Valid CIMAPRA19-F02-1-ENG Exam Real Questions

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F2 Advanced Financial Reporting CIMAPRA19-F02-1-ENG exam real quesitons are valid in the preparation. Many customers have studied the updated CIMAPRA19-F02-1-ENG questions to prepare for the test. Free CIMA certification CIMAPRA19-F02-1-ENG exam real questions are available below.

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1. LM is a car dealer that is supplied inventory by car manufacturer SQ. Trading between LM and SQ issubject to a contractual agreement.

This agreement states the following:

• Legal title of the cars remains with SQ until they are sold by LM to a third party.

• Upon notification of sale to a third party by LM, SQ raises an invoice at the price agreed at the original date of delivery to LM.

• LM has the right to return any car at any time without incurring a penalty.

• LM is responsible for insuring all of the cars on its property.

When considering how these cars should be accounted for, which THREEof the following statements aretrue?

The most significant risks attached to the cars are held by L

The most significant risks attached to the cars are held by S

SQ should recognise the cars as inventory in their financial statements.

LM should recognise the cars as inventory in their financial statements.

SQ should recognise revenue when the cars are delivered to L

When LM sells a car to a third party, SQ should recognise the revenue associated with that sale.

2. The following information relates to DEF for the year ended 31 December 20X7:

• Property, plant and equipment has a carrying value of $3,500,000 and a tax written down value of $2,500,000.

• There are unused tax losses to carry forward of $1,250,000. These tax losses have arisendue topoor trading conditions which are not expected to improve in the foreseeable future.

• The corporate income tax rate is 25%.

In accordance with IAS 12 Income Taxes, the financial statements of DEF for the year ended 31 December 20X7 would recognise deferred tax balances of:

Option A

Option B

Option C

Option D

3. As at 31 October 20X7 TU's financial statements show the entity having profit after tax

of $600,000 and 900,000 $1 ordinary shares in issue.There have been no issues of shares during the year. At 31 October 20X7 TU have 300,000 share options in issue, which allow the holders to purchase ordinary shares at $2 a share in 3 years' time. The average price of the ordinary shares throughout the year was $5 a share.

What is the diluted earnings per share for the year ended 31 October 20X7?

66.7 cents

58.8 cents

50.0 cents

55.6 cents

4. Which of the following reduce the usefulness of ratio analysis when comparing entities that operate in the same industry? Select ALL that apply.

The revenue figure being aggregated from many different activities and sources.

Accounting estimates in respect of depreciation being different between entities.

The effect of a material and unusual item being disclosed separately in the notes.

An entity adopting a policy of revaluing its non current assets.

Ratio calculations being based on historical information.

Ratios being quick and easy to calculate.

5. On 1 January 20X7 GH purchased plant and equipment at a cost of $400,000. The temporary differences in respect of this plant and equipment at 31 December 20X7 and 20X8 have been calculated as follows:

Assume that there are no other temporary differences in the periods and that the corporate income tax rate is 25%. GH is expected to have significant taxable profits in the future.

Which of the following is the correct impact in GH's statement of financial position at 31 December 20X8 in respect of deferred tax?

Increase in the deferred tax asset.

Increase in the deferred tax liability.

Decrease in the deferred tax asset.

Decrease in the deferred tax liability.

6. CORRECT TEXT

F has profit before interest and tax of $400,000 for the year to 30 June 20X4.

Extracts from F's statement of financial position at 30 June 20X4 are as follows:

Calculate the gearing (debt:equity) ratio at 30 June 20X4.

Give your answer to the nearest whole percentage.

? %

7. ST granted 1,000 share appreciation rights (SARs) to its 100 employees on 1 December 20X7. To be eligible, employees must remain employed for 3 years from the grant date. In the year to 30 November 20X8, 10 staff left and a further 20 were expected to leave over the following two years. The fair value of each SAR was $12 at 1 December 20X7 and $15 at 30 November 20X8.

What is the accounting entry to record this transaction for the year to 30 November 20X8?

Dr Staff costs $350,000, Cr Non-current liabilities $350,000

Dr Staff costs $350,000, Cr Equity $350,000

Dr Staff costs $280,000, Cr Non-current liabilities $280,000

Dr Staff costs $280,000, Cr Equity $280,000

8. LM is preparing its consolidated financial statements for the year ended 30 April 20X5. During the year LM acquired 30% of the equity shares of AB giving it significant influence over AB.

LM conducted ratio analysis comparing the financial performance of the group for 30 April 20X4 and 20X5.

Which of the following ratios would not be comparable as a result of the acquisition of AB?

Operating profit margin.

Return on capital employed.

Earnings per share.

Interest cover.

9. CORRECT TEXT

A convertible bond with a nominal value of $100 can be redeemed at par in 5 years' time or be converted into 1 new equity share for every $5 of bond held.

The current equity share price is $3.50 and it is anticipated that this will grow at a rate of 7% per year.

What is the value of the conversion option of the bond in 5 years' time?

Give your answer to two decimal places.

$ ?

10. HJ is currently in dispute with an employee, who is claiming $400,000 in a legal case against them.

HJ's legal advisors have stated that it is probable that they will lose the case and will have to pay the amount claimed.

Also, HJ are claiming $250,000 from a supplier of defective goods and the legal advisors have stated that it is probable that HJ will be successful in this claim.

What is the correct accounting treatment for these two items in HJ's financial statements?

Provide for the $400,000 potential outflow and disclose the $250,000 potential inflow.

Provide for the $400,000 potential outflow and recognise the $250,000 potential inflow.

Disclose the $400,000 potential outflow and disclose the $250,000 potential inflow.

Disclose the $400,000 potential outflow and recognise the $250,000 potential inflow.

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11. CORRECT TEXT

AB acquired its subsidiary on 1 January 20X7 when the fair value of net assets was the same as book value with the exception of property, plant and equipment that had a fair value $500,000 higher than carrying value.

These assets were assessed to have a remaining useful life of 5 years from the date of acquisition.

What is the net consolidation adjustment to the property, plant and equipment balance at 31 December 20X9?

Give your answer to the nearest whole number (in '$000s).

$?

12. CORRECT TEXT

Which of the following is the correct calculation for basic earnings per share in accordance with IAS 33 Earnings Per Share?

13. RST sells computer equipment and prepares its financial statements to 31 December.

On 30 September 20X5 RST sold computer software along with a two year maintenance package to a customer. The customer is given the right to return the goods within six months and claim a full refund if they are notsatisfiedwith the computer software. The risk of return is considered to be insignificant for RST.

How should the revenue from this transaction and the right of return be recognised in the financial statements for the year ended 31 December 20X5?

Recognise 100% of the revenue from both the sale of goods and the maintenance contract and create a provision for the anticipated level of returns.

Do not recognise any revenue from the sale of goods or the maintenance contract and do not create a provision for the anticipated level of returns.

Recognise 12.5% of the revenue from both the sale of goods and the maintenance contract and do not create a provision for the anticipated level of returns.

Recognise 100% of the revenue from the sale of goods,12.5% of the revenue from the maintenance contract and create a provision for the anticipated level of returns.

14. LM and JK operate in the same country and prepare their financial statements to 30 June 20X6 in accordance with International Accounting Standards. On 27 June 20X6 both entities raised $1 million cash by issuing debt instruments with identical terms and conditions. Prior to this issue both entities were financed entirely by equity.

At 30 June 20X6 the gearing ratios, calculated as Debt/Equity x 100%, were as follows:

LM: 30%

JK: 65%

Which of the following independent options would explain the difference between LM and JK's year-end gearing?

LM revalued its land and buildings upwards in the year; JK has performed no revaluations.

LM made a bonus issue from retained earnings in the year; JK issued no shares in the year.

LM had 100,000 $1 shares at the year end; JK had 200,000 50c shares in issue at the year end.

LM held no investments in other entities; JK revalued its available for sale investments upwards in the year.

15. CORRECT TEXT

AB acquired an investment in a debt instrument on 1 January 20X5 at its nominal value of $25,000, which it intends to hold until maturity. The instrument carried a fixed coupon interest rate of 5%, payable in arrears. Transactions costs of $5,000 were paid in respect of this investment. The effective interest rate applicable to this instrument was estimated at 9%.

Calculate the value of this investmentthat AB will include in its statement of financial position at 31 December 20X5.

Give your answer to the nearest whole number.

$ ?

16. Which THREE of the following statements are true in relation to financial assets designated as fair value through profit or loss under IAS 39 Financial Instruments:

Recognition and Measurement?

Shares in another entity held for short term trading purposes fall within this category.

Transaction costs in relation to these assets are expensed to profit or loss on acquisition.

Transaction costs in relation to these assets are added to the initial cost of the asset on acquisition.

The gain or loss on the subsequent measurement of these assets is recorded within other comprehensive income.

The gain or loss on the subsequent measurement of these assets is recorded within profit for the year.

Once the asset has been subsequently measured to fair value an impairment review is undertaken.

