Question 1

In relation to share capital, AASB 101 does not require disclosure in the financial statements of:

Accepted Answer

A)  the number of shares on issue at the end of the year. 
B)  the total dollar value of share capital at the end of the year. 
C)  restrictions on dividends payable to certain classes of shareholders. 
D)  the amount of any over- or under-subscription of new share issues during the year.

Question 2

Sunshine Company issued 20 000 share options to subscribe for ordinary shares. The exercise price on the options was $2 per share. If all options were exercised on the due date, the journal entry that would be recorded is:

Accepted Answer

A)  $\begin{array}{lr}
\text {Share capital — ordinary }&\text {Dr  }&60,000\
\text {Cash }&\text {Cr  }&&60,000\
\end{array}$ 
B)  $$\begin{array} { l l l l } 
\text { Bhare options - ordinary } & \mathrm { Dr } & 60000 & \
\text { Share capital - ordinary } & \mathrm { Cr } & & 60000
\end{array}$$ 
C)  $\begin{array}{lr}
\text {Share options reserve }&\text {Dr  }&60,000\
\text {Cash }&\text {Cr  }&&60,000\
\end{array}$ 
D)  $\begin{array}{lr}
\text {Cash }&\text {Dr  }&60,000\
\text {Share capital — ordinary }&\text {Cr  }&&60,000\
\end{array}$

Question 3

Gains or losses resulting from the translating of foreign currency denominated operations into the reporting currency are recognised in income:

Accepted Answer

A)  only if they are material items. 
B)  only when they are settled in cash. 
C)  in the reporting period in which they arise. 
D)  only when the interest in the foreign operation is sold.

Question 4

AASB 101 requires that information in relation to dividends paid or declared during the year be disclosed in:

Accepted Answer

A)  either the statement of changes in equity or the notes to the financial statements. 
B)  the statement of changes in equity only. 
C)  the notes to the financial statements only. 
D)  the statement of comprehensive income.

Question 5

Retained earnings are a component of:

Accepted Answer

A)  reserves. 
B)  contributed equity. 
C)  other equity. 
D)  comprehensive income.

Question 6

For-profit companies may be: I Listed
II No-liability
III Unlimited
IV Limited by guarantee

Accepted Answer

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

Question 7

Dividends declared after the balance date but before the financial statements are authorised for issue:

Accepted Answer

A)  meet the recognition criteria for a liability. 
B)  satisfy the recognition criteria for an expense. 
C)  do not meet the AASB 137 criteria of a present obligation. 
D)  are recognised in the statement of financial position as they meet the definition of equity.

Question 8

Which of the following statements relating to shares is not correct?

Accepted Answer

A)  A share represents an ownership right in a company. 
B)  Each share in a company carries a right to vote for directors of the company. 
C)  Each share in a company carries a right to share proportionately in all new share issues of a company. 
D)  Each share in a company carries a right to share in the assets on the liquidation of the company.

Question 9

If the balance in a forfeited shares account is refundable to the owners of those shares, then the forfeited shares account is classified in the financial statements as:

Accepted Answer

A)  income. 
B)  equity. 
C)  expenses. 
D)  liabilities

Exam 13: Share Capital and Reserves