Question 1

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 truein respect of AB's ratios calculated at 31 December 20X9?

Options :

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

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

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

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

Answer: D

Question 2

Whatis meant by the term 'a placing of ordinary shares'?

Options :

A : Selling new ordinary shares to a financial institution on a pre-arranged basis.

B : Selling new ordinary shares directly to the public.

C : Selling existing ordinary shares to new investors through a stock exchange.

D : Selling new ordinary shares to existing shareholders.

Answer: A

Question 3

ST acquired 75% of the 2 million $1 equity shares of CD on 1 January 20X3, when the retained earnings of CD were S3,550,000. CD has no other reserves.

ST paid $5,600,000 for the shares in CD and the non controlling interest was measured at its fair value of S1,400,000 at acquisition.

At 1 January 20X3, the fair value of CD's net assets were equal to their carrying amount, with the exception of a building. This building had a fair value of $1,000,000 in excess of its carrying amount and a remaining useful life of 25 years on 1 January 20X3.

At 31 December 20X5, the retained earnings of ST and CD were $8,500,000 and $5,250,000 respectively.

What is thefigure fornon-controlling interestto be shown in the consolidated statement of financial position of STas at 31 December 20X5?

Options :

A : $1,795,000

B : $1,607,500

C : $1,825,000

D : $1,805,000

Answer: A

Question 4

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:

Options :

A : $4,200

B : $5,000

C : $6,800

D : $5,600

Answer: A

Question 5

Which of the following are limitations of financial statement figures for ratio analysis? Select the ALL that apply.

Options :

A : Only provides historic data

B : Only provides financial information

C : Limited information to identify trends over time

D : Provide only summarised information

E : Contains complicated information that needs to be summarised

F : Only provides forecast data

Answer: A,B,C,D

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