Pass Your CIMAPRA19-F02-1-ENG Exam With Valid Questions and Answers

1. RS is a listed entity that has no subsidiaries although its Finance Director is also a director of TU, an unconnected entity.

It is preparing its financial statements to 30 September 20X6.

Which of the following substantial transactions must be disclosed in these financial statements in accordance with IAS 24 Related Party Disclosures?

2. You are a Financial Controller at BCD and are in the process of preparing the year-end financial statements. A member of your finance team has come to see you about her provisions balance at year-end.

She says that the Managing Director has asked her to increase the provisions balance by $1 million overall. She thinks this is because BCD has had a very good year in terms of profit, and the Managing Director wants to put some profit aside to protect against any future reductions in profit. $1 million is material to BCD.

You believe that the provisions balance was fairly stated without the additional $1 million.

Which TWO of the following would be appropriate actions in this scenario?

3. CORRECT TEXT

A convertible bond with a nominal value of $100 can be redeemed at par in 5 years' time or be converted into 1 new equity share for every $5 of bond held.

The current equity share price is $3.50 and it is anticipated that this will grow at a rate of 7% per year.

What is the value of the conversion option of the bond in 5 years' time?

Give your answer to two decimal places.

$ ?

4. Which of the following reduce the usefulness of ratio analysis when comparing entities that operate in the same industry? Select ALL that apply.

5. CORRECT TEXT

On 1 January 20X4 EF grants each of its 125 employees 500 share options on the condition that they remain in employment for 3 years. During the year to 31 December 20X4 10 employees left and It is expected that a further 25 will leave before the end of the vesting period.

The fair value of each share option is $30 on 1 January 20X4 and $45 on 31 December 20X4.

What is the journal entry in respect of these share options in EF's financial statements for the year ended 31 December 20X4?

6. Which of the following options provides a representation of how the non controlling interest in FG is measured in CD's consolidated statement of financial position at 31 December 20X8?

7. CORRECT TEXT

XY owned 60% of the equity share capital of AB at 1 January 20X6. XY acquired a further 20% of AB's equity share capital on 31 December 20X6 for $500,000. The non controlling interest in AB was measured at $720,000 immediately prior to the 20% acquisition.

Calculate the amount that XY debited to non controlling interest when it accounted for the 20% acquisition in its consolidated financial statements at 31 December 20X6.

Give your answer to the nearest $000.

$ ? 000

8. RST sells computer equipment and prepares its financial statements to 31 December.

On 30 September 20X5 RST sold computer software along with a two year maintenance package to a customer. The customer is given the right to return the goods within six months and claim a full refund if they are notsatisfiedwith the computer software. The risk of return is considered to be insignificant for RST.

How should the revenue from this transaction and the right of return be recognised in the financial statements for the year ended 31 December 20X5?

9. CORRECT TEXT

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.

? %

10. FG and RS operate in the same retail sector within the same country and are of a similar size.

The following ratios have been calculated based on the financial statements for the year ended 30 September 20X4:





Which of the following factors would limit the usefulness of these ratios as a basis for assessing the comparative performances of FG and RS?

11. CORRECT TEXT

EF has redeemable 10% bonds which are currently trading at $94.00 for each $100 of nominal value. Thebondscan be redeemed at par in five years' time. The corporate income tax rate is 22%.

The present value of the cash flows associated with $100 nominal value of these bonds at a discount rate of 7% is $9.28.

Calculate the post tax cost of debt.

Give your answer as a percentage to one decimal place.

%

12. CORRECT TEXT

GH's financial statements show the following:

What is the value of the dividend received from the associate to be included in GH's consolidated statement of cash flows for the year?

Give your answer to the nearest $000.

$ ? 000

13. An accountant acting under their Code of Ethics would do which THREE of the following?

14. On 1 January 20X4 JK had 1,500,000 ordinary shares in issue. On 1 September 20X4 JK issued 600,000 ordinary shares at the market value of $2.50 a share. For the financial year ended 31 December 20X4 the statement of profit or loss shows profit before tax of $625,000 and profit after tax of $500,000.

What is the earnings per share for the year ended 31 December 20X4?

15. 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 arisendue topoor 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:

16. CORRECT TEXT

The capital structure of ST issummarised in the table below:





What is the weighted average cost of capital of ST?

Give your answer as a percentage to one decimal place.

