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NEW QUESTION 86
JK has calculated its inventory holding period:
Which THREE of the following would have contributed to the above movement in inventory holding period?
- A. JK's main supplier offered a significant one-off discount for purchases made in March 20X8.
- B. JK is enforcing stringent inventory control techniques following management instructions.
- C. JK suffered industrial action by its production staff in the period December 20X7 to February 20X8.
- D. In January 20X8 a major competitor entered the market in which JK operates.
- E. It has been difficult to obtain one of JK's main components due to import issues with its overseas supplier.
- F. A substantial contract is due to be dispatched early in April 20X8.
Answer: A,D,F
NEW QUESTION 87
Which of the following principles are the basic principles followed by the consolidated income statement?
Select ALL that apply.
- A. Include all of the parent's income and expenses minus all of the subsidiaries' income and expenses
- B. Ignore investment income from subsidiary to parent (e.g. dividend payments or loan interest)
- C. Include investment income from subsidiary to parent (e.g. dividend payments or loan interest)
- D. After profit for the period, show the profit split between amounts attributable to the parent's shareholders and other shareholders
- E. Include all of the parent's income and expenses plus all of the subsidiaries' income and expenses
Answer: B,D,E
NEW QUESTION 88
AB and FG incorporated 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 to 31 December 20X1 both entities generated the same volume of sales.
Which of the following, taken individually, would explain why AB's return on capital employed ratio was lower than that of FG?
- A. FG issued bonds on 31 December 20X1; AB remains ungeared.
- B. AB revalued its non current assets upwards on 31 December 20X1; FG's non current assets were stated at historic cost.
- C. AB paid a lower dividend to its shareholders than FG in the year.
- D. AB's deferred tax provision at the year end is higher than that of FG.
Answer: B
NEW QUESTION 89
CD acquired 100% of the equity share capital of FG for cash consideration of Kr1,200,000 on 1 January
20X7.
Retained earnings of FG at the date of acquisition was Kr800,000. CD operates from Country A and its functional and presentation currency is $. FG is located and trades throughout Country B and its functional currency is the Krona (Kr).
CD has no other subsidiaries. Goodwill had not suffered any impairment to date.
Summarised data from the statements of financial position for both entities at 31 December 20X7 is presented below:
Which of the following is the correct application of IAS 21 The Effects of Changes in Foreign Exchange Rates in translating FG's statement of financial position into the presentation currency of CD for consolidation purposes at 31 December 20X7?
- A. * Goodwill at historic rate.
* Assets and liabilities at closing rate. - B. * Goodwill at closing rate.
* Assets and liabilities at closing rate. - C. * Monetary assets and liabilities at historic rate.
* Non monetary assets and liabilities at closing rate. - D. * Monetary assets and liabilities at closing rate.
* Non monetary assets and liabilities at historic rate.
Answer: B
NEW QUESTION 90
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?
- A. $1,800,000
- B. $1,050,000
- C. $1,240,000
- D. $1,960,000
Answer: B
NEW QUESTION 91
ST acquired two financial investments in the year to 31 December 20X8. One of these investments was initially classified as held for trading, the other as available for sale. ST remeasured both investments at fair value at 31 December 20X8 in accordance with IAS 39 Financial Instruments: Recognition and Measurement. The resulting gains were calculated as follows:
* Gain on held for trading investment $50,000
* Gain on available for sale investment $40,000
What was the value of the gain that ST presented in its other comprehensive income when it prepared its financial statements for the year to 31 December 20X8?
Give your answer to the nearest $000.
$ ? 000
Answer:
Explanation:
40, 40000
NEW QUESTION 92
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 the value of goodwill to be included in the consolidated statement of financial position of ST as at 31 December 20X5?
- A. $1,450,000
- B. $570,000
- C. $450,000
- D. $950,000
Answer: C
NEW QUESTION 93
AB acquired its one subsidiary, CD, on 1 January 20X1. At this date the fair value of CD's property, plant and equipment was found to be $40 million higher than its carrying value. The relevant items had a remaining estimated useful life of 10 years from the date of acquisition.
At 31 December 20X4 AB and CD presented property, plant and equipment of $100 million and $50 million respectively in their individual financial statements.
The value of property, plant and equipment presented in AB's consolidated statement of financial position at 31 December 20X4 is:
- A. $174 million
- B. $190 million
- C. $150 million
- D. $134 million
Answer: A
NEW QUESTION 94
On 1 January 20X8 XY, a listed entity, had 10,000,000 ordinary shares in issue each with a par value of 50 cents. On 1 July 20X8 XY raised $6,000,000 by issuing ordinary shares at a price of £1.50 each which was the full market price.
Place the correct figure into the box below to show the number that XY will use as its weighted average number of ordinary shares in the calculation of earnings per share for the year to 31 December 20X8.
Answer:
Explanation:
NEW QUESTION 95
ST acquired 80% of the equity shares of AB on 1 January 20X7. AB acquired 60% of the equity shares of UV on 1 January 20X8. Profit for the year ended 31 December 20X9 for AB is $160,000 and for UV is
$100,000.
Calculate the non-controlling interest figure to be included within ST's consolidated statement of profit or loss for the year ended 31 December 20X9.
Give your answer to the nearest whole number in $000s.
$ ?
Answer:
Explanation:
84000, 84
NEW QUESTION 96
XY has in issue a 6% convertible bond which is redeemable at par or convertible into equity shares in one year's time. The conversion terms are 20 equity shares for each $100 of convertible bond. The conversion value in one year's time is expected to be $105 per $100 nominal of the bond based on the current share price of $5.25.
Which of the following statements about the bond is correct?
- A. If the bond is redeemed rather than converted that means that the investor will receive $105 for each
$100 of nominal value. - B. XY's post tax cost of debt for the convertible bond will be higher than the yield to maturity.
- C. The yield to maturity of the convertible bond is a constant 6%.
- D. The bond will be converted into equity shares in one year's time if the share price does not change.
Answer: D
NEW QUESTION 97
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?
- A. Finance lease
- B. 8% preference shares
- C. Rights issue of equity shares
- D. 6% bank loan
Answer: C
NEW QUESTION 98
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?
- A. CR Deferred tax liability (SOFP) £36,000
- B. DR Corporation tax (income statement) £144,000
- C. CR Deferred tax liability (SOFP) £144,000
- D. DR Corporation tax (income statement) £36,000
- E. DR Deferred tax liability (SOFP) £144,000
- F. CR Corporation tax (income statement) £36,000
- G. DR Deferred tax liability (SOFP) £36,000
- H. CR Corporation tax (income statement) £144,000
Answer: G
NEW QUESTION 99
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.
? %
Answer:
Explanation:
86
NEW QUESTION 100
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?
- A. In 20X5 the increase in value of MNO's head office was reflected in the financial statements.
- B. In 20X4 an unused building was sold at a price in excess of its carrying value.
- C. In 20X4 an onerous contract was provided for and this provision did not change in 20X5.
- D. In 20X5 the average interest rate on borrowing decreased compared to 20X4.
Answer: C
NEW QUESTION 101
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.
AB's Finance Director met with one of the directors of EF to discuss the potential impact of the acquisition.
Which of the director's statements below is correct?
- A. Dividend yield for both entities will be identical after the acquisition.
- B. The P/E ratio of EF will increase to 12 after acquisition in line with that of AB.
- C. The gross profit margin of EF will increase if AB's bargaining power is used to negotiate lower material costs for the whole group.
- D. Redundancy costs arising from reorganisation following acquisition will be provided for by charging EF's profit for the year ended 31 October 20X4.
Answer: C
NEW QUESTION 102
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