Latest [Dec 04, 2021] F2 Exam with Accurate Advanced Financial Reporting PDF Questions
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NEW QUESTION 118
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 held no investments in other entities; JK revalued its available for sale investments upwards in the year.
- B. LM had 100,000 $1 shares at the year end; JK had 200,000 50c shares in issue at the year end.
- C. LM revalued its land and buildings upwards in the year; JK has performed no revaluations.
- D. LM made a bonus issue from retained earnings in the year; JK issued no shares in the year.
Answer: C
NEW QUESTION 119
Which TWO of the following are TRUE in respect of preparing a consolidated statement of cash flows where there has been an acquisition of a subsidiary part way through the year?
- A. Any shares that were issued on acquisition of the subsidiary will be shown separately on the statement of cash flows within financing activities.
- B. The working capital held by the subsidiary at acquisition will be excluded from the year end figures based on the percentage shareholding in the subsidiary.
- C. The year end cash and cash equivalents balance will be reduced by the cash and cash equivalents that were held by the subsidiary at the acquisition date.
- D. Non-controlling interest will arise in relation to the subsidiary and any dividends paid to the non- controlling interest will be shown within financing activities as a cash outflow.
- E. Investing activities will include a total cash outflow for the acquisition comprising the cash paid for the subsidiary less the cash held by the subsidiary at the acquisition date.
Answer: D,E
NEW QUESTION 120
AAA is the only director of entity CD. AAA is also a director of entity GH. CD owns 30% of the equity of MN and 60% of the equity of OP.
Identify which of the following are related parties of CD by placing the appropriate response against one.
Answer:
Explanation:
NEW QUESTION 121
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 122
FGH plans to issue a large number of shares to the public via an IPO.
It is considering either an offer for sale at a fixed price or an offer for sale by tender.
Which of the following would be an advantage to FGH of using the offer for sale by tender compared to the fixed price offer?
- A. There would be more certainty over the issue price of the shares.
- B. Tenders are more attractive to less sophisticated investors thus maximising potential investment.
- C. The shares will be sold to different investors at differing values thus maximising the capital raised.
- D. There is potential for reaching a higher share price thus maximising capital raised.
Answer: D
NEW QUESTION 123
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. $1,065,600
- B. $958,400
- C. $961,400
- D. $1,012,000
Answer: B
NEW QUESTION 124
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?
- A. $202,500
- B. $567,500
- C. $440,000
- D. $330,000
Answer: D
NEW QUESTION 125
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 126
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.
Answer:
Explanation:
NEW QUESTION 127
AB acquired an investment in a debt instrument on 1 January 20X5 at its nominal value of $25,000, which it intends to hold until maturity. The instrument carried a fixed coupon interest rate of 5%, payable in arrears. Transactions costs of $5,000 were paid in respect of this investment. The effective interest rate applicable to this instrument was estimated at 9%.
Calculate the value of this investment that AB will include in its statement of financial position at 31 December 20X5.
Give your answer to the nearest whole number.
$ ?
Answer:
Explanation:
31450
NEW QUESTION 128
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 $3,000 and credit profit or loss $3,000.
- B. Debit investment in equity shares $2,375 and credit profit or loss $2,375.
- C. Debit investment in equity shares $2,375 and credit other reserves $2,375.
- D. Debit investment in equity shares $3,000 and credit other reserves $3,000.
Answer: A
NEW QUESTION 129
BC are currently seeking to establish an accounting policy for a particular type of transaction.
There are four alternative ways in which this transaction can be treated. Each treatment will have a different outcome on the financial statements as follows:
* Treatment one means that the financial statements will be easier to prepare.
* Treatment two will give a fair representation of the transaction in the financial statements.
* Treatment three will maximise the profit figure presented in the financial statements.
* Treatment four means that the financial statements will be more easily understood by shareholders.
Which accounting treatment should BC adopt?
- A. Three
- B. One
- C. Four
- D. Two
Answer: D
NEW QUESTION 130
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?
- A. Neither basic nor diluted earnings per share
- B. Diluted earnings per share only
- C. Basic earnings per share only
- D. Both basic and diluted earnings per share
Answer: C
NEW QUESTION 131
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 figure for non-controlling interest to be shown in the consolidated statement of financial position of ST as at 31 December 20X5?
- A. $1,795,000
- B. $1,607,500
- C. $1,825,000
- D. $1,805,000
Answer: A
NEW QUESTION 132
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 133
Taking each statement individually, which of the following explains the movement in the gross profit margin from 20X4 to 20X5 as calculated by the analysts?
- A. Reduction in the cost of raw materials NOT passed onto customers.
- B. Prompt payment discounts no longer offered to customers.
- C. Increase in the volume of sales over the year.
- D. Increase in the levels of closing inventory of raw materials.
Answer: A
NEW QUESTION 134
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. Fair value at 31 December 20X8 will be used to value the options.
- B. Fair value at 1 January 20X8 will be used to value the options.
- C. The calculation of the charge for the year will be adjusted for actual and estimated leavers.
- D. The calculation of the charge for the year will be adjusted for actual leavers only.
- E. The credit entry will be to non-current liabilities.
- F. The credit entry will be to equity.
Answer: B,C,F
NEW QUESTION 135
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 136
XY purchased $100,000 of quoted 8% bonds in the current year which it intends to hold until redemption.
Which of the following identifies the correct classification and subsequent measurement basis for this financial instrument?
- A. A held to maturity financial asset subsequently measured at amortised cost.
- B. A held to maturity financial asset subsequently measured at fair value with gains and losses in reserves.
- C. A loans and receivables financial asset subsequently measured at amortised cost.
- D. A loans and receivables financial asset subsequently measured at fair value with gains and losses in reserves.
Answer: A
NEW QUESTION 137
XY has a weighted average cost of capital (WACC) of 12%. The debt:equity ratio is 1:3 and this is considered low for the industry. XY needs to raise finance to purchase new machinery in the coming year.
Which of the following forms of finance is most likely to increase the WACC?
- A. Finance lease
- B. 8% preference shares
- C. Rights issue of equity shares
- D. 6% bank loan
Answer: C
NEW QUESTION 138
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