Question 1

Which statement in relation to a company is not correct?

Accepted Answer

A)   If the accounts are required to be audited, the auditors are appointed by the directors.
B)   The directors are appointed by the shareholders.
C)   The directors are required to report to the shareholders by means of financial statements.
D)   None of the above, i.e. all are correct statements.E) None of the above
F) A) and C)

Question 2

The company 'Raider Limited' must be:

Accepted Answer

A)   a public company.
B)   a private company.
C)   a proprietary company.
D)   none of the above.E) None of the above
F) B) and D)

Question 3

Which of these is an accounting entity?

Accepted Answer

A)   company
B)   sole trader
C)   partnership
D)   all of the aboveE) A) and D)
F) B) and D)

Question 4

The assumption that for reporting purposes the life of a business is divided up into a series of time periods of equal length is known as the:

Accepted Answer

A)   accounting period assumption.
B)   entity assumption.
C)   realisation assumption.
D)   matching assumption.E) A) and B)
F) A) and C)

Question 5

The accounting convention that means that accountants ignore inflation when preparing accounting reports is the:

Accepted Answer

A)   realisation convention.
B)   dual aspect convention.
C)   reliability convention.
D)   stable monetary unit convention.E) C) and D)
F) A) and D) D

Question 6

The statement that is true about the order of repayment for a company in liquidation is:

Accepted Answer

A)   creditors rank before ordinary shareholders.
B)   wages owing to employees rank last.
C)   ordinary shareholders rank before preference shareholders.
D)   All of the statements are true.E) A) and B)
F) A) and C)

Question 7

A bonus issue of shares by a company will:

Accepted Answer

A)   increase total shareholders' equity.
B)   reduce total shareholders' equity.
C)   sometimes increase shareholders' equity and sometimes leave it unchanged.
D)   leave total shareholders' equity unchanged.E) A) and B)
F) C) and D)

Question 8

The report that is specifically designed to provide an assessment of the credibility and reliability of the financial statements a company issues for external use, is the:

Accepted Answer

A)   trustee statement.
B)   audit report.
C)   director's statement.
D)   director's report.E) B) and D)
F) C) and D)

Question 9

The accounting assumption that a business will continue to operate into the foreseeable future is the:

Accepted Answer

A)   going concern assumption.
B)   accounting period assumption.
C)   entity assumption.
D)   historical cost assumption.E) A) and B)
F) A) and C)

Question 10

The three most common types of structure used by businesses in New Zealand are:

Accepted Answer

A)   sole trader, company, co-operative.
B)   sole trader, partnership, company.
C)   partnership, private company, trust.
D)   partnership, company, association.E) All of the above
F) A) and C) B

Question 11

The organisation that is currently the sole standard-setting body in New Zealand is the:

Accepted Answer

A)   New Zealand Institute of Chartered Accountants.
B)   Accounting Standards Review Board.
C)   External Reporting Board.
D)   New Zealand Exchange.E) A) and B)
F) A) and C) C

Question 12

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

Accepted Answer

A)   rely on the principle of limited liability
B)   require the accounts of the company to be audited
C)   specify a particular accounting method to be used
D)   require a mortgage over a specific asset of the companyE) B) and C)
F) A) and B)

Question 13

The statement relating to preference shares that is not correct is:

Accepted Answer

A)   They normally have a fixed rate of dividend attached.
B)   Holders are entitled to receive a dividend before ordinary shareholders.
C)   They are generally more risky for shareholders to own than ordinary shares.
D)   They are often non-voting shares.E) C) and D)
F) None of the above

Question 14

The feature that is not a characteristic of a company is:

Accepted Answer

A)   perpetual life.
B)   less government regulation than other types of entities.
C)   limited liability.
D)   legal entity.E) B) and D)
F) B) and C)

Question 15

Bonus shares are:

Accepted Answer

A)   shares issued to valued customers.
B)   shares issued at no cost to shareholders.
C)   shares issued to employees.
D)   shares issued to the board of directors.E) All of the above
F) B) and D)

Question 16

Which of these is an advantage of a private company compared with a partnership? 
i)  perpetual life
Ii)  easier transfer of ownership
Iii)  mutual agency
Iv)  limited liability

Accepted Answer

A)   i, ii, iii
B)   i, ii, iv
C)   ii, iii, iv
D)   i, iiE) None of the above
F) All of the above

Question 17

A company issued 300,000 ordinary shares to the public, priced at $1. The shares were payable as 50 cents on 1 July 2015 with 50 cents uncalled. How much cash was due to the company on 1 July 2015 from the issue?