? %

17. CORRECT TEXT

On 1 January 20X4 EF grants each of its 125 employees 500 share options on the condition that they remain in employment for 3 years. During the year to 31 December 20X4 10 employees left and It is expected that a further 25 will leave before the end of the vesting period.

The fair value of each share option is $30 on 1 January 20X4 and $45 on 31 December 20X4.

What is the journal entry in respect of these share options in EF's financial statements for the year ended 31 December 20X4?

18. CORRECT TEXT

CD has 200,000 equity shares with a current market value of $2.50 each. The annual dividend of $0.50 a share is about to be paid.

CD also has redeemable debt with a nominal value of $100,000. This is currently trading at $90 for each $100 of nominal value.

The cost of equity is 20% and the post tax cost of debt is 6%.

What is CD's weighted average cost of capital?

Give your answer in % to one decimal place.

? %

19. JJ's current share price is $1.80, with a dividend of $0.20 a share just about to be paid.

Dividends have increased at an average annual growth rate of 4.5% and this is expected to continue into the future.

What is JJ's cost of equity?

20. Which THREE of the following statements about preference shares are true?

21. AB acquired a financial investment on 1 January 20X9, incurring $5,000 related agency fees. AB initially classified the investment as held for trading, in accordance with IAS 32 Financial Instruments: Presentation.

Which of the following statements reflects the accounting treatment that AB adopted in respect of this investment when it prepared its financial statements to 31 December 20X9?

22. Which TWO of the following are true in relation to IAS21.

The Effects of Changes in Foreign Exchange Rates when consolidating an overseas subsidiary?

23. CORRECT TEXT

LM acquired 15% of the equity share capital of ST on 1 January 20X6 for $18 million. LM acquired a further 50% of the equity share capital of ST for $50 million on 1 January 20X7 when the fair value of ST's net assets was $82 million. The original 15% investment in ST had a fair value of $20 million at 1 January 20X7. The non controlling interest in ST was measured at its fair value of $30 million at the date control in ST was acquired.

Calculate the goodwill arising on the acquisition of ST that LM included in its consolidated financial statements at 31 December 20X7.

Give your answer to the nearest $ million.

$ ? million

24. What is meant by the term "a placing of ordinary shares"?

25. 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?

26. Which THREE of the following actions should improve the cash position of an entity?

27. The consolidated statement of profit or loss for VW for the year ended 30 September 20X7 includes the following:

What is VW's interest cover for the year ended 30 September 20X7?

28. LM acquired 80% of the equity shares of ST when ST's retained earnings were $50 million.

The fair value of the net assets of ST included a contingent liability with a fair value of $100 million at the date of acquisition and a fair value of $40 million at 31 December 20X6.

No other fair value adjustments were required at the date of acquisition.

LM and ST had retained earnings of $200 million and $80 million respectively at 31 December 20X6.

The consolidated retained earnings of LM at 31 December 20X6 were:

29. Which of the following is a related party according to the definition of a related party in IAS24 Related Party Disclosures?

30. Which of the following actions would be most likely to improve an entity's gross profit margin?

31. How would KL account for its investment in MN in its consolidated financial statements for the year to 31 December 20X9?

32. CORRECT TEXT

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.

$ ?

33. CORRECT TEXT

LM acquired 15% of the equity share capital of ST on 1 January 20X6 for $18 million. LM acquired a further 50% of the equity share capital of ST for $50 million on 1 January 20X7 when the fair value of ST's net assets was $82 million. The original 15% investment in ST had a fair value of $20 million at 1 January 20X7. The non controlling interest in ST was measured at its fair value of $30 million at the date control in ST was acquired.

Calculate the goodwill arising on the acquisition of ST that LM included in its consolidated financial statements at 31 December 20X7.

Give your answer to the nearest $ million.

$ ? million

34. CORRECT TEXT

Which of the following is the correct calculation for basic earnings per share in accordance with IAS 33 Earnings Per Share?

35. CORRECT TEXT

In recent years EBITDA has been adopted by large entities as a key measure of performance.

The following figures have been extracted from the financialstatementsof 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.

36. 1.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?

37. CORRECT TEXT

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

38. 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?

39. CORRECT TEXT

Information extracted from JK's statement of financial position for the year ended 31 May 20X5 is as follows:





Calculate the gearing ratio (Debt/Equity measured as a percentage) at 31 May 20X5.

Give your answer to one decimal place.

