CIMA masters gateway F2 MCQ

8/10/2019 CIMA masters gateway F2 MCQ

1/27

1 BNM has $10 million $1 ordinary shares in issue at 1 January 2010. On 1 August 2010BNM issued 2 million $1 ordinary shares at a premium of 30 cents. BNM's profit available toordinary shareholders was $4 million for the year ended 31 December 2010.

The basic earnings per share is:

A 33.3 cents per share

B 36.9 cents per share

C 40 cents per share

D 42.5 cents per share

(2 marks)

2 The Directors of GHJ, an unlisted entity, have approached the directors of a smaller listedentity and have proposed an agreed takeover by GHJ. The net assets of GHJ are

approximately twice as great as the target entity.

This type of arrangement is known as a

A merger

B listed acquisition

C reverse acquisition

D fresh start acquisition

(2 marks)

3 IOP operates a defined benefit pension plan for its employees. The present value of the

pension plan obligations as at 31 December 2010 total $567 million. The fair value of thepension plan assets at that date total $558 million. Unrecognised gains as at 31 December2010 were $3 million.

The statement of financial position of IOP as at 31 December 2010 will show:

A a net pension asset of $6 million

B a net pension liability of $6 million

C a net pension liability of $9 million

D a net pension liability of $12 million

(2 marks)

4 FGH acquired an investment in a listed entity and classified the investment as available forsale. 100,000 shares were acquired at $1.15 on 1 May 2010 and the related acquisitioncosts were $8,000. The shares were trading at $1.50 at 31 December 2010

The subsequent measurement of the available for sale investment will be recorded by:

A Debit investment $19,000 and credit profit or loss $19,000

B Debit investment $27,000 and credit profit or loss $27,000

C Debit investment $19,000 and credit reserves $19,000

D Debit investment $27,000 and credit reserves $27,000

(2 marks)


2/27

25 March 2010 0.741 : $130 April 2010 0.753 : $112 May 2010 0.731 : $1

At 30 April 2010, the entity's year end, what amounts would have been held in respect ofthis transaction?

A Non-current assets at cost of $332,005 and trade payables of $332,005

B Non-current assets at cost of $337,382 and trade payables of $332,005

C Non-current assets at cost of $337,382 and trade payables of $337,382

D Non-current assets at cost of $337,382 and trade payables of $341,997

(2 marks)

6 LMR had 3 million $1 ordinary shares in issue at 1 May 2009. On 30 September 2009, LMRissued a further 1 million $1 shares at par. Prof it before tax for the year ended 30 April 2010was $450,000 and the related income tax charge was $110,000.

Calculate the basic earnings per share of LMR for the year to 30 April 2010.

(2 marks)

7 The non-current asset turnover ratios of entities X and Y are 0.44 and 0.82 respectively.

Explain, giving TWO reasons, why this ratio may not provide a good comparison of theefficiency of the entities.

(2 marks)

8 NBW purchased a bond with a par value of $5 million on 1 July 2009. The bond carries a5% coupon, payable annually in arrears and is redeemable on 30 June 2014 at $5.8 million.

NBW fully intends to hold the bond until the redemption date. The bond was purchased at a10% discount. The effective interest rate on the bond is 10.26%.

Calculate the closing value of the bond liability in NBWs financial statements as at 30 June2010.

(2 marks)

9 GH granted share options to its 300 employees on 1 January 2009. Each employee willreceive 1,000 share options provided they continue to work for GH for three years from thegrant date. The fair value of each option at the grant date was $1.22.

The actual and expected staff movement over the three years to 31 December 2011 isprovided below:

2009 - 25 employees left and another 40 were expected to leave over the next two years.

2010 - A further 15 employees left and another 20 were expected to leave the followingyear.

The charge to GH's income statement for the year ended 31 December 2010 in respect ofthe share options was:

A $97,600

B $99,633

C $195,200


3/27

10 JK operates a defined benefit pension plan. The fair value of the plan assets at 31

December 2010 was $13.1 million. The present value of the plan liabilities at 31 December2010 was $13.9 million. JK currently adopts the corridor approach for the treatment ofactuarial gains and losses. Unrecognised actuarial losses as at 31 December 2010 totalled$0.5 million.

