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NEW QUESTION 119
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 15% and interest cover of 4.
- B. gearing of 15% and interest cover of 6.
- C. gearing of 16% and interest cover of 6.
- D. gearing of 16% and interest cover of 4.
Answer: B
NEW QUESTION 120
RS has issued an instrument with a nominal value of $1 million, at a discount of 2.5%, and a coupon rate of 6%. The terms of the issue are that the instrument must either be redeemed at par, at the option of the holder, in three years' time, or alternatively converted into equity shares in RS.
The characteristics of this instrument taken as a whole indicates that it would be classifed as which of the following?
- A. Discounted instrument
- B. Equity instrument
- C. Debt instrument
- D. Compound instrument
Answer: D
NEW QUESTION 121
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 122
The following information is extracted from the financial statements of RS for the year ended 30 June 20X7:
RS has no other liability balances and has no associate investments.
Calculate return on capital employed for RS at 30 June 20X7.
Give your answer to the nearest whole %.
? %
Answer:
Explanation:
20
NEW QUESTION 123
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 124
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 125
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 126
GG's gearing is currently 50% compared to the industry average of 40% (both measured as debt/equity).
GG's debt is all in the form of a single bank loan that is repayable in five years' time. The directors of GG are seeking to raise finance for a new project and they are considering an additional bank loan from the same bank.
Which of the following would prevent the bank from lending the finance for the project in the form of a new bank loan?
- A. A covenant on the existing bank loan that restricts the level of dividend that can be paid.
- B. A projected decrease in interest cover that would breach a covenant on the existing loan.
- C. A projected lack of profits to be able to claim tax relief on the additional interest arising from the new loan.
- D. The revaluation of GG's property that shows an increase in its value since the existing bank loan was taken out.
Answer: B
NEW QUESTION 127
On 30 November 20X9 OPQ acquires a financial asset that is classified as Available for Sale.
Which of the following describes the value of the financial asset on the date of acquisition?
- A. Fair value excluding transaction costs.
- B. Fair value including transaction costs.
- C. Present value excluding transaction costs.
- D. Present value including transaction costs.
Answer: B
NEW QUESTION 128
On 1 January 20X1 KL acquired 75% of the equity shares of PQ. Goodwill arising on the acquisition was
$480,000. On 31 December 20X3 KL sold the full investment of PQ to XY Group for $2,000,000. On this date the net assets of PQ were $1,340,000 and the non-controlling interests stood at $410,000.
What is the gain on disposal to be recognised in the consolidated statement of profit or loss of KL?
- A. $660,000
- B. $590,000
- C. $635,000
- D. $180,000
Answer: C
NEW QUESTION 129
At 31 October 20X1 RS has in issue 10% debentures 20X8 with a carrying value of $350,000.
Extracts from its statement of profit or loss for the year ending 31 October 20X7 are as follows:
What is the interest cover for RS for the ended 31 October 20X7?
- A. 10.0 times
- B. 9.0 times
- C. 8.0 times
- D. 11.1 times
Answer: B
NEW QUESTION 130
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. $9,715,000
Answer: A
NEW QUESTION 131
UV entered into a five year non-cancellable operating lease for an asset two years ago. Lease payments are settled annually in arrears.
At the year end, UV no longer requires this leased asset as they have decided to discontinue the product line that it was used for.
At this date UV had made two out of the five lease payments.
Which of the following statements about the unavoidable lease payments is true in accordance with IAS
37 Provisions, Contingent Liabilities and Assets?
- A. A provision should be recognised for the unavoidable lease payments with a corresponding charge to other comprehensive income.
- B. A provision should be recognised for the unavoidable lease payments with a corresponding charge to profit or loss.
- C. The amount of the unavoidable lease payments should be ignored in the financial statements.
- D. The amount of the unavoidable lease payments should be disclosed in the financial statements with no corresponding accounting entry.
Answer: B
NEW QUESTION 132
A group presents its financial statements in A$.
The goodwill of its only foreign subsidiary was measured at B$100,000 at acquisition. There have been no impairments to this goodwill.
Exchange rates (where A$/B$ is the number of B$'s to each A$) are as follows:
The value of goodwill to be included in the group's statement of financial position in respect of its foreign subsidiary for the year ended 31 December 20X4 is:
- A. A$75,758.
- B. A$66,667.
- C. A$132,000.
- D. A$150,000.
Answer: A
NEW QUESTION 133
KL sells luxury leather handbags and has 3 stores in exclusive shopping areas. Following years of static revenues and margins, in August 20X6 KL opened a fourth store at a busy airport terminal which is proving to be successful.
The revenue and gross profit of KL for the years ended 31 March 20X7 and 20X6 are as follows:
Which of the following would be a contributing factor to the movement in the gross profit margin of KL?