17. MNO has calculated its return on capital employed ratio for 20X4 and 20X5 as 41% and 56% respectively.

Taking each statement in isolation, which would explain the movement in the ratio between the 2 years?

In 20X5 the average interest rate on borrowing decreased compared to 20X4.

In 20X4 an onerous contract was provided for and this provision did not change in 20X5.

In 20X5 the increase in value of MNO's head office was reflected in the financial statements.

In 20X4 an unused building was sold at a price in excess of its carrying value.

18. PQ and WX are similar sized entities and operate in the same industry within Country X. Both operate from a single warehouse and have similar levels of non current asset resources.

The following ratios have been calculated at 31 October 20X8:

If considered individually, which of the following would limit the usefulness of these ratios in assessing the comparative financial performances of PQ and WX?

Depreciation of warehouses being charged to cost of sales by PQ and distribution costs by W

Operating lease rentals for plant and equipment being charged to administration expenses by PQ and distribution costs by W

Year end review of equipment resulting in WX charging an impairment loss while PQ's equipment is not impaired.

Increased prices for raw materials, which was passed on to customers by both entities.

19. On 1 January 20X7 GH purchased plant and equipment at a cost of $400,000.

The temporary differences in respect of this plant and equipment at 31 December 20X7 and 20X8 have been calculated as follows:

Assume that there are no other temporary differences in the periods and that the corporate income tax rate is 25%. GH is expected to have significant taxable profits in the future.

Which of the following is the correct impact in GH's statement of financial position at 31 December 20X8 in respect of deferred tax?

Increase in the deferred tax asset.

Increase in the deferred tax liability.

Decrease in the deferred tax asset.

Decrease in the deferred tax liability.

20. FGH plans to issue a large number of shares to the public via an IPO.

It is considering either an offer for sale at a fixed price or an offer for sale by tender.

Which of the following would be an advantage to FGH of using the offer for sale by tender compared to the fixed price offer?

The shares will be sold to different investors at differing values thus maximising the capital raised.

There would be more certainty over the issue price of the shares.

There is potential for reaching a higher share price thus maximising capital raised.

Tenders are more attractive to less sophisticated investors thus maximising potential investment.

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21. LM granted 100 share options to each of its 400 employees on 1 January 20X7. The options will only vest if employees remain with LM for 3 years from the grant date. The fair value of each share option was $5 on 1 January 20X7.

20 employees left in the year to 31 December 20X7 and at that date it was estimated that a further 35 would leave over the following two years.

Which of the following journal entries did LM process to account for the share options in the year to 31 December 20X7, in accordance with IFRS2 Share-based Payments?

Dr Profit or loss $57,500 ; Cr Other reserves within equity $57,500

Dr Profit or loss $57,500 ; Cr Liabilities $57,500

Dr Profit or loss $172,500 ; Cr Other reserves within equity $172,500

Dr Profit or loss $172,500 ; Cr Liabilities $172,500

22. Which of the following options provides a representation of how the non controlling interest in FG is measured in CD's consolidated statement of financial position at 31 December 20X8?

• FV of NCI at acquisition; plus • NCI's share of post acquisition reserves of FG; plus • NCI's share of accumulated exchange differences arising on goodwill of F

• FV of NCI at acquisition; plus • NCI's share of post acquisition reserves of FG; plus • NCI's share of exchange difference arising on goodwill of FG for the year.

• FV of NCI at reporting date; plus • NCI's share of post acquisition reserves of FG; plus • NCI's share of exchange difference arising on goodwill of FG for the year.

• FV of NCI at reporting date; plus • NCI's share of group reserves; plus • NCI's share of accumulated exchange differences arising on goodwill of F

23. Which of the following is a related party according to the definition of a related party in IAS24 Related Party Disclosures?

Major customer

Provider of finance

Managing Director

Major supplier

24. When preparing a consolidated statement of cash flows, which of the following describes the correct presentation of an associate's dividends?

Dividends received from the associate in cash flows from investing activities

Dividends received from the associate in cash flows from operating activities

Dividends paid by the associate in cash flows from financing activities

Dividends paid by the associate in cash flows from investing activities

25. Which of the following actions would be most likely to improve an entity's gross profit margin?

Negotiating with trade suppliers for a bulk purchase discount

Offering increased credit to customers

Reducing administrative expenses by 10%

Writing down the value of obsolete inventories

26. XY acquired 75% of the equity shares of LM on 31 December 20X3. LM acquired 60% of the equity shares of JK on 31 December 20X4 for $950,000. XY measured the non controlling interest in JK at the date of acquisition using the proportionate share of the fair value of the net assets acquired. The fair value of JK's net assets was $850,000 at 31 December 20X4.

