Question 1

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

Accepted Answer

The answer of Use the data below to calculate MNB...

Question 2

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

Accepted Answer

The statement of cash flows provides unique information that is not available in other financial statements. It explains the movement of cash in and out of an organization and is an essential tool for analysis and decision-making.

Question 3

Which of the following would be regarded as 'other comprehensive income'?
A)Foreign exchange gains.
B)Cash flow hedges.
C)Revaluation of property.
D)All of the above.

Accepted Answer

All three options - foreign exchange gains, cash flow hedges, and revaluation of property - can be classified as other comprehensive income. Other comprehensive income is a section of financial statements that includes gains and losses that are excluded from net income but are important to shareholders' understanding of a company's financial health.

Question 4

What is the system by which businesses are controlled and directed?
A)auditing.
B)general management.
C)corporate governance.
D)business directing.

Accepted Answer

Corporate governance refers to the system by which businesses are controlled and directed. It involves the set of processes, policies, laws, and regulations that govern how a company is managed and how decisions are made. Auditing is a process of examining financial records and other information to ensure that they are accurate and comply with regulations. General management refers to the day-to-day operations of a company, while business directing is not a commonly used term in relation to corporate governance.

Question 5

Which of the following organisations would be most likely to elect to order their assets on the statement of financial position according to liquidity?
A)Retailer.
B)Credit union.
C)Manufacturer.
D)Builder.

Accepted Answer

Credit unions, being financial institutions, prioritize liquidity to meet withdrawal demands and other financial obligations. They order assets on the statement of financial position according to liquidity to reflect their ability to quickly convert assets into cash.

Question 6

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:
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.

Accepted Answer

According to generally accepted accounting principles (GAAP), companies must comply with accounting standards to ensure that financial reports accurately reflect the company's financial position. However, if a situation arises where compliance with accounting standards would not result in a true and fair representation of the company's financial position, the company must still comply with the standards but has the option of including a note in the financial report to explain the situation. This ensures transparency and provides context for the financial statements.

Question 7

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

Accepted Answer

This statement is incorrect as risk oversight and internal control are areas that companies should be able to manage according to the ASX Corporate Governance Principles. Companies are encouraged to establish effective risk management systems and internal control processes.

Question 8

How would trade debtors normally be classified in a statement of financial position?
A)as a current liability.
B)as a current asset.
C)as a non-current liability.
D)as a reserve.

Accepted Answer

Trade debtors are amounts owed to a company by its customers for goods or services that have already been provided. As these receivables are expected to be collected within the next 12 months, they are classified as a current asset on the statement of financial position.

Question 9

Which of the following are sources of regulation applicable to publicly listed companies in Australia?
A)ASX rules.
B)Company law.
C)International accounting standards.
D)All of the above.

Accepted Answer

Publicly listed companies in Australia are subject to a range of regulations including the rules of the ASX, company law and international accounting standards. Therefore, all of the choices (A, B, and C) are correct.

Question 10

The global set of standards established for financial reporting cover each of the following aspects except:
A)information disclosure.
B)asset valuation.
C)valuation of shares.
D)measurement of profit.

Accepted Answer

The global set of standards established for financial reporting cover information disclosure, asset valuation, and measurement of profit. However, the valuation of shares is not explicitly covered by these standards. Valuation of shares may be indirectly impacted by these standards, as financial reports that follow these standards provide information that helps investors make informed decisions about the value of shares.

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

Accepted Answer

The answer of Calculate the total comprehensive income for the...

Question 12

Which of the following is included in the statement of changes in equity?
A)share issues.
B)changes to reserves.
C)changes to retained profits.
D)all of the above.

Accepted Answer

The statement of changes in equity includes all of the above items - share issues, changes to reserves, and changes to retained profits. The purpose of the statement is to reconcile the beginning and ending balances of the equity section of the balance sheet and to show how the various transactions during the period affected the company's equity.

Question 13

Currently worldwide, most major economies have either adopted IFRSs or:
A)are moving towards the adoption of such.
B)have elected never to use IFRSs.
C)have set timelines to converge with IFRSs.
D)Both A and C.

Accepted Answer

Most major economies have either adopted IFRSs or are moving towards the adoption of such, while others have set timelines to converge with IFRSs. Therefore, both A and C are correct, while B is incorrect.

