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NEW QUESTION 69
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?
- A. 66.7 cents
- B. 55.6 cents
- C. 50.0 cents
- D. 58.8 cents
Answer: B
NEW QUESTION 70
Which of the following principles are the basic principles followed by the consolidated income statement?
Select ALL that apply.
- A. After profit for the period, show the profit split between amounts attributable to the parent's shareholders and other shareholders
- B. Include investment income from subsidiary to parent (e.g. dividend payments or loan interest)
- C. Include all of the parent's income and expenses plus all of the subsidiaries' income and expenses
- D. Include all of the parent's income and expenses minus all of the subsidiaries' income and expenses
- E. Ignore investment income from subsidiary to parent (e.g. dividend payments or loan interest)
Answer: A,C,E
NEW QUESTION 71
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. The amount of the unavoidable lease payments should be ignored in the financial statements.
- B. A provision should be recognised for the unavoidable lease payments with a corresponding charge to other comprehensive income.
- C. The amount of the unavoidable lease payments should be disclosed in the financial statements with no corresponding accounting entry.
- D. A provision should be recognised for the unavoidable lease payments with a corresponding charge to profit or loss.
Answer: D
NEW QUESTION 72
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?
- A. Dr Profit or loss $57,500 ; Cr Other reserves within equity $57,500
- B. Dr Profit or loss $172,500 ; Cr Other reserves within equity $172,500
- C. Dr Profit or loss $172,500 ; Cr Liabilities $172,500
- D. Dr Profit or loss $57,500 ; Cr Liabilities $57,500
Answer: A
NEW QUESTION 73
Which of the following statements are INCORRECT with regards to impairment of financial instruments; Select ALL that apply.
- A. If a loss is suspected following an impairment review, a financial asset is written down to its fair value.
- B. If a contract relating to a financial instrument is breached then this might be an indication of impairment.
- C. In the result of an impairment loss, the carrying amount of the asset is directly reduced, or reduced through an allowance account.
- D. The impairment loss on held to maturity instruments is the difference between the assets carrying amount and the present value of its future cashflows.
- E. Held to maturity instruments and available for sale assets are both measured at amortised cost and are therefore impacted by impairment.
Answer: A,E
NEW QUESTION 74
How would KL account for its investment in MN in its consolidated financial statements for the year to
31 December 20X9?
- A. Subsidiary
- B. Joint venture
- C. Joint arrangement
- D. Financial asset
Answer: B
NEW QUESTION 75
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. Goodwill is reflected in the consolidated statement of financial position translated at the exchange rate on the date of acquisition.
- B. Assets and liabilities of the subsidiary are translated at each reporting date using the average exchange rate for the period.
- C. 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.
- D. The statement of profit or loss of the subsidiary is translated for the reporting period using the closing exchange rate.
- E. A current period exchange gain or loss is shown within the consolidated statement of comprehensive income within other comprehensive income.
Answer: C,E
NEW QUESTION 76
WX acquired 20% of the equity share capital of MN for $135 million in 20X5. WX acquired a further 40% of the equity share capital of MN for $400 million on 1 October 20X8 when the fair value of the net assets of MN were $800 million.
The fair value of the initial 20% investment in MN was $175 million at 1 October 20X8. There has been no impairment of the investment in MN. WX uses the proportion of net assets method to value non- controlling interest at acquisition.
Calculate the goodwill arising on the acquisition of MN.
Give your answer to the nearest $ million.
$ ? million
Answer:
Explanation:
95, 95000000
NEW QUESTION 77
AB and EF are located in the same country and prepare their financial statements to 31 October in accordance with International Accounting Standards. EF supplies AB with a component that is vital to AB's product range. AB is considering acquiring a controlling interest in EF by 31 December 20X4 in order to guarantee future supply. The Board of EF has indicated that such an approach would be postively considered. AB would use its control to make AB the sole customer of EF.
The Finance Director of AB has been granted access to EF's management accounts and has conducted some initial analysis from the financial press. The results togther with comparisons for AB for the year to
31 October 20X4 are presented below:
AB and EF are forecasting revenues of S1,500,000 and $700,000 respectively for the year ended 31 October 20X5.
Which of the following independent options would explain the difference between the gearing ratios of AB and EF at 31 October 20X4?
- A. EF has a policy of revaluing non current assets whereas AB does not.
- B. EF's average cost of borrowing is significantly lower than that of AB and EF has taken advantage of that.
- C. EF made a bonus issue of shares from retained earnings during the year whereas AB did not.
- D. EF's market value of shares at 31 October 20X4 is lower than that of AB.
Answer: B
NEW QUESTION 78
ST acquired 70% of the equity shares of DE for $87,500 on 30 September 20X5. At the date of acquisition the net assets of DE were $54,700 and the fair value of the non controlling interest was measured at
$19,700. There has been no impairment of goodwill.
On 30 September 20X9 ST disposed of its entire investment in DE for $262,500 when the net assets of DE were $96,250.