The net pension asset or liability that would be included in JK's statement of financialposition as at 31 December 2010 is

A $300,000 pension asset

B $300,000 pension liability

C $800,000 pension liability

D $1,300,000 pension liability

(2 marks)

11 AD acquired 100,000 shares in BC on 25 October 2010 for $3 per share. The investmentresulted in AD holding 5% of the equity shares of BC. The related transaction costs were$12,000. BC's shares were trading at $3.40 on 31 December 2010. The investment hasbeen classified as held for trading.

The increase in value of the investment will result in

A a credit to retained earnings of $28,000

B a credit to retained earnings of $40,000

C a credit to profit or loss of $28,000

D a credit to profit or loss of $40,000

(2 marks)


4/27

12 Statement of comprehensive income for the year ended 31 December for KL

2010$m

Revenue 252Cost of sales (203)Gross profit 49Distribution costs (18)

Administrative expenses (16)Share of profit of associate 7Finance costs (12)Profit before tax 10Income tax expense (3)Profit for the year 7

The operating profit margin (to the nearest two decimal places) of KL for the year ended 31December 2010 is

A 3.97%

B 5.95%

C 8.73%

D 19.44%

(2 marks)

13 JAC operates a defined benefit pension plan for its employees. The fair value of the planassets at 1 June 2008 was $3,100,000. JAC made contributions of $300,000 to the plan inthe year to 31 May 2009 and the expected return on assets has been calculated at$190,000. The pension plan paid out a total of $225,000 in benefits in the period and thefair value of the plan assets at 31 May 2009 was $3,340,000.

The actuarial gain or loss in respect of the pension plan assets of JACs defined benefitpension plan for the year ended 31 May 2009 is:

A $125,000 loss

B $25,000 loss

C $25,000 gain

D $125,000 gain(2 marks )

14 MX had 5 million $1 ordinary shares in issue at 1 May 2008. On 30 September 2008 MXissued a further 2 million $1 ordinary shares at par.

Profit before tax for the year ended 30 April 2009 was $650,000 and the related incometax charge was $210,000.

The basic earnings per share of MX for the year to 30 April 2009 is:

A 6.9 cents per share

B7.1 cents per share

C 10.5 cents per share


5/27

D 13.5 cents per share(2 marks )

15 AB, CD and EF are listed entities operating in the same business sector. At 31 December2009 their P/E ratios were reported as follows:

AB 17.1CD 13.2

EF 9.3

Which ONE of the following statements about these P/E ratios is correct?

A AB is regarded by the market as the riskiest of the three entities.

B AB has the highest earnings per share of the three entities.

C CD represents the safest investment because its P/E lies midway between the other two.

D EFs share price may be relatively lower than that of AB and CD because of an adverseeffect such as a profit warning.

(2 marks )

16 The Global Reporting Initiative created a Sustainability Reporting Framework, whichprovides details of disclosures that entities should include in their corporate reports.

Which ONE of the following is not specified in that framework as an area for whichdisclosures should be provided?

A Economic

B Environmental

C Segmental

D Social

(2 marks )

17 AB granted 1,000 share options to its 300 employees on 1 January 2011. To be eligible,employees must remain employed for three years from the date of issue and the rightsmust be exercised in January 2014. In the year to 31 December 2011, 32 staff left and afurther 35 were expected to leave over the following two years.

The fair value of the share options at 1 January 2011 was $8.

The accounting entry to record the expense associated with the share options (to the

nearest $), for the year to 31 December 2011, in accordance with IFRS 2 Share-basedPayment is to:

A debit staff costs $1,864,000 and credit other reserves (within equity) $1,864,000.

B debit staff costs $1,864,000 and credit liabilities $1,864,000.

C debit staff costs $621,333 and credit other reserves (within equity) $621,333.

D debit staff costs $621,333 and credit liabilities $621,333.

(2 marks)

18 NM acquired an equity investment in another entity and classified it immediately as held fortrading. The investment cost $880,000 on 1 May 2011 and at its following year end NM hadrecognised a gain of $6,800 on the investment. NM pays 2% commission to its broker on alltransactions.