What is the value of goodwill that XY will include in its consolidated statement of financial position at 31 December 30X4 in respect of JK as a result of gaining indirect control?

$330,000

$202,500

$567,500

$440,000

27. CORRECT TEXT

LM acquired 15% of the equity share capital of ST on 1 January 20X6 for $18 million. LM acquired a further 50% of the equity share capital of ST for $50 million on 1 January 20X7 when the fair value of ST's net assets was $82 million. The original 15% investment in ST had a fair value of $20 million at 1 January 20X7. The non controlling interest in ST was measured at its fair value of $30 million at the date control in ST was acquired.

Calculate the goodwill arising on the acquisition of ST that LM included in its consolidated financial statements at 31 December 20X7.

Give your answer to the nearest $ million.

$ ? million

28. GH acquired 3,000,000 of the 12,000,000 equity shares of JK. All shares carried equal voting rights and no other single shareholder of JK held more than 10% of the equity shares. GH has the power to participate in the financial and operating policy decisions but not control them.

Based on the information provided above, how would GH's investment in JK be accounted for in its consolidated financial statements?

Associate

Joint venture

Joint arrangement

Financial asset

29. RS is a listed entity that has no subsidiaries although its Finance Director is also a director of TU, an unconnected entity.

It is preparing its financial statements to 30 September 20X6.

Which of the following substantial transactions must be disclosed in these financial statements in accordance with IAS 24 Related Party Disclosures?

Pension payments made on behalf of the Managing Director of R

Purchase of production materials from TU at a discounted price to the current market value.

Sale of finished goods to TU at normal selling price.

Performance related bonus payments made to the office staff for the year.

30. Which of the following is NOT an example of an unconsolidated structured entity as defined in IFRS12 Disclosure of Interests in Other Entities?

A post-employment benefit plan

A securitisation vehicle

An asset-backed financing scheme

An investment fund

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31. An entity undertakes an issue of new debt which has the effect of reducing the entity's weighted average cost of capital (WACC).

Which of the following would best explain why the WACC will have fallen?

The entity was 100% equity financed prior to the issue of the debt.

The risk to the shareholders has reduced leading to a fall in the cost of equity.

The new debt is being used to replace existing debt that had a lower cost.

The new debt is being used to replace existing debt that had the same cost.

32. Which of the following is a related party according to the definition of a related party in IAS24 Related Party Disclosures?

Major customer

Provider of finance

Managing Director

Major supplier

33. XY has a weighted average cost of capital (WACC) of 12%. The debt: equity ratio is 1:3 and this is considered low for the industry. XY needs to raise finance to purchase new machinery in the coming year.

Which of the following forms of finance is most likely to increase the WACC?

Rights issue of equity shares

6% bank loan

8% preference shares

Finance lease

34. The dividend yield of ST has fallen in the year to 31 May 20X5, compared to the previous year.

The share price on 31 May 20X4 was $4.50 and on 31 May 20X5 was $4.00. There were no issues of share capital during the year.

Which of the following should explain the reduction in the dividend yield for the year to 31 May 20X5 compared to the previous year?

The dividend paid in the year was reduced in order to pay for new assets.

Surplus cash was used to pay a special dividend in addition to the normal dividend in the year.

The profit for the year fell significantly and the dividend per share stayed the same.

To compensate investors for the reduction in share price a higher dividend per share was paid.

35. CORRECT TEXT

AB acquired 10% of the equity share capital of XY for $180 million in 20X4. On 1 January 20X8 AB acquired a further 45% of the equity share capital of XY for $900 million and at that date the original investment had a fair value of $200 million.

Place the correct values in the boxes below in order to complete the consideration transferred element of the goodwill calculation on the acquisition of XY.

36. LM acquired 80% of the equity shares of ST when ST's retained earnings were $50 million.

The fair value of the net assets of ST included a contingent liability with a fair value of $100 million at the date of acquisition and a fair value of $40 million at 31 December 20X6.

No other fair value adjustments were required at the date of acquisition.

LM and ST had retained earnings of $200 million and $80 million respectively at 31 December 20X6.

The consolidated retained earnings of LM at 31 December 20X6 were:

$164 million

$176 million

$272 million

$284 million

37. DRAG DROP

AAA is the only director of entity CD. AAA is also a director of entity GH. CD owns 30% of the equity of MN and 60% of the equity of OP.

