Chapter 20 - Multiple choice quiz

The duties of the liquidator include:

I	take possession of the company's assets.
II	determine the creditors and order of payment.
III	distribution of funds to shareholders.
IV	report to the court on completion of the winding-up.

A.	I, and II only;

B.	I, II and III only;

C.	II, III and IV only;

D.	I, II, III and IV.

Which of the following is not entitled to make an application to the court for an insolvent company to be wound up?

A.	the company itself;

B.	a director of the company;

C.	an administrator

ASIC.

Which of the following is a ground under s. 461 of the Corporations Act on which the court can order a winding-up?

I the company has no members;
II the company has not commenced business within one year of incorporation;
III the court is of the opinion that it is just and equitable that the company be wound up;
IV the company has resolved that it be wound up by the court.

I and IV;

B.	I, II and III;

C.	II, III and IV;

D.	I, II, III and IV.

Which of the following is not required to be reported in a Report as to Affairs (Form 507)?

A.	Cost or carrying amount of assets not subject to a specific charge;

B.	Estimated realisable value of assets subject to a specific charge;

C.	Names and addresses of sundry debtors;

D.	Names and addresses of major shareholders.

The Report as to Affairs (Form 507) is required to be prepared by:

A.	members of the company;

B.	directors of the company;

C.	creditors of the company;

D.	the liquidator;

The preliminary report required to be submitted to ASIC by the liquidator is required to contain which of the following?

I the estimated assets and liabilities of the company;
II the causes of company failure;
III any expected surplus or deficiency of assets after deducting creditor's claims;
IV details of shares issued, subscribed and paid-up.

I and IV;

B.	I, II and III;

C.	I, III and IV;

D.	I, II,and IV

A declaration of solvency is required to be signed by the directors of the company in order for:

A.	the liquidation to proceed as a creditors voluntary winding-up;

B.	the liquidation to proceed as a members voluntary winding-up;

C.	the court to make an order for liquidation;

D.	a liquidator to resign and the company to continue trading.

A voluntary winding-up commences when:

A.	the members of the company pass a special resolution to wind up;

B.	an application is filed with the court by the members of the company;

C.	the company is unable to pay its debts;

D.	an unpaid creditor applies for the winding up.

Under a member's voluntary winding-up, the directors of the company are required to prepare the following documents:

I statement of affairs;
II summary of affairs;
III preliminary liquidation report;
IV declaration of solvency.

I and IV;

B.	I, II and III;

C.	I, III and IV;

D.	I, II,and IV

10.

Under a creditor's voluntary winding-up, the directors of the company are required to prepare the following documents:

I	statement of affairs;
II	declaration of solvency;
III	preliminary liquidation report;
IV	summary of affairs.

I and IV;

B.	I, II and III;

C.	I, III and IV;

D.	I, II,and IV

11.

Under a court ordered winding-up a liquidator has the power to:

I	enter into legal proceedings on behalf of the company;
II	dispose of the property of the company;
III	use any legal methods to obtain money from a debtor;
IV	fix the time when debts and claims must be proved.

I and IV;

B.	I, II and III;

C.	I, III and IV;

D.	I, II,and IV

12.

In relation to the order of priority of payment of debts upon liquidation, which statement is correct?

A.	ordinary unsecured creditors rank before preferential unsecured creditors;

B.	preferential unsecured creditors rank before deferred creditors;

C.	the Crown ranks before ordinary unsecured creditors;

D.	creditors secured by a floating charge rank before creditors secured by a specific charge.

13.

The party with the highest priority in a court ordered winding-up is:

A.	the liquidator;

B.	creditors secured via a floating charge;

C.	workers compensation insurers;

D.	employees.

14.

Assuming a company is unable to pay all its debts, which of the following statements are correct regarding the order in which creditors are paid?

I	there is an order of repayment for preferential unsecured creditors;
II	there is an order of repayment for ordinary unsecured creditors;
III	all ordinary unsecured creditors rank equally;
IV	deferred creditors debts rank after all unsecured creditors.

I and IV;

B.	I, II and III;

C.	I, III and IV;

D.	I, II,and IV

15.

The realisation of assets is accounted for in a company's records by using which of the following ledger accounts?

A.	liquidators cash;

B.	contributories reserve;

C.	gain on sale;

D.	consideration on sale.

16.

The existence of Accumulated Losses at the commencement of a winding-up will:

A.	increase any deficiency calculated in the Liquidation account;

B.	decrease any deficiency calculated in the Liquidation account;

C.	have no effect on any deficiency calculated in the Liquidation account;

D.	increase cash available.

17.

The details below were extracted from the accounting records of CM Ltd (a company in the process of liquidation):

	$
10,000 $1 preference shares fully paid	10,000
30,000 $1 ordinary shares paid to 50 cents	15,000
	25,000
Cash available (after payment of all creditors)	2,500

Assume that the constitution of CM Ltd states that in the event of liquidation, all shares are to rank equally, based on the number of shares held, in distributing any surplus or deficiency.
For preference shareholders, what is the amount of the actual refund or call?

A.	a refund of $8,125;

B.	a call of $8,125;

C.	a refund of $2,500;

D.	a call of $5,625.

18.

The details below were extracted from the accounting records of CM Ltd (a company in the process of liquidation):

	$
10,000 $1 preference shares fully paid	10,000
30,000 $1 ordinary shares paid to 50 cents	15,000
	25,000
Cash available (after payment of all creditors)	2,500

Assume that the constitution of CM Ltd states that in the event of liquidation, all shares are to rank equally, based on the number of shares held, in distributing any surplus or deficiency.
For ordinary shareholders, what is the amount of the actual refund or call?

A.	a refund of $2,500;

B.	a refund of $5,625;

C.	a call of $5,625;

D.	a call of $15,000.

19.

The details below were extracted from the accounting records of CM Ltd (a company in the process of liquidation):

	$
10,000 $1 preference shares fully paid	10,000
30,000 $1 ordinary shares paid to 50 cents	15,000
	25,000
Cash available (after payment of all creditors)	2,500

Assume that the constitution of CM Ltd states that in the event of liquidation, all shares are to rank equally, based on the number of shares held, in distributing any surplus or deficiency.
What will be the deficiency or surplus apportioned to preference shareholders?

A.	a surplus of $11,875;

B.	a deficiency of $11,875;

C.	a surplus of $27,500;

D.	a deficiency of $27,500.

20.

The details below were extracted from the accounting records of CM Ltd (a company in the process of liquidation):

	$
10,000 $1 preference shares fully paid	10,000
30,000 $1 ordinary shares paid to 50 cents	15,000
	25,000
Cash available (after payment of all creditors)	2,500

Assume that the constitution of CM Ltd states that in the event of liquidation, all shares are to rank equally, based on the number of shares held, in distributing any surplus or deficiency.
What will be the deficiency or surplus apportioned to ordinary shareholders?

A.	a surplus of $17,500;

B.	a deficiency of $17,500;

C.	a surplus of $35,625;

D.	a deficiency of $35,625.

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