Deck 20: External Administration, Including Liquidation

Question 1

Which of the following statements is incorrect?

A)the higher the debt levels or leverage,the lower the risk that a company may not be able to meet its debts as they fall due
B)a company's assets are funded by both owners' equity and external liabilities
C)the higher the debt levels or leverage,the greater the risk that a company may not be able to meet its debts as they fall due
D)all of the above

Answer 1

A

Question 2

The journal entry for the forfeiture of shares due to calls in arrears includes which of the following?

A)Credit Call
B)Debit Call
C)Debit Share capital
D)both A and C

Answer 2

D

Question 3

The grounds for a court- ordered liquidation include which of the following?

A)the company has,by special resolution,resolved that it be wound up by the court
B)the company is unable to pay its debts
C)directors have been acting in their own interests rather than in the interests of the company
D)all of the above

Answer 3

D

Question 4

Discuss the legal requirements for voluntary administration.

Question 5

The recommendations made to creditors following an administrator's investigation include:

A)liquidate the company
B)enter into a deed of arrangement
C)terminate the administration and return control of the company to the board of directors
D)all of the above

Question 6

Identify the grounds for a court- ordered liquidation and the duties of a liquidator under the Corporations Act.

Question 7

Any discounts received on the payment of creditors as:

A)Credit Creditors
B)Credit Liquidation
C)Debit Liquidation
D)Credit Discount revenue

Question 8

A legal document used in a member's voluntary winding- up to declare that the company is able to pay its debts in full is referred to as a/an:

A)constitution
B)declaration of solvency
C)declaration of liquidation
D)none of the above

Question 9

External administration can include the appointment of a/an:

A)administrator
B)liquidator
C)receiver
D)all of the above

Question 10

Which of the following statements is correct?

A)unsecured debts must be paid before secured debts
B)secured debts must be paid before unsecured debts
C)all shareholders must be paid in full before creditors receive any payment
D)none of the above

Question 11

Shareholder reserves,including the retained earnings and forfeited shares reserve accounts,are closed to which account?

A)Liquidation
B)Profit and loss summary
C)Shareholder's distribution
D)none of the above

Question 12

A process by which a company is dissolved through selling its assets,paying off liabilities and paying any remaining amounts,if any,to shareholders is referred to as:

A)dissolution
B)receivership
C)administration
D)liquidation

Question 13

Identify the order of payment of creditors contained in the Corporations Act.

Question 14

Explain the process of a members' voluntary liquidation.

Question 15

A company's liquidation can be:

A)members' voluntary
B)court- ordered
C)creditors' voluntary
D)all of the above

Question 16

A receiver is usually appointed by:

A)directors
B)shareholders
C)debenture holders
D)auditors

Question 17

Which of the following is an ordinary unsecured creditor?

A)contingent creditors' claims
B)workers' compensation obligations
C)retrenchment payments
D)costs of liquidation

Question 18

A creditor secured by a secured charge or floating charge is known as a/an:

A)secured creditor
B)fixed creditor
C)charged creditor
D)none of the above

Question 19

A creditor which is not a preferential creditor and which does not have security over any assets of the company is referred to as a/an:

A)non- current creditor
B)insecure creditor
C)unsecured creditor
D)none of the above

Question 20

The set of regulations governing the conduct of a company is known as:

A)listing rules
B)a company's constitution
C)an agenda
D)none of the above

Question 21

Explain the nature of receivership and the major role of a receiver.