ACCY200 Midsession

Company Regulation

100

In Australia the law governing corporations is administered by the: A. Corporate Law Economic Reform Program; B. Australian Accounting Research Foundation; C. Australian Securities and Investments Commission; D. International Accounting Standards Board.

C. Australian Securities and Investments Commission;

200

What is NOT a role of the AASB? A: development of the conceptual framework B: formulating accounting standards in accordance with the Corporations Act C: promoting confidence in the financial system by maintaining, improving and facilitating the performance of the financial system D: formulating accounting standards for other purposes

C: promoting confidence in the financial system by maintaining, improving and facilitating the performance of the financial system

300

Which of the following statement is NOT correct in relation to the Financial Reporting Council (FRC)? A. Membership of the FRC is determined by the Federal Treasurer B. The only role of the FRC is to act as an overseer and advisory body to ASIC C. The FRC was established in 2000, as a result of the CLERP Act 1999 D. The FRC does not have the power to veto accounting standards

B. The only role of the FRC is to act as an overseer and advisory body to ASIC

400

Which of the following statements is correct in relation to the Urgent Issues Group (UIG): A. The UIG is now defunct. As a result previously issued interpretations are no longer enforceable. B. Has been replaced by the International Financial Reporting Interpretations Committee (IFRIC) C. Prior to ceasing to exist, the UIG provided consensus views on a range of topics peculiar to the Australian political, legal and economic system D. Prior to ceasing to exist, the UIG was a sub-committee of IFRIC.

C. Prior to ceasing to exist, the UIG provided consensus views on a range of topics peculiar to the Australian political, legal and economic system

500

The Corporate Law Reform Program (CLERP) was introduced to (amongst other things): A. achieve easier access to capital for small business B. to reduce exposure and limit liability for directors C. to clarify the reporting entity concept D. oversee the implementation of harmonised accounting standards

A. achieve easier access to capital for small business

The Conceptual Framework

100

According to the AASB Framework, assets are: A. future obligations; B. benefits to be controlled by the entity as a result of future transactions; C. future benefits controlled by the entity as the result of past events; D. items that depend upon the occurrence of another event before they result in a future benefit.

C. future benefits controlled by the entity as the result of past events;

200

A listed company has issued 30 000 shares for $1 each. The shares are currently trading on the Australian Securities Exchange for $3 each. Details from the company's financial statements reveal: Total assets $100 000; Total liabilities $60 000; Retained earnings $5 000. The amount of recorded equity of this company is: A. $90 000; B. $30 000; C. $35 000; D. $40 000.

D. $40 000.

300

Income arises because of changes in: A. equity; B. assets and liabilities; C. expenses; D. contingent items.

B. assets and liabilities;

400

In relation to the measurement of an asset, the amount of consideration given to acquire the asset is known as its: A. historical cost; B. current cost; C. realisable value; D. present value.

A. historical cost;

500

The item 'dividend payable' would appear in which of a company's financial statements? A. Statement of Cash Flows; B. Statement of Comprehensive Income C. Statement of Financial Position D. Statement of Changes in Equity.

D. Statement of Changes in Equity.

Shareholder's Equity

100

The journal entry to record $10 000 received on application for a share issue is: A. DR Cash $10 000 CR Allotment $10 000 B. DR Application $10 000 CR Cash trust $10 000 C. DR Application $10 000 CR Share capital $10 000 D. DR Cash trust $10 000 CR Application $10 000

D. DR Cash trust $10 000 CR Application $10 000

200

ABC Limited issued a prospectus offering 100 000 ordinary shares at a price of $2.50 each, payable $1.50 on application. The company received applications for 110 000 shares. Which of the following entries correctly records the application money? A. DR Cash trust $150 000 CR Application $150 000 B. DR Cash trust $250 000 CR Application $250 000 C. DR Cash trust $165 000 CR Application $165 000 D. DR Cash trust $275 000 CR Application $275 000

