Question 1

The dividend yield of ST hasfallen in theyear 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.

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

Options :

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

B : Surplus cash was used to pay a special dividend in additionto the normal dividend in the year.

C :

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

D : To compensate investors for thereduction in share price a higher dividend per share was paid.

Answer: A

Question 2

The tax benefit on a company's asset is 180,000 and the useful life on that asset is five years. The company creates a deferred tax provision to spread this benefit over the asset's useful life.

What entry is needed to reduce this deferred tax provision in the company's year two accounts?

Options :

A : DR Deferred tax liability (SOFP) 36,000

B : CR Deferred tax liability (SOFP) 36,000

C : DR Corporation tax (income statement) 36,000

D : CR Corporation tax (income statement) 36,000

E : DR Deferred tax liability (SOFP) 144,000

F : CR Deferred tax liability (SOFP) 144,000

G : DR Corporation tax (income statement) 144,000

H : CR Corporation tax (income statement) 144,000

Answer: A

Question 3

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:

Options :

A : A$75,758.

B : A$66,667.

C : A$150,000.

D : A$132,000.

Answer: A

Question 4

AB owned 80% of the equity share capital of FG at 1 January 20X6. AB disposed of 10% of FG's equity share capital on 31 December 20X6 for $400,000. The non controlling interest was measured at $700,000 immediately prior to the disposal.

Which of the following represents the adjustment that AB made to non controlling interest in respect of the disposal when it prepared its consolidated financial statements at 31 December 20X6?

Options :

A : Credit of $350,000

B : Debit of $400,000

C : Debit of $350,000

D : Credit of $50,000

Answer: A

Question 5

AB and FGincorporated on 1 January 20X1 in the same country and had similar investment in net assets. Both entities are financed entirely by equity. In the year to31 December 20X1 both entitiesgenerated the same volume of sales.

Which of the following, takenindividually, would explainwhy AB's return on capital employed ratio was lower than that of FG?

Options :

A : AB revalued its non current assets upwards on 31 December 20X1; FG-s non current assets were stated at historic cost.

B : FG issuedbonds on 31 December 20X1; AB remains ungeared.

C : AB paid a lower dividend to its shareholders than FG in the year.

D : AB-s deferred tax provision at the year end ishigher than that of FG.

Answer: A

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