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CIMA F2 - F2 Advanced Financial Reporting

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Total 268 questions

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 shows a favourable view of performance.

C.

It is in accordance with International Financial Reporting Standards.

D.

It is straightforward to implement.

E.

It maximises shareholder wealth.

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?

A.

15.83

B.

7.92

C.

10.56

D.

9.31

JK is seeking to raise new finance through a rights issue of equity shares. 

Which THREE of the following statements are correct?

A.

The administration costs associated with a rights issue are higher than those for an initial public offering.

B.

Shareholders must pay the full market price for shares offered in a rights issue.

C.

An alternative name for a rights issue is a scrip issue of shares.

D.

A rights issue will dilute an existing shareholder's control of the entity if they do not take up their rights.

E.

Entities have the opportunity to underwrite a rights issue.

F.

Shareholders' entitlement to rights may be sold on their behalf.

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:

A.

$164 million

B.

$176 million

C.

$272 million

D.

$284 million

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

A.

The revenue figure being aggregated from many different activities and sources.

B.

Accounting estimates in respect of depreciation being different between entities.

C.

The effect of a material and unusual item being disclosed separately in the notes.

D.

An entity adopting a policy of revaluing its non current assets.

E.

Ratio calculations being based on historical information.

F.

Ratios being quick and easy to calculate.

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

A.

Major customer

B.

Provider of finance

C.

Managing Director

D.

Major supplier

When consolidating for group accounts, a number of calculations and adjustments are required to properly combine the entities into a single group. Which of the following processes are involved in this consolidation

method?

Select ALL that apply:

A.

Add together the assets and liabilities of parent and subsidiary

B.

Adjust for investment in subsidiaries

C.

Adjustment for equity

D.

Adjustment for profits

E.

Adjustment for depreciation and amortisation

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$150,000.

D.

A$132,000.

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?

A.

Dr Deferred tax provisionCr Tax expense

B.

Dr Deferred tax provisionCr Other comprehensive income

C.

Dr Tax expenseCr Deferred tax provision

D.

Dr Other comprehensive incomeCr Deferred tax provision

Which of the following would limit the effectiveness of analysis performed on the operating profit margins of two separate entities with the same total revenue over a12 month period?

A.

Different accounting estimates in respect of depreciation of property, plant and equipment.

B.

Different approaches to allocating expenses to cost of sales, administration expenses and distribution costs.

C.

Different interest rates on loan finance available to the entities.

D.

Different pattern of monthly revenues caused by seasonality.