6/27

The value of this investment will be included in NM's statement of financial position at:

A $886,800

B $904,400

C $904,536

D $912,560

(2 marks )

19 GHJ operates a defined benefit pension plan for its employees. At 1 July 2011 the presentvalue of the plan liabilities was $1,400,000. The interest cost on the plan liabilities wasestimated at 7%.

The actuary estimates that the current service cost for the year ended 30 June 2012 is$300,000. GHJ made contributions into the pension plan of $400,000 in the year.

The pension plan paid $220,000 to retired members in the year to 30 June 2012.

At 30 June 2012 the present value of the plan liabilities was $1,600,000.

GHJ recognises actuarial gains and losses in other comprehensive income in the period inwhich they occur.

The actuarial gain or loss on the pension liabilities that GHJ will recognise in othercomprehensive income for the year ended 30 June 2012 is:

A gain of $198,000

B gain of $22,000

C loss of $8,000

D loss of $22,000

20 ABC issued 6% debentures on 1 January 2010 at their par value of $3 million. Issue costswere $200,000. The interest on the debentures is paid annually in arrears. The debentureswill be redeemed in 4 years' time at a premium of $400,000. The effective interest rate inrespect of these debentures is approximately 11%.

The debentures will be included in the statement of financial position of ABC at 31December 2011 at a value of:

A $2,928,000

B $2,940,000

C $3,070,080

D $3,150,000

(2 marks )

(2 marks )


7/27


8/27

21 SR granted 1,000 share appreciation rights (SARs) to its 300 employees on 1 January2011. To be eligible, employees must remain employed for 3 years from the date of issueand the rights must be exercised in January 2014, with settlement due in cash. In the yearto 31 December 2011, 32 members of staff left and a further 35 were expected to leaveover the following 2 years.

The fair value of each SAR was $8 at 31 December 2011.

The accounting entry to record the expense associated with the SARs (to the nearest $), forthe year to 31 December 2011, in accordance with IFRS 2 Share-based Payment is to:

A debit staff costs $1,864,000 and credit other reserves (within equity) $1,864,000.

B debit staff costs $1,864,000 and credit liabilities $1,864,000.

C debit staff costs $621,333 and credit other reserves (within equity) $621,333.

D debit staff costs $621,333 and credit liabilities $621,333.

(2 marks )

22 KL issued a long term debt instrument with a nominal value of $9.5 million on 1 January2011. The costs associated with the issue totalled $370,000. The instrument carries acoupon rate of 5%. However, effective interest rate for this instrument is 7%.

The value of the debt instrument in KL's statement of financial position at 31 December2011 was

A $8,965,900

B $9,294,100

C $9,312,600

D $9,690,000

(2 marks )

23 The following information is available for GHJ for the year ended 31 March 2012:

Profit for the year $160mTotal comprehensive income for the year $248mShare capital ($1 equity shares) $300m

The share capital at the year-end includes 100m shares that were issued as a bonus issueon 1 July 2011.

The basic earnings per share for the year ended 31 March 2012 is

A 53.3 cents B 58.2 cents C 82.7 cents D 90.2 cents

24 SR acquired 60% of the 1 million $1 ordinary shares of BN on 1 July 2011 for $3,250,000when BN's retained earnings were $2,760,000. The group policy is to measure non-controlling interests at fair value at the date of acquisition. The fair value of non-controllinginterests at 1 July 2011 was $1,960,000. There has been no impairment of goodwill sincethe date of acquisition.

SR acquired a further 20% of BN's share capital on 1 March 2012 for $1,000,000 when theretained earnings of BN were $2,960,000.

The value of goodwill appearing on SR Group's statement of financial position at 31 March

2012 is


9/27

A $994,000

B $1,450,000

C $1,594,000

D $2,250,000

(2 marks )

(2 marks )


10/27

The following data are given for questions 25 and 26

R operates a defined benefit pensions plan for its employees. At 1 January 2012 the fairvalue of the pension plan assets was $1,100,000 and the present value of the plan liabilities$1,200,000. The interest cost and the expected return on assets was estimated at 5%. Thecurrent service cost for the year ended 31 December 2012 was $250,000. R madecontributions to the pension plan of $150,000 and the pension plan paid $225,000 to retiredmembers in the year to 31 December 2012.