? %

40. FG has a weighted average cost of capital of 12% based on its existing:

• level of gearing of 30% (measured as debt/(debt + equity)); and

• business operations.

This would be used as an appropriate discount factor to assess which of the following significantprojects?

41. HJ is currently in dispute with an employee, who is claiming $400,000 in a legal case against them.

HJ's legal advisors have stated that it is probable that they will lose the case and will have to pay the amount claimed.

Also, HJ are claiming $250,000 from a supplier of defective goods and the legal advisors have stated that it is probable that HJ will be successfulin this claim.

What is the correct accounting treatment for these two items in HJ's financial statements?

42. DRAG DROP

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 ofearnings per share for the year to 31 December 20X8.

43. 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?

44. 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?

45. As at 31 October 20X7 TU's financial statements show the entity having profit after tax

of $600,000 and 900,000 $1 ordinary shares in issue.There have been no issues of shares during the year. At 31 October 20X7 TU have 300,000 share options in issue, which allow the holders to purchase ordinary shares at $2 a share in 3 years' time. The average price of the ordinary shares throughout the year was $5 a share.

What is the diluted earnings per share for the year ended 31 October 20X7?

46. CORRECT TEXT

AB acquired its subsidiary on 1 January 20X7 when the fair value of net assets was the same as book value with the exception of property, plant and equipment that had a fair value $500,000 higher than carrying value.

These assets were assessed to have a remaining useful life of 5 years from the date of acquisition.

What is the net consolidation adjustment to the property, plant and equipment balance at 31 December 20X9?

Give your answer to the nearest whole number (in '$000s).

$?

47. 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?

48. Information from the financial statements of RST for the year ended 30 April 20X9 is as follows:





At 30 April 20X9 the ordinary shares are trading at $4.75.

What is the price earnings (P/E) ratio for RST at 30 April 20X9?

49. 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:

50. 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?

51. 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:

52. On 1 January 20X7 GH purchased plant and equipment at a cost of $400,000. The temporary differences in respect of this plant and equipment at 31 December 20X7 and 20X8 have been calculated as follows:

Assume that there are no other temporary differences in the periods and that the corporate income tax rate is 25%. GH is expected to have significant taxable profits in the future.

Which of the following is the correct impact in GH's statement of financial position at 31 December 20X8 in respect of deferred tax?

53. Which of the following actions should XY's management take in order to reduce its investment in working capital?

54. 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?

55. On 1 January 20X7 GH purchased plant and equipment at a cost of $400,000.

The temporary differences in respect of this plant and equipment at 31 December 20X7 and 20X8 have been calculated as follows:





Assume that there are no other temporary differences in the periods and that the corporate income tax rate is 25%. GH is expected to have significant taxable profits in the future.

Which of the following is the correct impact in GH's statement of financial position at 31 December 20X8 in respect of deferred tax?

56. Which of the following is NOT an example of an unconsolidated structured entity as defined in IFRS12 Disclosure of Interests in Other Entities?

57. Which THREE of the following statements are true in relation to financial assets designated as fair value through profit or loss under IAS 39 Financial Instruments: Recognition and Measurement?

58. AB's financial information shows that the non current assets' carrying value is greater than the tax base at the year end.

What is the journal entry to record the movement in the provision for deferred tax resulting from this difference?

59. CORRECT TEXT

VW acquired 240,000 of the 300,000 $1 equity shares of EF for $1,440,000 on 1 January 20X2. Goodwill arising from the acquisition, using the proportionate

method for measuring non controllinginterest, was $540,000. On 1 January 20X3 VW disposed of 30,000 of the equity shares in EF for $200,000 cash when the net assets of EF were £1,200,000. Goodwill arising on the acquisition of EF had not suffered any impairment.

Prepare the accounting adjustment that will be processed by VW to reflect the disposal of shares in EF when it prepares its consoldiated financial statements.

60. ST has in issue unquoted 7% debentures which were issuedat 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?

61. XY acquired 75% of the equity shares of LM on 31 December 20X3. LM acquired 60% of the equity shares of JK on 31 December 20X4 for $950,000. XY measured the non controlling interest in JK at the date of acquisition using the proportionate share of the fair value of the net assets acquired. The fair value of JK's net assets was $850,000 at 31 December 20X4.

What is the value of goodwill that XY will include in its consolidated statement of financial position at 31 December 30X4 in respect of JK as a result of gaining indirect control?

62. 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?