Identify which of the following are related parties of CD by placing the appropriate response against one.

38. LM acquired 80% of the equity shares of ST when ST's retained earnings were $50 million.

The fair value of the net assets of ST included a contingent liability with a fair value of $100 million at the date of acquisition and a fair value of $40 million at 31 December 20X6.

No other fair value adjustments were required at the date of acquisition.

LM and ST had retained earnings of $200 million and $80 million respectively at 31 December 20X6.

The consolidated retained earnings of LM at 31 December 20X6 were:

$164 million

$176 million

$272 million

$284 million

39. UV entered into a five year non-cancellable operating lease for an asset two years ago.

Lease payments are settled annually in arrears.

At the year end, UV no longer requires this leased asset as they have decided to discontinue the product line that it was used for.

At this date UV had made two out of the five lease payments.

Which of the following statements about the unavoidable lease payments is true in accordance with IAS 37 Provisions, Contingent Liabilities and Assets?

A provision should be recognised for the unavoidable lease payments with a corresponding charge to profit or loss.

A provision should be recognised for the unavoidable lease payments with a corresponding charge to other comprehensive income.

The amount of the unavoidable lease payments should be disclosed in the financial statements with no corresponding accounting entry.

The amount of the unavoidable lease payments should be ignored in the financial statements.

40. Which of the following statements is true in respect of ST's gross profit margin based on the information given?

Gross profit margin has increased as a result of management negotiating a premium price for the contract with the new customer.

Economies of scale have been achieved from increased revenues resulting in a reduction in the gross profit margin.

The associate's gross profit margin is greater than ST's leading to an overall increase in ST's margin.

Gross profit margin has reduced due to the increased cost of the new contract.

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41. CORRECT TEXT

LK acquired 100% of the equity shares of TU on 1 January 20X4. LK disposed of 60% of TU for £2,400,000 on 30 September 20X4. The sale proceeds reflected the fair value of TU's shares on that date.

The remaining 40% shareholding gave LK the ability to exercise significant influence

over the activities of TU. TU reported profit of $1,800,000 for the year ended 31 December 20X4 and this accrued evenly throughout the year.

Calculate the investment in associate that will be presented in LK's consolidated statement of financial position as at 31 December 20X4.

Give your answer to the nearest whole $'000.

$ 000

42. An accountant acting under their Code of Ethics would do which THREE of the following?

Resist pressure from the directors to recognise revenue on sales where the risks and rewards have not transferred to the customer.

Report material conflicts of interest to a more senior level.

Reject a justified change to a depreciation policy that increases profitability.

Accept a recommendation from the audit committee to increase segregation of duties within the finance department.

Make a provision for a liability of uncertain timing or amount, requested by the directors, where there is NOT a present obligation.

Accept a director's instruction to remove one element of their remuneration from the directors' remuneration report.

43. Following a wedding in October 20X0 ten people contracted food poisoning from eating food cooked by the wedding caterer PQ. At 31 December 20X0 PQ was advised by its legal advisors that a liability was possible but not probable and the incident was disclosed as a contingent liability at that date.

As the result of developments in the case, which is still not settled, PQ was advised that it is now probable, as at 31 December 20X1, that they will be found liable and will therefore have to pay damages of unknown value.

Which of the following would indicate that in the financial statements of PQ for the year ended 31 December 20X1 this should still be recognised as a contingent liability rather than a provision?

There is no reliable estimate of the cost.

A present obligation exists as a result of a past event.

It is probable that there will be an outflow of economic resources to settle the case.

The case has not yet been settled.

44. Entity A entered into a 3 year operating lease on 1 April 20X3. The rentals are £5,000 a year payable in advance with an additional payment of $1,800 payable on 1 April 20X3.

The rental expense to be included in the statement of profit or loss for the year ended 31 December 20X3 will be:

$4,200

$5,000

$6,800

$5,600

45. The consolidated statement of profit or loss for VW for the year ended 30 September 20X7 includes the following:

What is VW's interest cover for the year ended 30 September 20X7?

4.5

3.3

4.1

5.1

46. EF obtained a government licence, free of charge, to operate a silver mine in 20X7 and $5 million was spent on preparing the site. The mine commenced operation on 1 January 20X8. The licence requires that at the end of the mine's useful life of 20 years, the site above ground must be reinstated to its original position.

EF estimated that the cost in 20 years' time of this reinstatement will be $3 million, which has a present value of $1 million at 1 January 20X8.

Which THREE of the following describe how the cost of the reinstatement of the site should be treated in the financial statements of EF in the year ended 31 December 20X8?