At 31 December 2012 the fair value of the pension plan assets was $1,150,000 and the

present value of the pension plan liabilities was $1,350,000.

25 The amount that will be included in the profit and loss of R for the year ended 31 December2012 in respect of the pension plan is:

A An expense of $155,000.

B An expense of $245,000.

C An expense of $255,000.

D An expense of $365,000.

(2 marks )

26 The actuarial gain or loss on the pension plan assets that will be included in the othercomprehensive income of R for the year ended 31 December 2012 is:

A a loss of $155,000

B a loss of $70,000

C a gain of $70,000

D a gain of $220,000

(2 marks )


11/27

27 X issues 1 million $1 redeemable preference shares at par on 1 January 2012. It incurstransaction costs relating to the issue of $10,000. The issue will be initially recorded as:

A Dr Bank $990,000Dr profit/loss $10,000Cr Equity $1,000,000

B Dr Bank $990,000Cr Equity $990,000

C Dr Bank $990,000Dr profit/loss $10,000Cr Liability $1,000,000

D Dr Bank $990,000Cr Liability $990,000

(2 marks)

28 X Group acquired 40% of Y on 1 April 2012 for $400,000 and, as a result, was able toexercise significant influence over Y. Y's profit for the year ended 31 December 2012 was$100,000 and its other comprehensive income, net of tax, was $20,000.

The value of the investment in associate that X Group will include in its accounts as at 31December 2012 is:

A $430,000

B $436,000

C $490,000

D $520,000

(2 marks )


12/27

29 MAT has the following balances:Year to 30 June 2013

$000Inventories at period end 620Revenue for the period 3,100Cost of sales 2,420Trade receivables 850

The inventories days and the trade receivable days for the period to 30 June 2013 will beapproximately:

Inventories days Receivables days

A 94 days 128 days

B 94 days 100 days

C 73 days 100 days

D 73 days 128 days

(2 mark s)


13/27

30 On 1 October 2012, AB, a listed entity, had 8,000,000 $1.00 ordinary shares in issue. On 1July 2013 AB issued 1,500,000 new $1.00 ordinary shares for $9.20 per share. The profitbefore tax of AB for the year ended 30 September 2013 was $10,580,000. AB is subject totax of 20% on all profits.

AB's basic earnings per share for the year ended 30 September 2013 is approximately:

A 89.1 cents

B 96.6 cents

C 101.1 cents

D 126.3 cents

(2 marks )

31 EM acquired 100,000 of the 1 million equity shares in LR on 1 October 2012 for $6 pershare. The related transaction costs were $30,000. The investment was classified as heldfor trading. At 31 December 2012 LR's shares were trading at $6.40.

Which of the following journal entries will be processed to record the subsequentmeasurement of the investment at 31 December 2012?

A Dr Investment $40,000; Cr Profit or loss $40,000

B Dr Investment $37,000; Cr Profit or loss $37,000

C Dr Investment $40,000; Cr Reserves $40,000

D Dr Investment $37,000; Cr Reserves $37,000

32 ABC operates a defined benefit plan for all its employees. At 1 October 2012, the definedbenefit pension plan's assets had a fair value of $1,100,000. The actuary estimated that forthe year to 30 September 2013 the interest cost was 10%, the expected return on assets6% and the current service cost $400,000. ABC paid contributions of $420,000 into the planand the pension plan paid $300,000 to retired members in the year to 30 September 2013.

At 30 September 2013, the defined benefit plan's assets had a fair value of $1,300,000.

