Testbank to accompany Company Accounting 10e

Testbank For Company Accounting 10e by Ken Leo, Jeffrey Knapp, Sue McGowan & John Sweeting Prepared by Peter Baxter 1 / 4

Testbank to accompany Company Accounting 10e © John Wiley & Sons Australia, Ltd 2015 1.2

Chapter 1: Nature and regulation of companies

Multiple-choice questions 1.The advantages of a company over a partnership and sole trader do not include which of the following?a.Members are able to sell their shares at any time to another person without having to obtain permission from the other members.b.Members are liable for only a limited amount of the company’s debts.c.A company has a legal existence distinct from its owners.*d. A company is only entitled to raise small amounts of cash by issuing shares.

Correct answer: d

Learning Objective 1.1 ~ summarise the nature and attributes of a company

2.In Australia, the Corporations Act 2001 is administered by the:

a.Australian Securities Exchange.b.Australian Accounting Research Foundation.*c. Australian Securities and Investments Commission.d.Securities and Exchange Commission.

Correct answer: c

Learning Objective 1.1 ~ summarise the nature and attributes of a company 3.The two main types of companies permitted to be registered under the Corporations Act

2001 are a:

a.private company, and a proprietary company.b.public company, and a trade union.*c. proprietary company, and a public company.d.proprietary company, and a partnership.

Correct answer: c

Learning Objective 1.2 ~ discuss the different types of companies which may be formed under the Corporations Act 2001 2 / 4

Chapter 1: Nature and regulation of companies

© John Wiley & Sons Australia, Ltd 2015 1.3 4.According to the Corporations Act 2001, a small proprietary company is one which satisfies at least two of the following tests: it must have consolidated revenue of less than

$25 million, consolidated gross assets of less than $12.5 million and:

a.total liabilities of less than $10 million.b.total liabilities of less than $20 million.c.fewer than 100 employees at the end of the financial year.*d. fewer than 50 employees at the end of the financial year.

Correct answer: d

Learning Objective 1.2 ~ discuss the different types of companies which may be formed under the Corporations Act 2001 5.A proprietary company must have at least one shareholder and cannot have more than: a.100 shareholders.*b. 50 shareholders.c.20 shareholders.d.500 shareholders.

Correct answer: b

Learning Objective 1.2 ~ discuss the different types of companies which may be formed under the Corporations Act 2001

6.A disclosing entity includes:

a.a company that is not a reporting entity.*b. an entity which has its shares listed on the ASX.c.an entity which issues its shares only to the company directors.d.a small proprietary company.

Correct answer: b

Learning Objective 1.2 ~ discuss the different types of companies which may be formed under the Corporations Act 2001 7.The certificate of registration issued by the Australian Securities and Investments

Commission is valid:

a.for 12 months only and must be renewed annually.b.for a maximum period of 5 years.c.for 15 years.*d. until the company is deregistered.

Correct answer: d

Learning Objective 1.3 ~ describe the necessary documentation for forming a company 3 / 4

Testbank to accompany Company Accounting 10e © John Wiley & Sons Australia, Ltd 2015 1.4 8.The replaceable rules built into the Corporations Act deal with which of the following?*a. Appointment, powers, remuneration and termination of directors.b.Meetings between the external auditors and the company’s audit committee.c.Remuneration of the external auditors.d.Annual dividend payments to members.

Correct answer: a

Learning Objective 1.3 ~ describe the necessary documentation for forming a company 9.The replaceable rules that apply to a company have effect as a contract between: a.the company and each member.b.the company and each director and company secretary.c.a member and each other member.*d. all of the above.

Correct answer: d

Learning Objective 1.3 ~ describe the necessary documentation for forming a company

10.The share capital of a company may consist of:

*a. ordinary or preference shares issued by the company either fully paid or partly paid.b.loans from banks.c.secured and unsecured notes issued by the company.d.debentures issued by the company.

Correct answer: a

Learning Objective 1.5 ~ compare and contrast shares and debentures, and discuss the reasons for issuing disclosure documents 11.The main role of the trustee for debenture holders is to protect the interests of: a.suppliers.*b. debenture holders.c.directors.d.employees.

Correct answer: b

Learning Objective 1.5 ~ compare and contrast shares and debentures, and discuss the reasons for issuing disclosure documents

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