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LK acquired 100% of the equity shares of TU on 1 January 20X4. LK disposed of 60% of TU for £2,400,000 on 30 September 20X4. The sale proceeds reflected the fair value of TU's shares on that date.
The remaining 40% shareholding gave LK the ability to exercise significant influence over the activities of TU. TU reported profit of $1,800,000 for the year ended 31 December 20X4 and this accrued evenly throughout the year.
Calculate the investment in associate that will be presented in LK's consolidated statement of financial position as at 31 December 20X4.
Give your answer to the nearest whole $'000.
$ 000
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?
A ) 
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?
When accounting for a finance lease under IAS 17 Leases, which TWO of the following are recognised in the statement of profit or loss?
Which of the following actions would be most likely to improve an entity's gross profit margin?
Which of the following actions should XY's management take in order to reduce its investment in working capital?
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?
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?
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
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?
Ratios calculated from the financial statements of ST Group for the years ended 31 August 20X7 and 20X6 are as follows:
Which of the following would have contributed to the movements in these ratios?
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?
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?
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
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
An accountant acting under their Code of Ethics would do which THREE of the following?
JK is seeking to raise finance for a project and the directors would prefer to take out a fixed rate bank loan repayable over the next 5 years. The project will increase the profit of JK even after taking into account the additional interest costs.
Which of the following statements about the use of a bank loan in this situation is true?
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?
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?
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?
When establishing a group structure, which of the following factors need to be considered: Select ALL that apply.
Which of the following principles are the basic principles followed by the consolidated income statement?
Select ALL that apply.
The capital structure of ST is summarised in the table below:
What is the weighted average cost of capital of ST?
Give your answer as a percentage to one decimal place.
? %
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?
Which TWO of the following are true for an entity raising equity finance using a rights issue rather than a placing of equity shares to new investors?
Which of the following is a related party according to the definition of a related party in IAS24 Related Party Disclosures?
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?
KL acquired 2 million $1 equity shares in MN on 18 July 20X0 for $1.65 a share and classified this investment as available for sale (AFS) in accordance with IAS 39 Financial instruments: Recognition and Measurement.
KL paid a 0.5% transaction fee to its broker on this transaction. MN's shares were trading at $1.78 on 31 December 20X0.
Which of the following journals records the subsequent measurement of this investment at 31 December 20X0?
The following information has been extracted from the financial statements of two single entities, TUV and XYZ, for the year ended 30 September 20X3.
Which of the following options shows the gearing ratios (Debt/Equity) for TUV and XYZ at 30 September 20X3?
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?
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?
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?
Which of the following is a related party according to the definition of a related party in IAS24 Related Party Disclosures?
The financial statements of ST at 31 December 20X9 include the following balances in respect of shares classed as equity:
The profit after tax for the year ended 31 December 20X9 is $200,000.
What is ST's basic EPS for the year to 31 December 20X9?
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:
If you were asked to express the overall performance of an entity as a percentage of its total investment in net assets which of the following ratios would you calculate?
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?
LK acquired 100% of the equity shares of TU on 1 January 20X4. LK disposed of 60% of TU for £2,400,000 on 30 September 20X4. The sale proceeds reflected the fair value of TU's shares on that date.
The remaining 40% shareholding gave LK the ability to exercise significant influence over the activities of TU. TU reported profit of $1,800,000 for the year ended 31 December 20X4 and this accrued evenly throughout the year.
Calculate the investment in associate that will be presented in LK's consolidated statement of financial position as at 31 December 20X4.
Give your answer to the nearest whole $'000.
$ 000
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?
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?
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.
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?
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?
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
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
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?
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?
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?
Which of the following is NOT an example of an unconsolidated structured entity as defined in IFRS12 Disclosure of Interests in Other Entities?
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.
The basic earning per share computed by a company for year ended 31st March 20X7 is £2 per share. The company had certain convertible debentures outstanding as on 31st March 20X7. The conversion of
debentures to equity shares would result in the earnings per share to be £2.2. Which of the following should the company disclose?
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?
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 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.
$ ?
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.
? %
Which of the following taken independently would explain the reduction in the profits as highlighted by the Chairman's press release?
On 1 January 20X6 AB, a listed entity, had 10,000,000 $1 ordinary shares in issue. On 1 April 20X6 AB issued 3,000,000 $1 ordinary shares at their full market price. AB's profit was reported as $1,100,000 after charging corporate income tax of $500,000.
Place the correct values for profit and weighted average number of shares in the boxes below that will be used to calculate AB's earnings per share for the year to 31 December 20X6.
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:
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?
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?
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.
$ ? 000
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?
CD commenced a construction contract on 1 April 20X9. The contract value was agreed at $100,000. CD had incurred $40,000 costs to date and estimated costs to completion were $50,000. At the year ended 31 December 20X9 this contract was estimated to be 60% complete. CD adopted the provisions of IAS 11 Construction Contracts when preparing its financial statements for the year to 31 December 20X9.
What value should be included in CD's profit for the year ended 31 December 20X9 in respect of this contract?
Give your answer to the nearest whole number.
$ ?
PQ and WX are similar sized entities and operate in the same industry within Country X . Both operate from a single warehouse and have similar levels of non current asset resources.
The following ratios have been calculated at 31 October 20X8:
If considered individually, which of the following would limit the usefulness of these ratios in assessing the comparative financial performances of PQ and WX?
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?
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 classified as which of the following?
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.
Which of the following independent options would explain the difference between the gearing ratios of AB and EF at 31 October 20X4?
Which of the following is the correct calculation for basic earnings per share in accordance with IAS 33 Earnings Per Share?
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 local council is one year into a two year project to renovate local parks. The project is on track to be completed within the set time-scale, however it has proved more costly than initially expected.
The project is on track to be completed within its two year period. Contracts for the labour and materials needed to renovate the parks were agreed at the start of the project and no changes have arisen. Despite the fact
that the council has yet to fully settle these contracts, costs are set to be as budgeted.
Why would this example not be recognised as a provision?
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 successful in this claim.
What is the correct accounting treatment for these two items in HJ's financial statements?
The directors of AB want to reduce the entity's gearing ratio in the year to 31 December 20X9.
Which of the following independent actions could the directors take during 20X9 to achieve this?
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?
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:
LM acquired an asset under a 5-year non-cancellable operating lease agreement on 1 January 20X8. Under the terms of the agreement, LM paid nothing for the first year and then made four payments of $50,000 in each subsequent year. LM adopted the provisions of IAS 17 Leases when accounting for this agreement.
Which of the following is correct in respect of this operating lease in LM's financial statements for the year to 31 December 20X8?
TESTED 15 May 2024
