1) Choose the correct statement in regard to the dividends and the solvency test, given the following information.

The directors of Bustid Ltd, an IT company, are considering the payment of a $900,000 dividend from the companys current annual profit of $1,500,000. The last set of audited financial statements (before payment of the dividend) showed the following amounts:

	$
Current Assets	3,400,000
Intangible Assets	900,000
Property, Plant & Equipment (net)	3,900,000
Total Assets	8,200,000
Current Liabilities	2,100,000
Non-current Liabilities	4,500,000
	6,600,000

There was also a contingent liability, being a court case for a trademark dispute, which Bustids legal team estimate will cost the company around $500,000.

The intangible assets consist primarily of internally-developed computer software programs.

1. The dividends are permitted; the company satisfies the liquidity part of the solvency test; the liquidity part of the solvency test gives a positive figure, $400,000
2. The dividends are not permitted; the company does not satisfy the liquidity part of the solvency test; the liquidity part of the solvency test gives a negative figure, -$100,000
3. The dividends are permitted; the company satisfies the financial position (balance sheet) part of the solvency test; the financial position part of the solvency test gives a positive figure, $700,000
4. The dividends are permitted; the company satisfies the financial position (balance sheet) part of the solvency test; the financial position part of the solvency test gives a positive figure, $200,000

2) Choose the correct statement. The strike price for a dividend election plan is calculated by:

1. Taking the lowest market price a few days near to the date the election plan is being decided, less any discount that may be given
2. Taking the highest market price a few days near to the date the election plan is being decided, less any discount that may be given
3. Calculating the average market price a few days near to the date the election plan is being decided, and adding any discount that may be given
4. Calculating the average market price a few days near to the date the election plan is being decided, and deducting any discount that may be given

3) Choose the incorrect statement in regard to NZ IAS 1 and the disclosure requirements for company share capital and reserves

1. The rights, preferences and restrictions on various classes of shares should be disclosed
2. A company should disclose the number of shares issued, both fully paid and not fully paid
3. The statement of financial performance should disclose both capital and reserves
4. Equity capital and reserves should be disaggregated into various classes such as paid-in capital, share premiums and reserves

4) Choose the incorrect statement in regard to interim dividends

1. They are paid partway through (after the middle) the company's financial year
2. They are called interim because they are paid out between a changeover of directors
3. They are usually based on mid-year (six-monthly) results for the company
4. They should not be paid out if the company fails its solvency test

5) Choose the incorrect statement in regard to bonus share issues

1. Have the benefit of enabling the company to distribute tax-free capital gains to existing shareholders
2. Avoid problems associated with alternative distributions that involve cash flow
3. Involve the issue of partly paid-up shares to existing shareholders, in proportion to the shares they currently hold
4. Whether a bonus share issue is tax free is determined by the company and depends on the source of the issue