Question 1(10 x 2 = 20 marks)

This question has 10 sub questions each worth two marks. For each question you must answer if the statement is true or false. This carries one mark. You must give a brief explanation no longer than in sample response.This carries one mark as well.

Sample question

Entities can only classify investments in other entities as subsidiaries if they actually exercise control over the financial and operating policies of an entity.

Sample response

The statement is false (one mark). An entity only needs to have the capacity to control, but does not have to be actively exercising such control (one mark).

1. Members of a company are allowed to sell their shares at any time, provided they obtain permission from the other members.

2. Australian accounting standards are now identical to their equivalent International Financial Reporting Standards (IFRSs).

3. Prior to the allotment/issue of shares, the balance in the application account represents a liability of the company to the applicants.

4. If a company forfeits shares and the company's constitution is silent in relation to reissue of the shares, the company is entitled to keep any balance in the account after reissue, payment of unpaid calls and interest and administrative costs.

5. The acquisition date is the date on which the contract between the acquirer and acquiree is signed.

6. General purpose financial statements are prepared for users who depend on those reports for information to enable them to make decisions about the allocation of scarce resources.

7. Winding up of a company only ever arises from the issuing of an order from the court.

8. The elimination of the full effects of intragroup transactions is required in the preparation of consolidated financial statements.

9. An entity must present a complete set of financial statements at least annually.

10. The consolidation process involves making adjustments to the individual financial statements and ledger accounts of the entities within the group.