Question 1

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. D

Question 2

The shareholders of a company are liable for prosecution under the Corporations Act 2001 if they allow the company to trade while it is insolvent.

Accepted Answer

A) True 
 B)False  False

Question 3

Under a members' voluntary winding up,the directors of the company are required to prepare which of the following documents?
I.Statement of affairs
II.Summary of affairs
III.Preliminary liquidation report
IV.Declaration of solvency

Accepted Answer

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

Question 4

What is the timeframe within which the liquidator must submit a preliminary report to ASIC after receiving the statement of affairs from the directors?

Accepted Answer

A) 12 months 
B) 2 months 
C) 3 months 
D) 14 days 
A) 12 months 
B) 2 months 
C) 3 months 
D) 14 days

Question 5

Under a creditor's voluntary winding up,the company must provide each creditor with a copy of the statement of affairs.

Accepted Answer

A) True 
 B)False

Question 6

Voluntary winding up can only take place where a company is solvent.

Accepted Answer

A) True 
 B)False

Question 7

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 8

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

Question 9

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 10

The existence of accumulated losses at the commencement of a winding up will:

Accepted Answer

A) increase any deficiency calculated in the liquidation account. 
B) decrease any deficiency calculated in the liquidation account. 
C) have no effect on any deficiency calculated in the liquidation account. 
D) increase cash available. 
A) increase any deficiency calculated in the liquidation account. 
B) decrease any deficiency calculated in the liquidation account. 
C) have no effect on any deficiency calculated in the liquidation account. 
D) increase cash available.

Question 11

At the commencement of a members' voluntary winding up,a written declaration must be provided by directors stating that all debts will be able to be paid in full within a period:

Accepted Answer

A) of no more than 30 days. 
B) of not more than 6 months. 
C) not exceeding 12 months. 
D) more than one year but less than two years. 
A) of no more than 30 days. 
B) of not more than 6 months. 
C) not exceeding 12 months. 
D) more than one year but less than two years.

Question 12

Which of the following is entitled to make an application to the court for an insolvent company to be wound up?

Accepted Answer

A) A court appointed receiver 
B) Employees of the company 
C) ASIC 
D) The company's external auditor 
A) A court appointed receiver 
B) Employees of the company 
C) ASIC 
D) The company's external auditor

Question 13

The main purpose of the liquidation account is to:

Accepted Answer

A) show the capital amount due to contributories. 
B) calculate the deficiency or surplus on liquidation. 
C) show the final cash payment to each class of contributory. 
D) record additional calls made on shareholders. 
A) show the capital amount due to contributories. 
B) calculate the deficiency or surplus on liquidation. 
C) show the final cash payment to each class of contributory. 
D) record additional calls made on shareholders.

Question 14

In relation to the order of priority of payment of debts upon liquidation,which statement is correct?

Accepted Answer

A) Ordinary unsecured creditors are paid before preferential unsecured creditors. 
B) Preferential unsecured creditors are paid before deferred creditors. 
C) Deferred creditors are paid before ordinary unsecured creditors. 
D) Deferred creditors are paid before secured creditors. 
A) Ordinary unsecured creditors are paid before preferential unsecured creditors. 
B) Preferential unsecured creditors are paid before deferred creditors. 
C) Deferred creditors are paid before ordinary unsecured creditors. 
D) Deferred creditors are paid before secured creditors.

Question 15

Who is required to prepare the report as to affairs (Form 507)?

Accepted Answer

A) Members of the company 
B) Directors of the company 
C) Creditors of the company 
D) The liquidator 
A) Members of the company 
B) Directors of the company 
C) Creditors of the company 
D) The liquidator

Question 16

The court is only able to make an order for a company to be wound up if the company is insolvent.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not a general ground under s.461 of the Corporations Act on which the court can order a winding up?

Accepted Answer

A) The company has no members. 
B) The company has not commenced business within three months of its incorporation. 
C) The court is of the opinion that it is just and equitable that the company be wound up. 
D) The company has by special resolution resolved that it be wound up by the court. 
A) The company has no members. 
B) The company has not commenced business within three months of its incorporation. 
C) The court is of the opinion that it is just and equitable that the company be wound up. 
D) The company has by special resolution resolved that it be wound up by the court.

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

In the case of a member's voluntary winding up,the directors of the company are required to prepare both a statement of affairs and a declaration of solvency.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is the journal entry recorded on realisation of the assets by the liquidator?

Accepted Answer

A) DR Cash,CR Liquidation 
B) DR Liquidation,CR Cash 
C) DR Cash,CR Revenue from sale of assets 
D) DR Shareholders' distribution,CR Cash 
A) DR Cash,CR Liquidation 
B) DR Liquidation,CR Cash 
C) DR Cash,CR Revenue from sale of assets 
D) DR Shareholders' distribution,CR Cash

Exam 25: Insolvency and Liquidation

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

The shareholders of a company are liable for prosecution under the Corporations Act 2001 if they allow the company to trade while it is insolvent.

Under a members' voluntary winding up,the directors of the company are required to prepare which of the following documents? I.Statement of affairs II.Summary of affairs III.Preliminary liquidation report IV.Declaration of solvency

What is the timeframe within which the liquidator must submit a preliminary report to ASIC after receiving the statement of affairs from the directors?

Under a creditor's voluntary winding up,the company must provide each creditor with a copy of the statement of affairs.

Voluntary winding up can only take place where a company is solvent.

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.

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.

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

The existence of accumulated losses at the commencement of a winding up will:

At the commencement of a members' voluntary winding up,a written declaration must be provided by directors stating that all debts will be able to be paid in full within a period:

Which of the following is entitled to make an application to the court for an insolvent company to be wound up?

The main purpose of the liquidation account is to:

In relation to the order of priority of payment of debts upon liquidation,which statement is correct?

Who is required to prepare the report as to affairs (Form 507)?

The court is only able to make an order for a company to be wound up if the company is insolvent.

Which of the following is not a general ground under s.461 of the Corporations Act on which the court can order a winding up?

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

In the case of a member's voluntary winding up,the directors of the company are required to prepare both a statement of affairs and a declaration of solvency.

Which of the following is the journal entry recorded on realisation of the assets by the liquidator?

Nature and Regulation of Companies

Financing Company Operations

Company Operations

Fundamental Concepts of Corporate Governance

Fair Value Measurement

Accounting for Company Income Tax

Financial Instruments

Foreign Currency Transactions and Forward Exchange Contracts

Property, Plant and Equipment

Leases

Intangible Assets

Business Combinations

Impairment of Assets

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Disclosure: 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

Investments in Joint Arrangements

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