Best Quality CIMA F2 Exam Questions PracticeMaterial Realistic Practice Exams [2021]
Critical Information To Advanced Financial Reporting Pass the First Time
NEW QUESTION 22
In recent years EBITDA has been adopted by large entities as a key measure of performance. The following figures have been extracted from the financial statements of UV for the year ended 30 November 20X9:
What is EBITDA for UV for the year ended 30 November 20X9?
Give your answer to the nearest $'000.
$ ? 000
Answer:
Explanation:
61500, 61500000
NEW QUESTION 23
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 retained earnings that will be presented in the consolidated statement of financial position of ST as at 31 December 20X5?
- A. $9,685,000
- B. $10,080,000
- C. $9,775,000
- D. $9,715,000
Answer: A
NEW QUESTION 24
The following information relates to DEF for the year ended 31 December 20X7:
* Property, plant and equipment has a carrying value of $3,500,000 and a tax written down value of
$2,500,000.
* There are unused tax losses to carry forward of $1,250,000. These tax losses have arisen due to poor trading conditions which are not expected to improve in the foreseeable future.
* The corporate income tax rate is 25%.
In accordance with IAS 12 Income Taxes, the financial statements of DEF for the year ended 31 December 20X7 would recognise deferred tax balances of:
- A. Option A
- B. Option D
- C. Option B
- D. Option C
Answer: A
NEW QUESTION 25
Which of the following is NOT an example of an unconsolidated structured entity as defined in IFRS12 Disclosure of Interests in Other Entities?
- A. A securitisation vehicle
- B. A post-employment benefit plan
- C. An asset-backed financing scheme
- D. An investment fund
Answer: B
NEW QUESTION 26
When establishing a group structure, which of the following factors need to be considered: Select ALL that apply.
- A. Non-controlling interests
- B. The percentage ownership
- C. Whether control has been established
- D. The date of acquisition
- E. Intra-group investments
- F. Goodwill
- G. Whether control is direct or indirect
Answer: B,C,D
NEW QUESTION 27
Mr. Rodgers is an accountant for JK Pic. He is asked to record a particular share-based payment in the company's accounts and obliges by debiting as an expense the first relevant account and crediting the corresponding double-entry as a liability.
Which type of share-based payment has Mr. Rodgers recorded?
- A. Cash-settled in the future
- B. Equity-settled in the future
- C. Equity-settled immediately
- D. Cash-settled immediately
- E. Neither cash nor equity-settled
Answer: A
NEW QUESTION 28
Ratios have been produced below for EF for the year to 31 March:
Which TWO of the following could explain the movement in both gearing and ROCE?
- A. A debt issue on 31 March 20X3.
- B. A revaluation upwards on the head office property on 1 April 20X2.
- C. A rights issue on 31 March 20X3.
- D. A bank loan to purchase new machinery on 31 March 20X3.
- E. A bonus issue of shares on 1 April 20X2.
Answer: B,C
NEW QUESTION 29
In recent years EBITDA has been adopted by large entities as a key measure of performance. The following figures have been extracted from the financial statements of UV for the year ended 30 November 20X9:
What is EBITDA for UV for the year ended 30 November 20X9?
Give your answer to the nearest $'000.
Answer:
Explanation:
61500, 61500000
NEW QUESTION 30
How would KL account for its investment in MN in its consolidated financial statements for the year to
31 December 20X9?
- A. Joint arrangement
- B. Subsidiary
- C. Financial asset
- D. Joint venture
Answer: D
NEW QUESTION 31
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 had 100,000 $1 shares at the year end; JK had 200,000 50c shares in issue at the year end.
- B. LM revalued its land and buildings upwards in the year; JK has performed no revaluations.
- C. LM held no investments in other entities; JK revalued its available for sale investments upwards in the year.
- D. LM made a bonus issue from retained earnings in the year; JK issued no shares in the year.
Answer: B
NEW QUESTION 32
LM is preparing its consolidated financial statements for the year ended 30 April 20X5. During the year LM acquired 30% of the equity shares of AB giving it significant influence over AB.
LM conducted ratio analysis comparing the financial performance of the group for 30 April 20X4 and
20X5.
Which of the following ratios would not be comparable as a result of the acquisition of AB?
- A. Return on capital employed.
- B. Operating profit margin.
- C. Interest cover.
- D. Earnings per share.
Answer: D
NEW QUESTION 33
JKL measure gearing as debt:equity, based on book values. At 31 December 20X5 the ratio is 2:3 and JKL would like this to be 2:5.
Which of the following transactions individually would achieve this?
- A. Revaluation of investment property to an increased fair value.
- B. Bonus issue from the share premium account.
- C. Issue of redeemable preference shares at par.
- D. Repayment of a 6 year term loan with the issue of 5 year redeemable debentures.