The cost of the mine will be increased by $1 million on 1 January 20X8.

The cost of the mine will be increased by $3 million on 1 January 20X8.

There will be a credit to finance costs for the unwinding of the discount on the reinstatement provision.

There will be a debit to finance costs for the unwinding of the discount on the reinstatement provision.

Only the cost of the site preparation will be depreciated over the mine's useful economic life.

Depreciation will be charged over 20 years on the full cost of the mine including the reinstatement cost.

47. You are a Financial Controller at BCD and are in the process of preparing the year-end financial statements. A member of your finance team has come to see you about her provisions balance at year-end.

She says that the Managing Director has asked her to increase the provisions balance by $1 million overall. She thinks this is because BCD has had a very good year in terms of profit, and the Managing Director wants to put some profit aside to protect against any future reductions in profit. $1 million is material to BCD.

You believe that the provisions balance was fairly stated without the additional $1 million.

Which TWO of the following would be appropriate actions in this scenario?

Discuss the matter with the Finance Director as he is your immediate line manager.

Speak to the Managing Director to explain that the level of provisions is governed by financial reporting standards.

Tell the member of your finance team to ignore the Managing Director and to leave the provisions balance as it was.

Contact the external auditors of BCD and tell them that the Managing Director wants to change the provisions balance.

Speak to the shareholders at the upcoming annual general meeting about this issue.

48. Which TWO of the following are true in relation to IAS21 The Effects of Changes in Foreign Exchange Rates when consolidating an overseas subsidiary?

A current period exchange gain or loss is shown within the consolidated statement of comprehensive income within other comprehensive income.

Goodwill is re-translated at the end of each reporting period and reflected at the period end exchange rate in the consolidated statement of financial position.

Assets and liabilities of the subsidiary are translated at each reporting date using the average exchange rate for the period.

Goodwill is reflected in the consolidated statement of financial position translated at the exchange rate on the date of acquisition.

The statement of profit or loss of the subsidiary is translated for the reporting period using the closing exchange rate.

49. JK has calculated its inventory holding period:

Which THREE of the following would have contributed to the above movement in inventory holding period?

JK's main supplier offered a significant one-off discount for purchases made in March 20X8.

In January 20X8 a major competitor entered the market in which JK operates.

A substantial contract is due to be dispatched early in April 20X8.

JK is enforcing stringent inventory control techniques following management instructions.

JK suffered industrial action by its production staff in the period December 20X7 to February 20X8.

It has been difficult to obtain one of JK's main components due to import issues with its overseas supplier.

50. Information from the financial statements of RST for the year ended 30 April 20X9 is as follows:

What is the price earnings (P/E) ratio for RST at 30 April 20X9?

15.83

7.92

10.56

9.31

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51. CORRECT TEXT

The following information has been extracted from the financial statements of two single entities, TUV and XYZ, for the year ended 30 September 20X3.

Which of the following options shows the gearing ratios (Debt/Equity) for TUV and XYZ at 30 September 20X3?

52. AB sold the majority of its operating equipment to LM for cash on 30 December 20X9 and then immediately leased it back under an operating lease.

AB used the cash proceeds from the sale to reduce its long term borrowings significantly.

No early repayment charge was levied by the lender.

Which of the following statements is true in respect of AB's ratios calculated at 31 December 20X9?

AB's return on capital employed would be lower as a result of this sale being recorded.

AB's current ratio would be lower as a result of this sale being recorded.

AB's non-current asset turnover would be lower as a result of this sale being recorded.

AB's gearing ratio would be lower as a result of this sale being recorded.

53. The financial statements of ST at 31 December 20X9 include the following balances in respect of shares classed as equity:

The profit after tax for the year ended 31 December 20X9 is $200,000.

What is ST's basic EPS for the year to 31 December 20X9?

8.8 cents

17.5 cents

20.0 cents

10.0 cents

54. CORRECT TEXT

GH's financial statements show the following:

What is the value of the dividend received from the associate to be included in GH's consolidated statement of cash flows for the year?

Give your answer to the nearest $000.

$ ? 000

55. Ratios calculated from the financial statements of ST Group for the years ended 31 August 20X7 and 20X6 are as follows:

Which of the following would have contributed to the movements in these ratios?

During 20X7 ST Group acquired an associate which made a relatively small profit for the year.

ST Group extended its customer base which resulted in an increase in the volume of sales during 20X7.

During 20X7 ST Group increased the useful life of its vehicles to five years from four and adjusted the depreciation charge accordingly.