The actuarial gain arising on ABC's defined benefits pension plan assets for the yearended 30 September 2013 was:

A $2,000

B $14,000

C $34,000

D $124,000

(2 marks )


14/27

33Quartile is in the jewellery retail business which can be assumed to be highly seasonal. For theyear ended30 September 2014, Quartile assessed its operating performance by comparing selectedaccounting ratios with thoseof its business sector average as provided by an agency. You may assume that the businesssector used by the agency

is an accurate representation of Quartiles business.Which of the following circumstances may invalidate the comparison of Quartiles ratioswith those of the sectoraverage?(i) In the current year, Quartile has experienced significant rising costs for its purchases(ii) The sector average figures are complied from companies whose year end is between 1 July2014 and30 September 2014(iii) Quartile does not revalue its properties, but is aware that other entities in this sector do(iv) During the year, Quartile discovered an error relating to the inventory count at 30 September2013. This errorwas correctly accounted for in the financial statements for the current year ended 30 September2014

AAll fourB (i), (ii) and (iii)C (ii) and (iii) onlyD (ii), (iii) and (iv)

34The following information has been taken or calculated from Fowlers financial statements forthe year ended30 September 2014.Fowlers cash cycle at 30 September 2014 is 70 days.Its inventory turnover is six times.Year-end trade payables are $230,000.Purchases on credit for the year were $2 million.Cost of sales for the year was $18 million.What is Fowlers trade receivables collection period as at 30 September 2014? All calculations should be made to the nearest full day. The trading year is 365 days.A 106 daysB 89 daysC 56 daysD 51 days

35On 1 January 2014, Viagem acquired 80% of the equity share capital of Greca.Extracts of their statements of profit or loss for the year ended 30 September 2014 are:Viagem Greca$000 $000Revenue 64,600 38,000Cost of sales (51,200) (26,000)Sales from Viagem to Greca throughout the year ended 30 September 2014 had consistently been$800,000 permonth. Viagem made a mark-up on cost of 25% on these sales. Greca had $15 million of thesegoods in inventoryas at 30 September 2014.What would be the cost of sales in Viagems consolidated statement of profit or loss for theyear ended

30 September 2014?A $599 million


15/27

B $614 millionC $638 millionD $679 million

36 Which of the following is NOT a purpose of the IASBs Conceptual Framework? A To assist the IASB in the preparation and review of IFRSB To assist auditors in forming an opinion on whether financial statements comply with IFRSC To assist in determining the treatment of items not covered by an existing IFRSD To be authoritative where a specific IFRS conflicts with the Conceptual Framework37An associate is an entity in which an investor has significant influence over the investee.Which of the following indicate(s) the presence of significant influence?(i) The investor owns 330,000 of the 1,500,000 equity voting shares of the investee(ii) The investor has representation on the board of directors of the investee(iii) The investor is able to insist that all of the sales of the investee are made to a subsidiary of theinvestor(iv) The investor controls the votes of a majority of the board membersA (i) and (ii) only

B (i), (ii) and (iii)C (ii) and (iii) onlyDAll four

38 Consolidated financial statements are presented on the basis that the companies within thegroup are treated as ifthey are a single (economic) entity.Which of the following are requirements of preparing group accounts?(i) All subsidiaries must adopt the accounting policies of the parent(ii) Subsidiaries with activities which are substantially different to the activities of other members ofthe group shouldnot be consolidated(iii) All entity financial statements within a group should (normally) be prepared to the same

accounting year endprior to consolidation(iv) Unrealised profits within the group must be eliminated from the consolidated financialstatementsAAll fourB (i) and (ii) onlyC (i), (iii) and (iv)D (iii) and (iv)39 The Caddy group acquired 240,000 of Augusts 800,000 equity shares for $6 per share on 1

April 2014. Augustsprofit after tax for the year ended 30 September 2014 was $400,000 and it paid an equity dividendon 20 September2014 of $150,000.

On the assumption that August is an associate of Caddy, what would be the carryingamount of the investmentin August in the consolidated statement of financial position of Caddy as at 30 September2014?A $1,455,000B $1,500,000C $1,515,000D $1,395,00040 On 1 October 2013, Hoy had $25 million of equity shares of 50 cents each in issue.No new shares were issued during the year ended 30 September 2014, but on that date therewere outstanding shareoptions to purchase 2 million equity shares at $120 each. The average market value of Hoysequity shares during

the year ended 30 September 2014 was $3 per share.Hoys profit after tax for the year ended 30 September 2014 was $1,550,000.


