New 2022 Guaranteed Success with Pass4sures F2 Dumps CIMA PDF Questions
Exceptional Practice To Advanced Financial Reporting Pass the First Time
NEW QUESTION 50
Information from the financial statements of an entity for the year to 31 December 20X5:
The gearing ratio calculated as debt/equity and interest cover are:
- A. gearing of 16% and interest cover of 4.
- B. gearing of 15% and interest cover of 4.
- C. gearing of 16% and interest cover of 6.
- D. gearing of 15% and interest cover of 6.
Answer: D
NEW QUESTION 51
ST acquired 70% of the equity shares of DE for $87,500 on 30 September 20X5. At the date of acquisition the net assets of DE were $54,700 and the fair value of the non controlling interest was measured at
$19,700. There has been no impairment of goodwill.
On 30 September 20X9 ST disposed of its entire investment in DE for $262,500 when the net assets of DE were $96,250.
What is the gain or loss on disposal of DE that will be included in ST's consolidated profit or loss for the year ended 30 September 20X9?
- A. $113,750 gain
- B. $166,250 gain
- C. $166,250 loss
- D. $113,750 loss
Answer: A
NEW QUESTION 52
KL issued $100,000 of 6% convertible debentures at par on 1 January 20X7. These debentures are redeemable at par or can be converted into 5 shares for each $100 of nominal value of debentures on
31 December 20X9.
The share price on 1 January 20X7 is $18 a share. The share price is expected to grow at a rate of 7% a year.
The expected redemption value for each $100 nominal value of debentures on the date of conversion is:
- A. $90.00
- B. $100.00
- C. $103.04
- D. $110.25
Answer: D
NEW QUESTION 53
Which TWO of the following are relevant ethical considerations when selecting an accounting policy?
- A. It shows faithful representation of the financial statements.
- B. It maximises shareholder wealth.
- C. It is straightforward to implement.
- D. It shows a favourable view of performance.
- E. It is in accordance with International Financial Reporting Standards.
Answer: A,E
NEW QUESTION 54
EFG is preparing its financial statements to 31 March 20X8. During the year ended 31 March 20X7, EFG purchased a piece of land for $1 million which is used as the staff car park. EFG has a policy of revaluing land, in accordance with International Accounting Standards, and at 31 March 20X8, accounted for a substantial increase in its value.
Revenue and operating profit has remained constant over the 2 years.
When comparing EFG's financial statements for the year ended 31 March 20X7 with those of 20X8, which THREE of the following would be expected?
- A. Increase in net asset turnover.
- B. Decrease in return on capital employed.
- C. Increase in profit before tax.
- D. Increase in other comprehensive income.
- E. Increase in return on capital employed.
- F. Decrease in net asset turnover.
Answer: B,D,F
NEW QUESTION 55
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 revaluation upwards on the head office property on 1 April 20X2.
- B. A debt issue on 31 March 20X3.
- C. A bank loan to purchase new machinery on 31 March 20X3.
- D. A rights issue on 31 March 20X3.
- E. A bonus issue of shares on 1 April 20X2.
Answer: A,D
NEW QUESTION 56
LM has made the following share purchases during the year:
* Purchased 55% of the equity share capital of OP.
* Purchased 45% of the equity share capital of QR. LM have the power to appoint the majority of board members on the QR board.
* Purchased 30% of the equity share capital of ST. LM is represented by one director on the main board of ST which has five members in total. The other 70% of ST's equity share capital is owned by a single company, UV.
The Managing Director has told you that OP has performed well, but both QR and ST have not performed as expected. He is therefore pleased that OP will be included as a subsidiary and that QR and ST will only be included as investments in the group financial statements.
In accordance with the ethical principle of professional competence and due care how should the investments in OP, QR and ST be treated in the group financial statements?
- A. OP and QR should be equity accounted and ST should be valued at cost.
- B. OP should be consolidated, QR should be equity accounted and ST should be valued at cost.
- C. OP should be consolidated and QR and ST should be equity accounted.
- D. OP and QR should be consolidated and ST should be equity accounted.
Answer: D
NEW QUESTION 57
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. There is no reliable estimate of the cost.
- C. It is probable that there will be an outflow of economic resources to settle the case.
- D. A present obligation exists as a result of a past event.
Answer: B
NEW QUESTION 58
CD granted 1,000 share options to its 100 employees on 1 January 20X8.To be eligible, employees must remain employed for 3 years from the grant date. In the year to 31 December 20X8, 15 staff left and a further 25 were expected to leave over the following two years.
The fair value of each option at 1 January 20X8 was $10 and at 31 December 20X8 was $15.
Which THREE of the following are true in respect of recording these share options in the year ended 31 December 20X8?
- A. The calculation of the charge for the year will be adjusted for actual and estimated leavers.
- B. The credit entry will be to non-current liabilities.
- C. Fair value at 1 January 20X8 will be used to value the options.
- D. The calculation of the charge for the year will be adjusted for actual leavers only.
- E. The credit entry will be to equity.
- F. Fair value at 31 December 20X8 will be used to value the options.
Answer: A,C,E
NEW QUESTION 59
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. £9,000
- B. £1,000
- C. £5,000
- D. £6,000
- E. £4,000
- F. £7,000
Answer: E
NEW QUESTION 60
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?
- A. Debit of $400,000
- B. Debit of $350,000
- C. Credit of $350,000
- D. Credit of $50,000
Answer: C
NEW QUESTION 61
XY has a weighted average cost of capital (WACC) of 10% based on its gearing level (measured as debt/debt+equity) of 40%. It is considering a signficant new project.
In which of the following situations would it be appropriate to appraise this project using XY's existing WACC of 10%?
