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MULTIPLE-CHOICE QUESTIONS
(Answers on page 11)
Select the best answer (ONE ONLY) to each of the following multiple-choice questions.
Financing Company Operations Chapter 2
1.
When a company makes a public issue of shares, the offer comes from:
a.
b.
c.
d.
e.
2.
3.
the applicants;
the directors of the company;
the company issuing the shares;
the broker handing the share issue for the company;
the shareholders.
According to the Corporation Act 2001, when a company listed on the Australian
Stock Exchange issues shares to the public, the issue price, terms and rights
associated with the shares are determined by:
a.
b.
c.
d.
e.
Page 1 of 11
4.
5.
6.
an increase in expense;
an increase in share capital;
a decrease in liability;
a decrease in share capital.
an increase in asset;
A share option is a financial instrument that gives a shareholder the right to:
a.
b.
c.
d.
e.
7.
Cr Cash trust;
Cr Share capital;
Dr Cash;
Cr Application;
Dr Application.
5% of existing capital;
10% of existing capital;
15% of existing capital;
20% of existing capital;
25% of existing capital.
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8.
9.
Page 3 of 11
11.
An appropriate journal entry to record the payment of final dividends paid will
include the following line:
a.
b.
c.
d.
e.
12.
Dr Retained earnings;
Dr Final dividend payable;
Cr Cash trust;
Cr Final dividends payable;
Dr Cash.
Which of the following items is not a reason given for issuing bonus shares?
a.
b.
c.
d.
e.
Page 4 of 11
13.
14.
Page 5 of 11
In accordance with AASB 112 Income Taxes, which of the following statements
about accounting for income taxes is incorrect?
a.
b.
c.
d.
e.
16.
17.
Impairment of goodwill
Insurance expense
Rental revenue
Additional tax deduction for R & D
Government grant
a.
b.
c.
d.
e.
I and IV.
II and III.
I, II and III
I, IV and V
I, III and IV
Page 6 of 11
18.
The tax effect method of accounting for a companys income tax is based on an
assumption that:
a.
b.
c.
d.
e.
19.
20.
Prepayments
Rent received in advance
Provision for employee benefits
Research & development
Goodwill
Provision for warranty
a.
b.
c.
d.
e.
I, II and II..
I, II and VI.
I, IV and V.
II, III, and VI.
I, and IV.
reserves;
income;
expenses;
losses;
assets.
Page 7 of 11
21.
Deductible temporary differences arise from tax losses can lead to the recognition
of:
a.
b.
c.
d.
e.
22.
Where the impairment of goodwill is not tax deductible, AASB 112 Income Taxes:
a.
b.
c.
d.
e.
23.
Which of the following items are excluded from the explanation of the
relationship between income tax expense and prima facie tax on profit (ie
accounting profit multiplied by the applicable rate)?
I
II
III
IV
V
VI
Building depreciation
Bad debts expense
Exempt income
Loss from change in tax rate
Annual leave expense
Entertainment expense
a.
b.
c.
d.
e.
I and VI.
II and VI.
II and V.
I, III, IV and VI.
I, III, V and VI.
Page 8 of 11
The revaluation under AASB 116 Property, Plant and Equipment apply to:
a.
b.
c.
d.
e.
25.
27.
An acquirer to be identified.
Goodwill acquired to be recognized.
The assets, liabilities and contingent liabilities to be measured initially at
cost at acquisition date.
Disclosure of information that enables users to evaluate changes in the
carrying amount of goodwill.
The measurement of the cost of a business combination.
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The appropriate account to debit in the records of the acquiring company for costs
directly attributable to a business combination is:
a.
b.
c.
d.
e.
29.
cash;
retained earnings;
goodwill;
net assets acquired;
expense.
30.
Page 10 of 11
Answers:
1
2
3
4
5
6
7
8
9
10
a
e
a
d
d
b
c
e
b
b
11
12
13
14
15
16
17
18
19
20
b
e
c
d
d
d
a
b
c
b
21
22
23
24
25
26
27
28
29
30
Page 11 of 11
e
a
c
d
a
c
c
e
b
a