16/27

In accordance with IAS 33 Earn ings per Share, what is Hoys diluted earnings per share forthe year ended30 September 2014?A 250 centsB 221 centsC 310 cents

D 419 cents41Although the objectives and purposes of not-for-profit entities are different from those ofcommercial entities, theaccounting requirements of not-for-profit entities are moving closer to those entities to which IFRSsapply.Which of the following IFRS requirements would NOT be relevant to a not-for-profit entity?A Preparation of a statement of cash flowsB Requirement to capitalise a finance leaseC Disclosure of earnings per shareD Disclosure of non-adjusting events after the reporting date

42 Trent uses the formula:(trade receivables at its year end/revenue for the year) x 365to calculate how long on average (in days) its customers take to pay.Which of the following would NOT affect the correctness of the above calculation of theaverage number of daysa customer takes to pay?A Trent experiences considerable seasonal tradingB Trent makes a number of cash sales through retail outletsC Reported revenue does not include a 15% sales tax whereas the receivables do include the taxD Trent factors with recourse the receivable of its largest customer

43.

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER FOR KL

2010

$m

Revenue 252

Cost of sales (203)

Gross profit 49

Distribution costs (18)

Administrative expenses (16)

Share of profit of associate 7

Finance costs (12)

Profit before tax 10

Income tax expense (3)

Profit for the year 7

The operating profit margin (to the nearest two decimal places) of KL for the year ended 31 December

2010 is:A 3.97%

B 5.95%

C 8.73%

D 19.44%

44.

SR acquired 60% of the 1 million $1 ordinary shares of BN on 1 July 2011 for $3,250,000 when BN's

retained earnings were $2,760,000. The group policy is to measure noncontrolling interests at fair value

at the date of acquisition. The fair value of noncontrolling interests at 1 July 2011 was $1,960,000.

There has been no impairment of goodwill since the date of acquisition.

SR acquired a further 20% of BN's share capital on 1 March 2012 for $1,000,000 when the retained

earnings of BN were $2,960,000.

The value of goodwill appearing on SR Group's statement of financial position at 31 March 2012 isA $994,000


17/27

B $1,450,000

C $1,594,000

D $2,250,000

45.

NM acquired an equity investment in another entity and classified it immediately as held for trading.

The investment cost $880,000 on 1 May 2011 and at its following year end NM had recognised a gain of

$6,800 on the investment. NM pays 2% commission to its broker on all transactions.The value of this investment will be included in NM's statement of financial position at:

A $886,800

B $904,400

C $904,536

D $912,560

46.

X Group acquired 40% of Y on 1 April 2012 for $400,000 and, as a result, was able to exercise significant

influence over Y. Y's profit for the year ended 31 December 2012 was $100,000 and its other

comprehensive income, net of tax, was $20,000.

The value of the investment in associate that X Group will include in its accounts as at 31 December

2012 is:

A $430,000B $436,000

C $490,000

D $520,000

47.

AB owns a controlling interest in another entity, CD, and exerts significant influence over EF, an entity in

which it holds 30% of the ordinary share capital. During the financial year ended 30 April 2005, EF sold

goods to AB valued at $80,000. The cost of the goods to EF was $60,000. Twentyfive per cent of the

goods remained in ABs inventory at 30 April 2005. Briefly explain how the intragroup trading will bedealt with in the consolidated accounts of AB.

1 EPS = Profit available to shareholdersWeighted average ord shares

= 4,000,000(10,000,000 x 7/12) + (12,000,000 x 5/12)

= 36.9 cents per share

The answer is B

2 The answer is C - Reverse acquisition

3

$mPV of plan obligations 567FV of plan assets 558Pensin liability 9Unrecognised actuarial gains 3Net pension liability 12

The answer is D - A net pension liability of $12 million

4

AFS investment - initially recognised(FV + transaction costs) $123,000


18/27

31 December 2010 - FVUplift in value

$150,000$ 27,000

5 Non-current assets are recorded at the spot rate at the date of transaction and notretranslated (250,000/0.741 = $337,382). Trade payables are restated at the closing rate aspayables are a monetary item (250,000/0.753 = $332,005).

