Question 1

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 2

JKL measure gearingas debt:equity, based on book values.At 31 December 20X5the ratio is 2:3 and JKL would like this to be 2:5.

Which of the following transactions individually would achieve this?

Options :

A : Bonus issue from the share premium account.

B : Revaluationof investment propertyto an increased fair value.

C : Repayment of a6 year termloan with the issue of 5 year redeemable debentures.

D : Issue of redeemable preference shares at par.

Answer: B

Question 3

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 followingindependent optionswouldexplainthe differencebetween thegearingratios of AB and EF at 31 October 20X4?

Options :

A : EF-s average cost of borrowing is significantly lower than that of AB and EF has taken advantage of that.

B : EF has a policy of revaluing non current assetswhereas AB does not.

C : EF made a bonus issue of shares from retained earnings during the year whereas AB did not.

D : EF-s market value of sharesat 31 October 20X4 is lower than that of AB.

Answer: A

Question 4

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 andMeasurement?

Options :

A : Sharesin another entity held for short term trading purposes fall within this category.

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

C : Transaction costs in relation to these assets areadded to theinitial cost of the asset on acquisition.

D : The gainor loss on thesubsequent measurement of these assetsisrecordedwithin other comprehensive income.

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

F : Oncethe asset has beensubsequentlymeasured to fair value an impairment review is undertaken.

Answer: A,B

Question 5

J's current share price is $1.80,with a dividend of $0.20 a share just about to be paid.

Dividends have increased at an average annualgrowth rate of 4.5% and this is expected to continue into the future.

What is JJ'scost of equity?

Options :

A : 17.6%

B : 16.1%

C : 12.5%

D : 11.1%

Answer: A

Higher Test Marks with Free Online CIMAPRA19-F02-1-ENG Exam Practice

Buying Options: