Question 1

The global set of standards established for financial reporting cover each of the following aspects except:

Accepted Answer

A) information disclosure. 
B) asset valuation. 
C) valuation of shares. 
D) measurement of profit.

Question 2

If the management of a company believes that in complying with the accounting standards, the financial reports would not show a true and fair representation, they:

Accepted Answer

A) are not legally required to comply with the standards. 
B) just have to disclose that they have not used the standard. 
C) do not have to adhere to the standards in this situation. 
D) must comply with the standards and have the option of including a note in the report.

Question 3

Which of the following may be voluntarily disclosed in the annual report?

Accepted Answer

A) Human resource strategies 
B) Environmental initiatives 
C) Community contributions 
D) All of the above

Question 4

Which of the following comments in relation to the statement of cash flows is incorrect? The statement of cash flows:

Accepted Answer

A) allows the user of the report to determine where cash has been generated. 
B) is essentially a formal statement of all transactions affecting the cash account. 
C) highlights where cash has been spent. 
D) is a duplication of information already provided in the other financial statements.

Question 5

How does the statement of comprehensive income differ from a traditional statement of financial performance?

Accepted Answer

A) it does not show a gross profit. 
B) it only shows realised gains and losses. 
C) it shows all realised and unrealised gains and losses. 
D) it does not show financial expenses.

Question 6

Use the data below to calculate MNB Ltd's share issue made in 2017.

Equity balance (01/07/2017)- $700,000
Equity balance (30/06/2018)- $1,070,000
Retained Earnings (30/06/2018)- $230,000

There were no dividends declared in the current year and no other reserve accounts.

Accepted Answer

A) $610,000 
B) $150,000 
C) $140,000 
D) $380,000

Question 7

River Ltd pays $5,500,000 for a 70% share in Stream Ltd. The net assets acquired in Stream Ltd are valued at $5,000,000. The $500,000 difference will appear in River Ltd's statement of financial position as:

Accepted Answer

A) goodwill on consolidation. 
B) mortgage payable. 
C) long-term investment. 
D) acquisition reserve.

Question 8

Under AASB 101, in the statement of financial position, companies are normally required to distinguish between:

Accepted Answer

A) cash on hand and cash at bank. 
B) property and plant. 
C) current and non-current liabilities. 
D) current profit and retained profits.

Question 9

In a statement of financial position, subclassifications such as reserves, provisions and inventories are generally reported:

Accepted Answer

A) in the financial statement itself. 
B) in the director's report. 
C) as notes to the main financial statements. 
D) These items do not have to be reported at all.

Question 10

A company partly owned and controlled by another is known as a:

Accepted Answer

A) parent company. 
B) subsidiary company. 
C) a limited company. 
D) a private company.

Question 11

Calculate the total comprehensive income for the year if operating profit is $556,000, the tax rate is 30%, finance charges are $88,700 and other comprehensive income for the year (net of tax)is $195,000.

Accepted Answer

A) $452,460 
B) $522,110 
C) $426,000 
D) $562,800

Question 12

Which of these is a reason why companies are more heavily regulated than sole proprietorships or partnerships?

Accepted Answer

A) The owners (shareholders)are often removed from the day-to-day running of the business. 
B) As companies have limited liability, there is a greater need to protect creditors from financial loss. 
C) The members of a company operate under the mutual agency principle. 
D) Both A and B.

Question 13

The organisation that is currently the sole standard-setting body in Australia is the:

Accepted Answer

A) Institute of Chartered Accountants in Australia. 
B) Australian Accounting Standards Board. 
C) CPA Australia. 
D) Australian Securities Exchange.

Question 14

Which of the following statements relating to the ASX Corporate Governance Principles is incorrect?

Accepted Answer

A) Companies should actively promote ethical and responsible decision-making. 
B) Risk oversight and internal control are not necessarily areas companies can manage. 
C) Companies should promote timely and balanced disclosure of all material matters concerning the company. 
D) The audit committee should be structured so that it consists only of non-executive directors.

Question 15

An audit report that contains the opinion that the financial statements are true and fair and comply with the accounting standards is described as:

Accepted Answer

A) a qualified report. 
B) an authorised report. 
C) a quantified report. 
D) an unqualified report.

Question 16

How would trade debtors normally be classified in a statement of financial position?

Accepted Answer

A) as a current liability. 
B) as a current asset. 
C) as a non-current liability. 
D) as a reserve.

Exam 5: Regulatory Framework for Companies