The answer is B

6

Post tax earnings ($450,000 - 110,000) $340,000Weighted avarage number of shares in issue:1 May - 30 September 3 million x 5/12 months 1,250,0001 October - 30 April 4 million x 7/12 months 2,333,333

3,583,333

Basic earnings per share $340,000/3,583,333 9.5 cents per share

The answer is 9.5 cents per share

7 The non-current assets of one entity could be nearing the end of their useful life and thereforebe unrealistically low giving a higher non-current asset turnover figure. Alternatively, thenon-current assets of one entity could have been revalued which would result in assetturnover being low but not necessarily because of low efficiency.

8 The bond purchased by NBW should be classified as a held to maturity investment as NBW

intends to hold it to redemption. It is initially recorded at the net cost of $4.5 million and thensubsequently measured at amortised cost using the effective interest rate. The closingbalance of the liability at 30 June 2010 is $4,711.7, see working below:

Opening balance 10.26% effective rate Coupon interest paid Closing balance$000 $000 $000 $000

4,500 461.7 (250) 4,711.7


19/27

The answer is D - Debit investment $27,000 and credit reserves $27,000

9


20/27

2009 (300-25-40) x 1,000 x $1.22 = $286,700 over 3 years = $95,567 charge for 2009

2010 (300-25-15-20) x 1,000 x $1.22 = $292,800 x 2/3 years = $195,200 recognisable to date

Less amount recognised in 2009 $(195,200-95,567) = $99,633 charge for 2010

The answer is B

10Statement of financial position $mPV plan liability 13.9FV of plan assets (13.1)

0.8Unrecognised actuarial losses (0.5)Net pension liability 0.3

The answer is B

11Subsequent measurementDr Investment $40,000Cr Profit or Loss (Income statement) - gain $40,000

Being the uplift in value and the recording of the gain in the income statement

The answer is D


21/27

Cost of investment 880,000Plus gain on remeasurementTotal initial value recorded

12

Operating profit/revenue = $(49-18-16)m/$252m x 100 = 5.95% The answer is B

13

Pension plan assets $000FV of plan assets at 1 June 2008 3,100Contributions made 300Expected return on assets 190Benefits paid (225)

Actuarial loss (balancing figure) (25)FVofplanassetsat31May2009 3,340

The answer is B

14

Post tax earnings $440,000Weighted average number of shares in issue:1 may30 September 5 million shares x 5/12 months 2,0831 October30 April 7 million shares x 7/12 months 4,083

6,166Earnings per share $440,000/6,166,000 7.1 cents per share

The answer is B

15 The answer is D

16 The answer is C

17 Workings

1,000 options x (300 - 32 - 35) eligible employees x FV $8 = $1,864,000Recognised expense for the year to 31 December 2011 $1,864,000 x 1/3 years =

$621,333Recorded as DR staff costs and CR other reserves

The answer is C

18 Workings

The investment has been classified as held for trading on initial recognition and so is

recorded at fair value (cost) with transaction costs being recognised immediately in profitor loss.


22/27

$000Proceeds of issue 3,000Less issue costsNet proceeds 2,800Effective interest 11%Interest paid (180)

Balance of liability at 31 December 2011

The answer is D

20 Workings

The answer is A

21 1,000 options x (300-32-35) employees x FV$8 x 1/3 years = $621,333

The SARs are an example of a cash-settled share-based payment and therefore thecredit is to liabilities.

The answer is D

22Opening balance

$Finance cost at 7%

$Interest paid 5%

$Closing balance

$

9,130,000 639,100 (475,000) 9,294,100

The answer is B

23 EPS = profit for the year available to shareholdersweighted average number of shares in the year

= $160m/300m = 53.3 cents per share

The answer is A

May2012

11 M1 - Examiners' Answers


23/27

Goodwill $000 $000Consideration transferred 3,250Non-controlling interests

5,210Fair value of net assets acquired:

Share capital 1,000Retained earnings 2,760(3,760)

Goodwill on acquisition 1,450

24

Note: the additional 20% purchase of shares does not trigger a goodwill calculation because SRalready controls BN. The additional acquisition is dealt with by an adjustment to parent's equity.