What is the gain or loss on disposal of DE that will be included in ST's consolidated profit or loss for the year ended 30 September 20X9?
- A. $113,750 gain
- B. $166,250 gain
- C. $166,250 loss
- D. $113,750 loss
Answer: A
NEW QUESTION 79
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
Answer:
Explanation:
1780, 1780000
NEW QUESTION 80
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?
- A. LM revalued its land and buildings upwards in the year; JK has performed no revaluations.
- B. LM held no investments in other entities; JK revalued its available for sale investments upwards in the year.
- C. LM had 100,000 $1 shares at the year end; JK had 200,000 50c shares in issue at the year end.
- D. LM made a bonus issue from retained earnings in the year; JK issued no shares in the year.
Answer: A
NEW QUESTION 81
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 non controlling interest at 31 May 20X6?
- A. $840,600
- B. $811,000
- C. $816,400
- D. $741,400
Answer: D
NEW QUESTION 82
Information from the financial statements of RST for the year ended 30 April 20X9 is as follows:
At 30 April 20X9 the ordinary shares are trading at $4.75.
What is the price earnings (P/E) ratio for RST at 30 April 20X9?
- A. 7.92
- B. 15.83
- C. 10.56
- D. 9.31
Answer: B
NEW QUESTION 83
Which of the following statements are true regarding consolidated cash flows after the acquisition of a subsidiary?
Select ALL that apply.
- A. The subsidiary's cash inflows and outflows become part of the group after purchase
- B. Cash acquired from the subsidiary upon purchase is represented as a cash inflow
- C. Further adjustments are required to cash inflows and outflows after profit has been consolidated
- D. Disclosure notes are required to show cash and cash equivalents paid or received, but not details of goodwill, assets and liabilities acquired
- E. Adjustments need to be made to group working capital in light of the working capital acquired from the subsidiary
- F. Net cash paid to acquire a subsidiary is shown as a cash inflow within the cash flow from investing activities
Answer: A,B,E
NEW QUESTION 84
Which THREE of the following would typically indicate a finance lease?
- A. The lease contract for an asset includes an upgrade to the asset every two years.
- B. The lessee has the option to buy the asset at the end of the lease for $1.
- C. An asset with a useful life of ten years is being leased for ten years.
- D. A leased asset has been specifically modified for the lessee's use.
- E. The lessor is responsible for the annual maintenance of the asset.
Answer: B,C,D
NEW QUESTION 85
AB and CD are separate entities that prepare financial statements to 31 May using international accounting standards. AB and CD provide technical support services to the financial services industry and operate in the same country. The financial statements are identical except for the following:
* AB purchased all operating equipment, paying $100,000, using a 5 year bank loan. The useful life of the equipment was 5 years.
* CD signed an operating lease agreement for all operating equipment for 5 years paying
$20,000 per year.
Both entities charge all expenses relating to the equipment to cost of sales.
From the information provided, which of the following ratios would be reliably comparable for AB and CD?
- A. Profit before tax margin
- B. Non current asset turnover
- C. Return on capital employed
- D. Gross profit margin
Answer: D
NEW QUESTION 86
Information from the financial statements of an entity for the year to 31 December 20X5:
The gearing ratio calculated as debt/equity and interest cover are:
- A. gearing of 16% and interest cover of 4.
- B. gearing of 15% and interest cover of 4.
- C. gearing of 16% and interest cover of 6.
- D. gearing of 15% and interest cover of 6.
Answer: D
NEW QUESTION 87
Which TWO of the following statements about bonds and their issue are true?
- A. Bonds are a risk-free form of investing because they will always be repaid.
- B. Bonds are a form of loan capital, traded on stock exchanges.
- C. Credit rating agencies assign risk categories to bond issues.
- D. All bonds have the same terms and conditions when issued.
- E. A bond issue is never underwritten because the return is fixed and guaranteed.
Answer: B,C
NEW QUESTION 88
Company A are approached by a wealthy and internationally famous investor shortly before the launch date of their IPO. He tells them that the company do not need to incur all of the cost and risk of an IPO, as he will give them S55 million for 65% equity in the company.
Which of the following statements are also true of the offer? Select ALL that apply.
- A. The investor will want a long term commitment in the company
- B. This offer is from an angel investor
- C. The investor will probably want to manage the company
- D. The offer may ultimately require the majority stakeholder to sell his shares in the company
Answer: B,C,D
NEW QUESTION 89
A group presents its financial statements in A$.
The goodwill of its only foreign subsidiary was measured at B$100,000 at acquisition. There have been no impairments to this goodwill.
Exchange rates (where A$/B$ is the number of B$'s to each A$) are as follows:
The value of goodwill to be included in the group's statement of financial position in respect of its foreign subsidiary for the year ended 31 December 20X4 is:
- A. A$75,758.
- B. A$150,000.
- C. A$132,000.
- D. A$66,667.
Answer: A
NEW QUESTION 90
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