Question 14

Under AASB 101, in the statement of financial position, companies are normally required to distinguish between:
A)cash on hand and cash at bank.
B)property and plant.
C)current and non-current liabilities.
D)current profit and retained profits.

Accepted Answer

AASB 101 requires companies to present a statement of financial position that separates current assets and liabilities from non-current assets and liabilities. This helps users of financial statements to understand the liquidity and solvency of the entity. Therefore, the correct choice is C, current and non-current liabilities.

Question 15

If you were asked to loan money to a company that you feared may be getting into financial difficulties, which of these courses of action would provide you with the most protection from default on the loan?
A)Rely on the principle of limited liability.
B)Require a mortgage over a specific asset of the company.
C)Require the accounts of the company to be audited.
D)Specify a particular accounting method to be used.

Accepted Answer

Requiring a mortgage over a specific asset of the company would provide the most protection from default on the loan. In case of default, the lender could sell the asset and recover the amount owing. A and C are irrelevant as they do not provide additional protection from default, while D is impractical as it limits the company's accounting flexibility.

Question 16

Information if by its omission, misstatement or non-disclosure has the potential to influence economic decision-making, is regarded as:
A)reliable.
B)true and fair.
C)material.
D)objective.

Accepted Answer

Material information is information that could potentially influence economic decision-making. Therefore, option C is the correct answer. Options A, B, and D are incorrect because they may not necessarily be related to the concept of materiality.

Question 17

Which of the following statements is true about the order of repayment for a company in liquidation?
A)creditors rank before ordinary shareholders.
B)ordinary shareholders rank before preference shareholders.
C)wages owing to employees rank last.
D)All of the statements are true.

Accepted Answer

In liquidation, creditors have priority over shareholders in terms of repayment because they are owed money and have a legal claim on the company's assets. Preference shareholders have priority over ordinary shareholders, but both classes of shareholders rank behind creditors. Wages owing to employees are typically considered a priority debt and are therefore paid before any other unsecured creditors.

Question 18

Which of the following statements is incorrect? Under ASX Listing Rules, companies must:
A)attempt to follow best practice recommendations only if it is convenient.
B)identify reasons for not following the recommendations.
C)disclose if a recommendation is not met.
D)disclose if a disclosure is specifically required under a Rule.

Accepted Answer

Companies must attempt to follow best practice recommendations to the extent that it is appropriate for their particular circumstances, but they are not allowed to ignore them if it is inconvenient. Therefore, statement A is incorrect.

Question 19

The collapse of several companies earlier this century led to the establishment of a Royal Commission to investigate the contributing issues. Which of the following was not an identified issue?
A)Mismanagement.
B)Unsound management culture.
C)Ill-conceived decisions.
D)All of the above were identified as contributing issue

Accepted Answer

All of the identified issues (mismanagement, unsound management culture, and ill-conceived decisions) contributed to the collapse of the companies and were identified by the Royal Commission.

Question 20

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

Accepted Answer

The statement of comprehensive income shows all realised and unrealised gains and losses, including those that are not recognized in the traditional statement of financial performance. Therefore, options A, B, and D are incorrect because they do not accurately describe the differences between the two statements.

Quiz 5: Regulatory Framework for Companies

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.

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

Which of the following would be regarded as 'other comprehensive income'?

What is the system by which businesses are controlled and directed?

Which of the following organisations would be most likely to elect to order their assets on the statement of financial position according to liquidity?

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:

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

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

Which of the following are sources of regulation applicable to publicly listed companies in Australia?

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

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.

Which of the following is included in the statement of changes in equity?

Currently worldwide, most major economies have either adopted IFRSs or:

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

If you were asked to loan money to a company that you feared may be getting into financial difficulties, which of these courses of action would provide you with the most protection from default on the loan?

Information if by its omission, misstatement or non-disclosure has the potential to influence economic decision-making, is regarded as:

Which of the following statements is true about the order of repayment for a company in liquidation?

Which of the following statements is incorrect? Under ASX Listing Rules, companies must:

The collapse of several companies earlier this century led to the establishment of a Royal Commission to investigate the contributing issues. Which of the following was not an identified issue?

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