The answer is B

25 Workings

Profit/loss expense $000Service costs 250Net interest cost 5% (1,200 - 1,100) 5Net expense 255

The answer is C


24/27

26 Workings

Movement on assets $000Opening balance 1,100Expected return 5% x $1,100,000 55

Contribution paid 150Benefits paid (225)1,080

Actuarial gain 70Closing balance 1,150

The answer is C

27 The preference shares are redeemableand will therefore be classified as aliability as an outflow of economicbenefit is probable (redemption). The

liability is initially recorded at netproceeds and so the transactions costsare deducted from the initial carryingvalue.

Recorded as: Dr Bank $990,000 and CrLiability $990,000

The answer is D

28 The group will include the cost of$400,000 plus its share of the postacquisition profit and gains of theassociate 40% (($100,000 + $20,000) x9/12)) = $400,000 + $36,000 =$436,000 = valuation of associate @31/12/2012.

The answer is B

29 Workings

Inventories at 30/6/13 $620,000

x 365 days = 94 days

Cost of sales for 6 months $2,420,000

Receivables at 30/6/13 $850,000 x 365 days = 100 daysRevenue $3,100,000

The answer is B


25/27

30 Workings

EPS

Profit after tax ($10,580,000 - $2,116,000) $8,464,000Weighted average number of shares:

At 1 October 2012 8,000,000

Issue in the period (1,500,000 x 3/12) 375,0008,375,000

Basic eps for 2013 $8,464,000/8,375,000 101.1 centsper share

The answer is C

31 Tha gain on investment will be recorded as Dr Investment $40,000; CR Profit or loss$40,000. The transaction costs on held for trading investments are written off immediatelyto profit or loss. The gain on subsequent measurement is recorded in profit for the year.

The answer is A

32 WorkingsFV of pension plan assets

$000


26/27

Opening balance 1,100Expected return 6% 66Contributions 420Benefits paid (300)Actuarial gain on plan assets 14

Closingbalance 1,300

The answer is B

33 C

34 DYear end inventory of six times is 61 days (365/6).Trade payables period is 42 days (230,000 x 365/2,000,000).Therefore receivables collection period is 51 days (7061 + 42).

35 C$Cost of salesViagem 51,200Greca (26,000 x 9/12) 19,500Intra-group purchases (800 x 9 months) (7,200)URP in inventory (1,500 x 25/125) 30063,800

36 D

37 A

38 D

39 A$000Cost (240,000 x $6) 1,440Share of associates profit (400 x 6/12 x 240/800) 60 Less dividend received (150 x 240/800) (45)1,455

40 A

(1,550/((2,500 x 2 + 1,200 see below)2 million shares at $120 = $24 million which would buy 800,000 shares at full price of $3.Therefore, dilution element (free shares) is 1,200,000 (2,000 800).

41 C

42 DFactoring with recourse means Trent still has the risk of an irrecoverable receivable and therefore wouldnot derecognise the receivable.


27/27

43.

Operating profit/revenue = $(491816)m/$252m x 100 = 5.95%

The answer is B

44.

Goodwill $000Consideration transferred 3,250

Noncontrolling interests 1,9605,210

Fair value of net assets acquired:

Share capital 1,000

Retained earnings 2,760

(3,760)

Goodwill on acquisition 1,450

Note: the additional 20% purchase of shares does not trigger a goodwill calculation because SR alreadycontrols BN. The additional acquisition is dealt with by an adjustment to parent's equity.

The answer is B

45.

$000

Cost of investment 880

Plus gain on remeasurement 6.8

Total initial value recorded 886.8

The investment has been classified as held for trading on initial recognition and so is recorded at fair

value (cost) with transaction costs being recognised immediately in profit or loss.

The answer is A

46.

The group will include the cost of $400,000 plus its share of the postacquisition profit and gains of the

associate 40% (($100,000 + $20,000) x 9/12)) = $400,000 + $36,000 = $436,000 = valuation of associate

at 31/12/2012.

The answer is B

47.

Unrealised profit = ($80,000 $60,000) x 25% = $5,000.

The group share of the figure is 30%, i.e. $1,500. The profit and inventory are located in the holdingentity, so therefore the adjustment is to consolidated reserves and consolidated inventory.

Documents

CIMA masters gateway F2 MCQ