- A. The project is an extension of XY's current operations and is funded by equal amounts of debt and equity.
- B. The project is an extension of XY's current operations and is funded 40% by debt and 60% by equity.
- C. The project is in a different industry to XY's current operations and is funded by equal amounts of debt and equity.
- D. The project is in a different industry to XY's current operations and funded entirely by equity.
Answer: B
NEW QUESTION 62
ST has sold its main office property, which had a carrying value of $360,000, to AB, a property management entity.
The property was sold for $400,000 which is equal to its fair value and was immediately leased back under an operating lease agreement.
Which of the following journals will record this transaction?
- A. Option C
- B. Option A
- C. Option B
- D. Option D
Answer: B
NEW QUESTION 63
MNO is listed on its local stock exchange. It has a high level of gearing compared to the industry average as a result of rapid expansion funded by debt. The directors of MNO would like to reduce the level of gearing by raising equity to fund the next expansion project. The directors are considering whether to use a placing of new shares or a rights issue.
Which of the following statements is true?
- A. The directors must use a placing before offering the rights issue to existing shareholders.
- B. A placing will increase the proportion of the total number of MNO's shares held by large investors.
- C. A rights issue would not need to be underwritten because the risk of the shares not being taken up is small compared to a placing.
- D. The administration costs associated with a placing are usually more expensive than a rights issue because less investors are involved.
Answer: B
NEW QUESTION 64
Which of the following principles are the basic principles followed by the consolidated income statement?
Select ALL that apply.
- A. After profit for the period, show the profit split between amounts attributable to the parent's shareholders and other shareholders
- B. Include investment income from subsidiary to parent (e.g. dividend payments or loan interest)
- C. Include all of the parent's income and expenses plus all of the subsidiaries' income and expenses
- D. Include all of the parent's income and expenses minus all of the subsidiaries' income and expenses
- E. Ignore investment income from subsidiary to parent (e.g. dividend payments or loan interest)
Answer: A,C,E
NEW QUESTION 65
An entity has declared a dividend of $0.12 a share. The cum dividend market price of one equity share is
$1.40.
Assuming a dividend growth rate of 7% a year, what is the entity's cost of equity?
- A. 8.6%
- B. 17.0%
- C. 16.2%
- D. 9.4%
Answer: B
NEW QUESTION 66
Which of the following should be eliminated when using the equity method to account for associates in a parent's financial statements?
Select ALL that apply.
- A. Intra-group balances and transactions
- B. Unrealised profits
- C. Goodwill payments
- D. Dividends from associates
Answer: B,D
NEW QUESTION 67
Which THREE of the following statements about preference shares are true?
- A. Preference shareholders receive their dividend entitlement before the equity shareholders.
- B. Unlike ordinary shares, preference shares may be cumulative.
- C. Preference shareholders rank below the equity shareholders in a winding up.
- D. Preference shares cannot be issued as redeemable shares.
- E. The characteristics of preference shares are closer to debt than equity.
- F. For an investor, preference shares carry more risk than ordinary shares.
Answer: A,B,E
NEW QUESTION 68
What is the total comprehensive income attributable to the non-controlling interest that will be presented in GHI's consolidated statement of changes in equity for the year ended 31 December 20X4?
- A. $575,000
- B. $95,000
- C. $595,000
- D. $190,000
Answer: B
NEW QUESTION 69
AB, a listed entity, prepared its financial statements to 31 December 20X7, in accordance with international accounting standards.
Which THREE of the following were disclosed as related parties of AB in its financial statements?
- A. AB's main supplier, GH, who supplies more than 70% of AB's goods for manufacture.
- B. AB's bank that provides more than 60% of the entity's loan finance.
- C. ST, an entity that was jointly established by AB and CD, and that is accounted for as a joint venture in AB's financial statements to 31 December 20X7.
- D. AB's defined benefit pension plan.
- E. The wife of the Managing Director of AB, to whom AB sold a motor vehicle in the year to 31 December 20X7.
Answer: C,D,E
NEW QUESTION 70
The yield to maturity of a redeemable bond is calculated as the internal rate of return of the relevant cash flows associated with the bond.
Which TWO of the following are considered relevant cash flows in this calculation?
- A. The redemption value of the bond at the date of redemption.
- B. The annual interest payments net of tax relief.
- C. The market value of the bond now.
- D. The nominal value of the bond now.
- E. The value of the conversion premium on conversion to equity shares.
Answer: A,C
NEW QUESTION 71
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 72
LM are just about to pay a dividend of 20 cents a share. Historically, dividends have grown at a rate of
5% each year.
The current share price is $3.05.
The cost of equity using the dividend valuation model is:
- A. 7.4%
- B. 11.9%
- C. 12.4%
- D. 6.9%
Answer: C
NEW QUESTION 73
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:
Calculate the exchange difference arising on the retranslation of goodwill on the acquisition in the consolidated statement of financial position of CD at 31 December 20X7.
Give your answer to the nearest $000.
Answer:
Explanation:
14, 14000, 13636, 13637
NEW QUESTION 74
Which THREE of the following would determine the functional currency of an overseas subsidiary in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates?
- A. The currency in which all non-current assets are purchased and recognised.
- B. The currency that mainly influences labour, material and other costs.
- C. The currency which the parent company uses to present its financial statements.
- D. The currency in which operating receipts are retained.
- E. The currency which principally influences the choice of functional currency of the parent.
- F. The currency which principally influences selling prices for goods and services.
Answer: B,D,F
NEW QUESTION 75
......
F2 EXAM DUMPS WITH GUARANTEED SUCCESS: https://www.pass4sures.top/CIMA-Management/F2-testking-braindumps.html