Multiple Choice Questions
1. A business organised as a separate legal entity that is owned by shareholders is a:
a. Partnership.
b. Company.
c. Sole trader.
d. Legal partnership.
2. The shareholders' equity section of the balance sheet for a public company includes:
a. Share capital (contributed equity).
b. Retained earnings.
c. Reserves.
d. All of the above.
3. Retained earnings represent a part of owner's equity resulting from profit that:
a. Was paid in by the original shareholders.
b. Has not been distributed as a dividend.
c. Must be paid to the government in the form of GST.
d. Must be used when a company makes a call on capital.
4. Equity finance for a sole trader comes from:
a. The issue of shares to the public.
b. Borrowings from financial institutions.
c. The owner and retained earnings.
d. Government loans.
5. Partnerships are most common among:
a. Doctors.
b. Accountants.
c. Lawyers.
d. All of the above.
6. For a partnership to be legal, the agreement should:
a. Be in writing.
b. Indicate a sharing of a bank account.
c. Indicate how profits and losses are to be shared.
d. Have any one or more of the above characteristics.
7. In Australia, a trust:
a. Is an obligation on a person to hold property for the benefit of beneficiaries.
b. Pays income tax on net profit.
c. Has unlimited liability.
d. Has all of the above characteristics.
8. An advantage of a trust as a form of business structure is that it:
a. Is simple to set up, just like a sole trader or partnership.
b. Is generally tax effective.
c. Possesses limited liability.
d. Has all of the above characteristics.
9. Under a discretionary trust, a trustee can distribute income and assets:
a. According to government acts.
b. Using wide discretionary powers.
c. According to specific items in the Corporations Act.
d. As advised by the principal beneficiary.
10. A sole trader in Australia is taxed at:
a. The company tax rate of 30 per cent
b. The same as the rate of capital gains tax for the owner.
c. The owner's marginal tax rate.
d. Both the rates in (b) and (c) above.