The fair value of an investment acquired in 20X7 and classified as fair value through profit or loss has increased in value by the year end.

56. CORRECT TEXT

On 1 January 20X4 EF grants each of its 125 employees 500 share options on the condition that they remain in employment for 3 years. During the year to 31 December 20X4 10 employees left and It is expected that a further 25 will leave before the end of the vesting period.

The fair value of each share option is $30 on 1 January 20X4 and $45 on 31 December 20X4.

What is the journal entry in respect of these share options in EF's financial statements for the year ended 31 December 20X4?

57. CORRECT TEXT

Information extracted from JK's statement of financial position for the year ended 31 May 20X5 is as follows:

Calculate the gearing ratio (Debt/Equity measured as a percentage) at 31 May 20X5.

Give your answer to one decimal place.

? %

58. When accounting for a finance lease under IAS 17 Leases, which TWO of the following are recognised in the statement of profit or loss?

Finance cost element of the lease payments

Depreciation of the leased asset

Lease payments paid

Lease payments payable

Capital repayment element of the lease payments

59. On 30 November 20X9 OPQ acquires a financial asset that is classified as Available for Sale.

Which of the following describes the value of the financial asset on the date of acquisition?

Fair value excluding transaction costs.

Fair value including transaction costs.

Present value including transaction costs.

Present value excluding transaction costs.

60. HJ is currently in dispute with an employee, who is claiming $400,000 in a legal case against them.

HJ's legal advisors have stated that it is probable that they will lose the case and will have to pay the amount claimed.

Also, HJ are claiming $250,000 from a supplier of defective goods and the legal advisors have stated that it is probable that HJ will be successfulin this claim.

What is the correct accounting treatment for these two items in HJ's financial statements?

Provide for the $400,000 potential outflow and disclose the $250,000 potential inflow.

Provide for the $400,000 potential outflow and recognise the $250,000 potential inflow.

Disclose the $400,000 potential outflow and disclose the $250,000 potential inflow.

Disclose the $400,000 potential outflow and recognise the $250,000 potential inflow.

Page 7 of 8

61. As at 31 October 20X7 TU's financial statements show the entity having profit after tax of $600,000 and 900,000 $1 ordinary shares in issue. There have been no issues of shares during the year. At 31 October 20X7 TU have 300,000 share options in issue, which allow the holders to purchase ordinary shares at $2 a share in 3 years' time. The average price of the ordinary shares throughout the year was $5 a share.

What is the diluted earnings per share for the year ended 31 October 20X7?

66.7 cents

58.8 cents

50.0 cents

55.6 cents

62. PQ is a retail business. In recent years they have improved their financial performance and increased their revenue.

The following ratios have been calculated for the years ended 31 December 20X4 and 20X3:

Which of the following explanations of PQ's financial performance is consistent with these ratios?

In 20X4 PQ reduced the unit selling price resulting in an increase in volumes sold and an increase in overall revenue.

PQ changed suppliers early in 20X4 because the new supplier agreed to supply the same goods at a cheaper price.

In 20X4 taxation legislation was amended which reduced the rate of corporate income tax by 3.5%.

In 20X4 PQ sold a retail outlet resulting in a significant gain on disposal which has been deducted from administrative expenses.

63. CORRECT TEXT

XY owned 60% of the equity share capital of AB at 1 January 20X6. XY acquired a further 20% of AB's equity share capital on 31 December 20X6 for $500,000. The non controlling interest in AB was measured at $720,000 immediately prior to the 20% acquisition.

Calculate the amount that XY debited to non controlling interest when it accounted for the 20% acquisition in its consolidated financial statements at 31 December 20X6.

Give your answer to the nearest $000.

$ ? 000

64. On 1 January 20X7 GH purchased plant and equipment at a cost of $400,000. The temporary differences in respect of this plant and equipment at 31 December 20X7 and 20X8 have been calculated as follows:

Assume that there are no other temporary differences in the periods and that the corporate income tax rate is 25%. GH is expected to have significant taxable profits in the future.

Which of the following is the correct impact in GH's statement of financial position at 31 December 20X8 in respect of deferred tax?

Increase in the deferred tax asset.

Increase in the deferred tax liability.

Decrease in the deferred tax asset.

Decrease in the deferred tax liability.

65. ST has in issue unquoted 7% debentures which were issuedat par and are redeemable in 1 year's time. These debentures cannot be traded. The yield to maturity on these debentures has been calculated at 5%.

Which of the following would explain why the yield to maturity is lower than the coupon?

ST will benefit from the tax relief on the interest payment.