- A. A worldwide shortage of leather resulting in increased prices from suppliers.
- B. KL locating a new supplier prepared to supply handbags at a cheaper price.
- C. KL locating a new supplier closer to the warehouse, reducing distribution costs.
- D. The opportunity to sell handbags in the airport store at a premium price.
Answer: A
NEW QUESTION 134
GH acquired 3,000,000 of the 12,000,000 equity shares of JK. All shares carried equal voting rights and no other single shareholder of JK held more than 10% of the equity shares. GH has the power to participate in the financial and operating policy decisions but not control them.
Based on the information provided above, how would GH's investment in JK be accounted for in its consolidated financial statements?
- A. Joint arrangement
- B. Associate
- C. Financial asset
- D. Joint venture
Answer: B
NEW QUESTION 135
An entity undertakes an issue of new debt which has the effect of reducing the entity's weighted average cost of capital (WACC).
Which of the following would best explain why the WACC will have fallen?
- A. The new debt is being used to replace existing debt that had a lower cost.
- B. The entity was 100% equity financed prior to the issue of the debt.
- C. The new debt is being used to replace existing debt that had the same cost.
- D. The risk to the shareholders has reduced leading to a fall in the cost of equity.
Answer: B
NEW QUESTION 136
XY puchased 2% of the equity shares of FG on 1 October 20X3.
XY paid $25,000 for the shares as well as a transaction cost of 2.5% of the purchase price.
The shares are being held for short term trading and XY intend to sell them in December 20X3.
At the year end of 31 October 20X3, the shares in FG could be sold for $28,000.
What is the journal entry to record the subsequent measurement for this investment at 31 October
20X3?
- A. Debit investment in equity shares $2,375 and credit profit or loss $2,375.
- B. Debit investment in equity shares $2,375 and credit other reserves $2,375.
- C. Debit investment in equity shares $3,000 and credit other reserves $3,000.
- D. Debit investment in equity shares $3,000 and credit profit or loss $3,000.
Answer: D
NEW QUESTION 137
GH issued a 6% debenture for $1,000,000 on 1 January 20X4. A broker fee of $50,000 was payable in respect of this issue. The effective interest rate associated with this debt instrument is 7.2%.
The carrying value of the debenture at 31 December 20X4 is:
- A. $958,400
- B. $961,400
- C. $1,012,000
- D. $1,065,600
Answer: A
NEW QUESTION 138
XY owned 80% of the equity share capital of AB at 1 January 20X5. XY disposed of 20% of AB's equity share capital on 31 December 20X5 for $200,000. The non controlling interest was measured at
$140,000 immediately prior to the disposal.
What was the amount of the credit to retained earnings that XY will process in respect of this disposal when it prepares its consolidated financial statements at 31 December 20X5?
- A. $60,000
- B. $200,000
- C. $80,000
- D. $140,000
Answer: A
NEW QUESTION 139
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 140
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 141
DE acquired 10% of the equity shares of KL on 31 December 20X2.
A further 50% of the equity shares of KL were acquired by DE on 1 January 20X4.
Which THREE of the following would be part of the process for recording the second purchase of shares?
- A. A 50% non controlling interest will be shown in the consolidated financial statements.
- B. Net assets at 1 January 20X4 being compared to the purchase consideration and a transfer to equity made.
- C. Goodwill being calculated at 1 January 20X4 for the first time.
- D. The 10% investment being revalued to fair value at 1 January 20X4.
- E. Assets, liabilities, income and expenses being fully consolidated from 1 January 20X4.
- F. The goodwill calculated at 31 December 20X2 being revalued at 1 January 20X4.
Answer: C,D,E
NEW QUESTION 142
WX acquired 20% of the equity share capital of MN for $135 million in 20X5. WX acquired a further 40% of the equity share capital of MN for $400 million on 1 October 20X8 when the fair value of the net assets of MN were $800 million.
The fair value of the initial 20% investment in MN was $175 million at 1 October 20X8. There has been no impairment of the investment in MN. WX uses the proportion of net assets method to value non- controlling interest at acquisition.
Calculate the goodwill arising on the acquisition of MN.
Give your answer to the nearest $ million.
$ ? million
Answer:
Explanation:
95, 95000000
NEW QUESTION 143
Which of the following actions should XY's management take in order to reduce its investment in working capital?
- A. Sell its long-term investments and use the proceeds to reduce its bank overdraft.
- B. Pay trade suppliers more quickly to take advantage of prompt payment discounts.
- C. Extend credit terms with its trade customers.
- D. Scrap its obsolete inventory and replace with new inventory.
Answer: A
NEW QUESTION 144
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