Accepted Answer

A)   $300,000
B)   $150,000
C)   $250,000
D)   $100,000E) B) and C)
F) None of the above

Question 18

The legal entity is:

Accepted Answer

A)   sole trader.
B)   company.
C)   partnership.
D)   all of the above.E) All of the above
F) A) and B)

Question 19

Which of these is not a consequence of the status of a company as a separate legal entity?

Accepted Answer

A)   the right to enter into contracts in its own name
B)   the right to retain profits
C)   the obligation to pay taxation
D)   None of the above, i.e. all are consequences of the status of a company as a separate legal entity.E) A) and B)
F) B) and D)

Question 20

An investor invests in Canta Ltd by purchasing 1,000 shares for $2.50 each. In the following year the company distributes a 1 for 1 share dividend (bonus issue) . After the issue the number of shares held by the investor:

Accepted Answer

A)   will increase by 1000 and the market price of the shares will rise.
B)   will increase by 1000 and the market price of the shares will remain the same.
C)   will increase by 100 and the market price of the shares will fall.
D)   will increase by 1000 and the market price of the shares will fall.E) C) and D)
F) A) and B)

Exam 2: Different Accounting Entities

Which statement in relation to a company is not correct?

Correct AnswerverifiedShow Answer

The company 'Raider Limited' must be:

Correct AnswerverifiedShow Answer

Which of these is an accounting entity?

Correct AnswerverifiedShow Answer

The assumption that for reporting purposes the life of a business is divided up into a series of time periods of equal length is known as the:

Correct AnswerverifiedShow Answer

The accounting convention that means that accountants ignore inflation when preparing accounting reports is the:

Correct AnswerverifiedD

The statement that is true about the order of repayment for a company in liquidation is:

Correct AnswerverifiedShow Answer

A bonus issue of shares by a company will:

Correct AnswerverifiedShow Answer

The report that is specifically designed to provide an assessment of the credibility and reliability of the financial statements a company issues for external use, is the:

Correct AnswerverifiedShow Answer

The accounting assumption that a business will continue to operate into the foreseeable future is the:

Correct AnswerverifiedShow Answer

The three most common types of structure used by businesses in New Zealand are:

Correct AnswerverifiedB

The organisation that is currently the sole standard-setting body in New Zealand is the:

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

The statement relating to preference shares that is not correct is:

Correct AnswerverifiedShow Answer

The feature that is not a characteristic of a company is:

Correct AnswerverifiedShow Answer

Bonus shares are:

Correct AnswerverifiedShow Answer

Which of these is an advantage of a private company compared with a partnership? i) perpetual life Ii) easier transfer of ownership Iii) mutual agency Iv) limited liability

Correct AnswerverifiedShow Answer

A company issued 300,000 ordinary shares to the public, priced at $1. The shares were payable as 50 cents on 1 July 2015 with 50 cents uncalled. How much cash was due to the company on 1 July 2015 from the issue?

Correct AnswerverifiedShow Answer

The legal entity is:

Correct AnswerverifiedShow Answer

Which of these is not a consequence of the status of a company as a separate legal entity?

Correct AnswerverifiedShow Answer

An investor invests in Canta Ltd by purchasing 1,000 shares for $2.50 each. In the following year the company distributes a 1 for 1 share dividend (bonus issue) . After the issue the number of shares held by the investor:

Correct AnswerverifiedShow Answer

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B

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C

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