FAC2601 QUESTION BANK (SEMESTER 1 & SEMESTER 2)

CONTENTS LU 1: Introduction to company financial statements ...................................................... 3 LU 2: The Framework of accounting .................................... Error! Bookmark not defined. LU 3: Presentation of annual financial statements – IAS 1 Error! Bookmark not defined. LU 4: Inventory – IAS 2 ......................................................... Error! Bookmark not defined. LU 5: Property, Plant and equipment – IAS 16 .................... Error! Bookmark not defined. LU 6: Investment Property – IAS 40 ..................................... Error! Bookmark not defined. LU 7: Leases – IAS 17 ............................................................ Error! Bookmark not defined. LU 8: Financial instruments – IFRS 9, IAS 32, IAS 39 ......... Error! Bookmark not defined. LU 9: Revenue from contracts with customers – IFRS 15 .. Error! Bookmark not defined. FAC2601/QUESTION BANK 3 LU 1: INTRODUCTION TO COMPANY FINANCIAL STATEMENTS MULTIPLE CHOICE QUESTIONS Answer the following multiple choice questions. Indicate your choice by selecting only 1, 2, 3 or 4 for each question answered. 1. Which one of the following statements with regards to the Companies Act 71 of 2008 is incorrect? 1. The Memorandum of Association was previously (Companies Act 61 of 1973) known as the Memorandum of Incorporation. 2. The capital of a company is not divisible and it is therefore impractical to open a capital account for each member. 3. A company is a legal entity that is incorporated in terms of the Companies Act 71 of 2008 and it is independent of its owners. 4. Public companies may be listed on the Johannesburg Stock Exchange which promotes the marketability of their shares. 2. The authorised share capital is: 1. The total number of shares issued to shareholders. 2. The total amount of paid up share capital by shareholders. 3. The maximum share capital mentioned in the Memorandum of Incorporation. 4. Always equal to the ordinary share capital. SHARE TRANSACTIONS Questions 3 to 5 are based on the following information: The following information regarding share capital in the accounting records of Mulan Ltd was obtained on 28 February 2014: R Ordinary share capital at date of incorporation ...................................................................... 3 000 000 Proceeds on 1 000 000 ordinary shares issued – 31 August 2013 ....................................... 1 300 000 10 000 12% Cumulative preference shares .......................................................................... 200 000 Additional information: a) 2 400 000 Ordinary shares were issued at incorporation on 1 March 2011, while the cumulative preference shares were issued on 1 March 2012. b) The following decision was made by the directors and must still be recorded: A capitalisation issue of shares must be made on 31 December 2013 to ordinary shareholders in the ratio of one ordinary share, at R1.50, for every 5 ordinary shares held. c) An ordinary dividend of 10c per share was declared by the company to shareholders registered on 28 February 2014. No dividends were declared or paid by the company in the previous financial year. 3. The number of ordinary shares issued to the public before the capitalisation issue is: 1. 1 000 000 shares 2. 4 000 000 shares 3. 3 400 000 sha