C. DR Cash trust $165 000 CR Application $165 000

300

Wilson Limited received applications for 50 000 shares at a price of $3.00 per share. The company had offered 40 000 shares and the terms required the company to make a refund of all oversubscribed amounts. The journal entry to record the refund will be: A. DR Cash trust $30 000 CR Application $30 000 B. DR Cash trust $150 000 CR Application $150 000 C. DR Application $120 000 CR Cash $120 000 D. DR Application $30 000 CR Cash trust $30 000

D. DR Application $30 000 CR Cash trust $30 000

400

An appropriate journal entry to record further receipts of cash due on the allotment of shares will include the following line: A. DR Allotment; B. DR Share capital; C. CR Allotment; D. CR Cash trust.

C. CR Allotment;

500

A share option is a financial instrument that gives a shareholder the right to: A. receive a certain number of new shares in a company at no cost; B. buy or sell a certain number of shares in the company by a specific date and at a specific price; C. preferential allotment of shares under a new share issue by the company; D. not pay the unpaid balance on shares they own when that balance is called in by the company;

B. buy or sell a certain number of shares in the company by a specific date and at a specific price;

Taxation

100

Income tax payable by a company is based on its: A. taxable income; B. accounting profit; C. total revenue; D. total deductions.

A. taxable income;

200

To the extent that tax payable exists and has not yet been paid a company will recognise: A. current tax asset; B. current tax liability; C. non-current asset; D. non-current liability.

B. current tax liability;

300

Differences may arise between the accounting treatment of an item and its tax treatment because: A. the tax treatment follows accrual principles and accounting treatment focuses on cash flows; B. accounting treatment follows accounting concepts while the tax treatment is based on GAAP; C. tax treatment follows cash flow principles and the accounting treatment follows accrual principles; D. accountants are not obliged to follow any rules when compiling a company's tax return.

C. tax treatment follows cash flow principles and the accounting treatment follows accrual principles;

400

Select the two words that best fit the gaps in the following sentence. When dealing with 'bad and doubtful debts' a difference will arise between accounting and tax treatment of the item because under accounting principles the item is recognised when_________ while under tax law the item is written off when________. A. doubtful, bad; B. bad, accrued. C. sold, paid; D. bad, sold.

A. doubtful, bad;

500

Barton Limited has an accounting profit before tax of $200 000. All of the following items have been included in the accounting profit: depreciation of equipment $30 000 (tax deductible depreciation is $20 000); entertainment expenses $15 000 (non-deductible for tax purposes); Long service leave expense provided $6 000 (no employee took long service leave during the year). The tax rate is 30%. The amount of current tax liability is: A. $81 300; B. $69 300; C. $50 700; D. $38 700

B. $69 300;

Surprise Me!

100

When was the plan for international harmonisation introduced? A: 1985 B: 1996 C: 2001 D: 1998

B: 1996

200

Which country is NOT on board with IFRS? A: Australia B: US C: Europe D: UK

B: US

300

What is not a measurement basis: A: historical cost B: fair value C: net realisable value D: after tax cost

D: after tax cost

400

The tax base for an asset is determined using which of the following formulae? Tax base for an asset = A. Carrying amount – Future taxable amount + Future deductible amount; B. Carrying amount + Future taxable amount – Future deductible amount; C. Carrying amount – Future taxable amount – Future deductible amount; D. Carrying amount + Future taxable amount + Future deductible amount.

A. Carrying amount – Future taxable amount + Future deductible amount;

500

Juicy Limited has an accounting profit of $100 000. The following items are included in that profit: depreciation on motor vehicles $8 000; non-tax deductible entertainment expenses $5 000. Depreciation on motor vehicles is double the accounting rate. The tax on company income is 30%. Which of the following is the amount of taxable income for this company? A. $71 000; B. $97 000; C. $103 000; D. $129 000.

B. $97 000;