The debentures will be redeemed at a discount to their par value.

The debentures will be redeemed at their par value.

The market value of the debentures must be higher than their par value.

66. The consolidated statement of profit or loss for VW for the year ended 30 September 20X7 includes the following:

What is VW's interest cover for the year ended 30 September 20X7?

4.5

3.3

4.1

5.1

67. FG acquired 75% of the equity share capital of HI on 1 September 20X3.

On the date of acquisition, the fair value of the net assets was the same as the carrying amount, with the exception of a contingent liability disclosed by HI and relating to a pending legal case. At 1 September 20X3, the contingent liability was independently valued at $1.2 million.

At the current year end, 31 March 20X5, the legal case is still outstanding. The fair value of the liability has now been estimated at $1.4 million, and the case is expected to be resolved in the forthcoming financial year.

How should this contingent liability be recorded in the consolidated financial statements for the year ended 31 March 20X5?

A current liability of $1.4 million.

A non-current liability of $1.4 million.

A current liability of $1.2 million.

A non-current liability $1.2 million.

68. CORRECT TEXT

LK acquired 100% of the equity shares of TU on 1 January 20X4. LK disposed of 60% of TU for £2,400,000 on 30 September 20X4. The sale proceeds reflected the fair value of TU's shares on that date.

The remaining 40% shareholding gave LK the ability to exercise significant influence over the activities of TU. TU reported profit of $1,800,000 for the year ended 31 December 20X4 and this accrued evenly throughout the year.

Calculate the investment in associate that will be presented in LK's consolidated statement of financial position as at 31 December 20X4.

Give your answer to the nearest whole $'000.

$ 000

69. On1 September 20X3, GH purchased 200,000 $1 equity shares in QR for $1.20 each and classified this investment as held for trading.

GH paid a 1% transaction fee to its broker on this transaction. QR's equity shares had a fair value of $1.35 each on 31 December 20X3.

Which of the following journals records the subsequent measurement of this financial instrument at 31 December 20X3?

Option A

Option B

Option C

Option D

70. AB sold the majority of its operating equipment to LM for cash on 30 December 20X9 and then immediately leased it back under an operating lease.

AB used the cash proceeds from the sale to reduce its long term borrowings significantly.

No early repayment charge was levied by the lender.

Which of the following statements is true in respect of AB's ratios calculated at 31 December 20X9?

AB's return on capital employed would be lower as a result of this sale being recorded.

AB's current ratio would be lower as a result of this sale being recorded.

AB's non-current asset turnover would be lower as a result of this sale being recorded.

AB's gearing ratio would be lower as a result of this sale being recorded.

Page 8 of 8

71. Following the impairment review of the investment in BC, what would be the carrying value of this associate in KL's consolidated statement of financial position at 31 December 20X9?

$1,050,000

$1,240,000

$1,800,000

$1,960,000

72. CORRECT TEXT

LM acquired 15% of the equity share capital of ST on 1 January 20X6 for $18 million. LM acquired a further 50% of the equity share capital of ST for $50 million on 1 January 20X7 when the fair value of ST's net assets was $82 million. The original 15% investment in ST had a fair value of $20 million at 1 January 20X7. The non controlling interest in ST was measured at its fair value of $30 million at the date control in ST was acquired.

Calculate the goodwill arising on the acquisition of ST that LM included in its consolidated financial statements at 31 December 20X7.

Give your answer to the nearest $ million.

$ ? million

73. AB acquired 90% of the equity of YZ on 31 December 20X2. On the same date YZ acquired 60% of the equity shares of VW for $750,000. AB has no other subsidiaries.

The following information regarding YZ and VW was available:

What amount will AB include in its consolidated statement of financial position in respect of noncontrolling interest at 31 May 20X6?

$816,400

$741,400

$840,600

$811,000

74. CORRECT TEXT

Calculate the value of non controlling interest that will be presented in KL's consolidated statement of financial position at 31 December 20X9?

Give your answer to the nearest whole $'000.

$ ? 000

75. Which of the following would cause a deferred tax balance to be included in the statement of financial position for an entity?

Expenses in the statement of profit or loss which are not allowable for tax creating a permanent difference.

The acquisition of land for which there is no tax depreciation.

The acquisition of plant and equipment a year ago where the tax depreciation rate is different to the accounting depreciation rate.

Impairment of goodwill that arose on the acquisition of a subsidiary entity.

Valid CIMAPRA19-F02-1-ENG Exam Real Questions

Valid CIMAPRA19-F02-1-ENG Exam Real Questions

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