Answer: A
NEW QUESTION 34
MS Group's total profit for period on their consolidated income statement is £31,000. This includes adjusting for their share of joint venture JV2. Calculate the share of joint venture MS Group received based on the following information.
MS operating profit £41,000
Dividend from JV2 £5,000
Finance cost £3,000
Tax £11,000
- A. £6,000
- B. £9,000
- C. £5,000
- D. £1,000
- E. £7,000
- F. £4,000
Answer: F
NEW QUESTION 35
Following a wedding in October 20X0 ten people contracted food poisoning from eating food cooked by the wedding caterer PQ. At 31 December 20X0 PQ was advised by its legal advisors that a liability was possible but not probable and the incident was disclosed as a contingent liability at that date.
As the result of developments in the case, which is still not settled, PQ was advised that it is now probable, as at 31 December 20X1, that they will be found liable and will therefore have to pay damages of unknown value.
Which of the following would indicate that in the financial statements of PQ for the year ended 31 December 20X1 this should still be recognised as a contingent liability rather than a provision?
- A. The case has not yet been settled.
- B. A present obligation exists as a result of a past event.
- C. It is probable that there will be an outflow of economic resources to settle the case.
- D. There is no reliable estimate of the cost.
Answer: D
NEW QUESTION 36
AB and CD are competitors supplying components to the car manufacturing industry. AB operates in Country X and CD operates in Country Y.
Both entities were incorporated on the same day, are the same size and prepare financial statements to 31 March each year using international accounting standards.
Which of the following statements taken individually would limit the usefulness of the comparison of the return on capital employed ratio between the two entities?
- A. The currency is Dollar in Country X and Krona in Country Y.
- B. The corporate tax rate is 25% in Country X and 40% in Country Y.
- C. The average rate of borrowing is 2% in Country X and 7% in Country Y.
- D. The average rate of inflation is 3% in Country X and 10% in Country Y.
Answer: D
NEW QUESTION 37
PQ is a retail business. In recent years they have improved their financial performance and increased their revenue. The following ratios have been calculated for the years ended 31 December 20X4 and
20X3:
Which of the following explanations of PQ's financial performance is consistent with these ratios?
- A. In 20X4 PQ sold a retail outlet resulting in a significant gain on disposal which has been deducted from administrative expenses.
- B. In 20X4 PQ reduced the unit selling price resulting in an increase in volumes sold and an increase in overall revenue.
- C. In 20X4 taxation legislation was amended which reduced the rate of corporate income tax by 3.5%.
- D. PQ changed suppliers early in 20X4 because the new supplier agreed to supply the same goods at a cheaper price.
Answer: D
NEW QUESTION 38
FG granted share options to its 500 employees on 1 August 20X0. Each employee will receive 1,000 share options provided they continue to work for FG for the four years following the grant date. The fair value of the options at the grant date was $1.30 each. In the year ended 31 July 20X1, 20 employees left and another 50 were expected to leave in the following three years. In the year ended 31 July 20X2, 18 employees left and a further 30 were expected to leave during the next two years.
The amount recognised in the statement of profit or loss for the year ended 31 July 20X1 in respect of these share options was $139,750.
Calculate the charge to FG's statement of profit or loss for the year ended 31 July 20X2 in respect of the share options.
- A. $280,800
- B. $154,050
- C. $293,800
- D. $141,050
Answer: D
NEW QUESTION 39
ST has in issue unquoted 7% debentures which were issued at par and are redeemable in 1 year's time.
These debentures cannot be traded. The yield to maturity on these debentures has been calculated at
5%.
Which of the following would explain why the yield to maturity is lower than the coupon?
- A. ST will benefit from the tax relief on the interest payment.
- B. The market value of the debentures must be higher than their par value.
- C. The debentures will be redeemed at a discount to their par value.
- D. The debentures will be redeemed at their par value.
Answer: C
NEW QUESTION 40
UV has raised $100,000 through the issue of two irredeemable financial instruments:
* 6% debentures with a current market value of $101.50 per $100 nominal value; and
* 8% preference shares with a current share price of $2.20 each.
The corporate income tax rate is 20%
What is the post tax cost of debt for each of these instruments?
Answer:
Explanation:
NEW QUESTION 41
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 42
W and Y are very similar entities with the same level of profit before interest and tax. However, W has gearing of 95% and Y has gearing of 30%.
Which of the following statements is true?
- A. Investing in W carries a higher level of risk than investing in Y.
- B. Investors in Y will expect a higher return than investors in W.
- C. A greater proportion of profit will be available out of which to declare a dividend in W.
- D. Y has a greater commitment to meet interest payments than W.
Answer: A
NEW QUESTION 43
......
F2 EXAM DUMPS WITH GUARANTEED SUCCESS: https://www.practicematerial.com/F2-exam-materials.html
