of 50 000 shares at $3 required $2.20 per share to be paid at the time of application.On allotment,another $0.30 was due and a further $0.50 when determined by the board of directors.The application money in respect of the 50 000 shares was received on 8 July.On 26 July,the shares were issued with the amount due on allotment received on 15 August.The remaining $0.50 was called up on 20 September and received on 10 October
- What was the balance of share capital at 11 October?

Accepted Answer

A)  $25 000 
B)  $125 000 
C)  $150 000 
D)  $110 000 
A)  $25 000 
B)  $125 000 
C)  $150 000 
D)  $110 000

Question 5

Which of the following is NOT omitted from the consolidated accounts?

Accepted Answer

A)  Debt owing to parent company by subsidiary company 
B)  Intercompany sales 
C)  Management fees charged to the subsidiary by the parent company 
D)  Credit sales of the subsidiary 
A)  Debt owing to parent company by subsidiary company 
B)  Intercompany sales 
C)  Management fees charged to the subsidiary by the parent company 
D)  Credit sales of the subsidiary

Question 6

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 7

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 8

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 method,what dividend revenue would it record for the year ended 31 December 2016 in respect of its investment in Ping Ltd?

Accepted Answer

A)  Nil 
B)  $120 000 
C)  $200 000 
D)  $350 000 
A)  Nil 
B)  $120 000 
C)  $200 000 
D)  $350 000

Question 9

XYZ Limited paid $2 million for 100 per cent of the voting shares of ABC Limited and determined the assets to be worth $3 million and the liabilities $800 000.What was the goodwill on consolidation at the date of acquisition?

Accepted Answer

A)  $100 000 
B)  $200 000 
C)  $300 000 
D)  None of the answers provided 
A)  $100 000 
B)  $200 000 
C)  $300 000 
D)  None of the answers provided

Question 10

The directors of Behrens Ltd decided to issue 300 000 ordinary shares at $1 each.25 cents per share was payable on application,25 cents per share on allotment and the balance through two equal calls.Applications were received for 250 000 shares,which were duly issued and allotment money was paid in full.The journal entries to record the allotment would include a:

Accepted Answer

A)  credit to allotment,$75 000. 
B)  credit to cash,$62 500. 
C)  debit to share capital,$62 500. 
D)  debit to allotment,$75 000. 
A)  credit to allotment,$75 000. 
B)  credit to cash,$62 500. 
C)  debit to share capital,$62 500. 
D)  debit to allotment,$75 000.

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 method,what would have been the impact of Ping Ltd's 30 June 2016 earnings announcement?

Accepted Answer

A)  Dividend revenue would have increased by $200 000. 
B)  Investment in Ping Ltd would have increased by $200 000. 
C)  Investment in Ping Ltd would have decreased by $200 000. 
D)  No record would have been made. 
A)  Dividend revenue would have increased by $200 000. 
B)  Investment in Ping Ltd would have increased by $200 000. 
C)  Investment in Ping Ltd would have decreased by $200 000. 
D)  No record would have been made.

Question 12

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.

Question 13

Which of the following statements about the general reserve account is NOT true?

Accepted Answer

A)  A transfer to this account may be used to indicate to shareholders that it is unlikely to be paid out in dividends. 
B)  Amounts can be transferred back from it to retained profits. 
C)  The general reserve account provides an indication of where funds are invested. 
D)  The general reserve account appears under shareholders' equity in the balance sheet. 
A)  A transfer to this account may be used to indicate to shareholders that it is unlikely to be paid out in dividends. 
B)  Amounts can be transferred back from it to retained profits. 
C)  The general reserve account provides an indication of where funds are invested. 
D)  The general reserve account appears under shareholders' equity in the balance sheet.

Question 14

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 15

An issue of 50 000 shares at $3 required $2.20 per share to be paid at the time of application.On allotment,another $0.30 was due and a further $0.50 when determined by the board of directors.The application money in respect of the 50 000 shares was received on 8 July.On 26 July,the shares were issued with the amount due on allotment received on 15 August.The remaining $0.50 was called up on 20 September and received on 10 October
-The journal entry to record the amount due on application would include:

Accepted Answer

A)  Dr Share capital,$110 000. 
B)  Cr Application,$110 000. 
C)  Cr Share capital,$150 000. 
D)  Dr Share capital,$110 000 
A)  Dr Share capital,$110 000. 
B)  Cr Application,$110 000. 
C)  Cr Share capital,$150 000. 
D)  Dr Share capital,$110 000

Question 16

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 17

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 18

What percentage of shares,as a general rule,are held by an investor for it to be presumed that the investor has significant influence over the company,unless there is evidence to the contrary?

Accepted Answer

A)  20 per cent or more 
B)  40 per cent or more 
C)  50 per cent or more 
D)  80 per cent or more 
A)  20 per cent or more 
B)  40 per cent or more 
C)  50 per cent or more 
D)  80 per cent or more

Question 19

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 12 February 2016 would include:

Accepted Answer

A)  Dr Interim dividend declared,$25 000. 
B)  Cr Cash,$25 000. 
C)  Cr Retained profits,$25 000. 
D)  none of the answers provided. 
A)  Dr Interim dividend declared,$25 000. 
B)  Cr Cash,$25 000. 
C)  Cr Retained profits,$25 000. 
D)  none of the answers provided.

Question 20

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.

Share splits increase:

Which of the following statements about a 2:1 share split is NOT true?

Which of the following is NOT omitted from the consolidated accounts?

XYZ Limited paid $2 million for 100 per cent of the voting shares of ABC Limited and determined the assets to be worth $3 million and the liabilities $800 000.What was the goodwill on consolidation at the date of acquisition?

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

Which of the following statements about the general reserve account is NOT true?

When bonus shares are issued:

What percentage of shares,as a general rule,are held by an investor for it to be presumed that the investor has significant influence over the company,unless there is evidence to the contrary?

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 12 February 2016 would include:

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

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

Share splits increase:

Which of the following statements about a 2:1 share split is NOT true?

Which of the following is NOT omitted from the consolidated accounts?

XYZ Limited paid $2 million for 100 per cent of the voting shares of ABC Limited and determined the assets to be worth $3 million and the liabilities $800 000.What was the goodwill on consolidation at the date of acquisition?

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

Which of the following statements about the general reserve account is NOT true?

When bonus shares are issued:

What percentage of shares,as a general rule,are held by an investor for it to be presumed that the investor has significant influence over the company,unless there is evidence to the contrary?

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 12 February 2016 would include:

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

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