CIMAPRA19-F02-1 Online Practice Questions and Answers

When accounting for a finance lease under IAS 17 Leases, which TWO of the following are recognised in the statement of profit or loss?

A. Finance cost element of the lease payments

B. Depreciation of the leased asset

C. Lease payments paid

D. Lease payments payable

E. Capital repayment element of the lease payments

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. The credit entry will be to equity.

B. The credit entry will be to non-current liabilities.

C. Fair value at 1 January 20X8 will be used to value the options.

D. Fair value at 31 December 20X8 will be used to value the options.

E. The calculation of the charge for the year will be adjusted for actual leavers only.

F. The calculation of the charge for the year will be adjusted for actual and estimated leavers.

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 loans and receivables financial asset subsequently measured at fair value with gains and losses in reserves.

B. A held to maturity financial asset subsequently measured at amortised cost.

C. A loans and receivables financial asset subsequently measured at amortised cost.

D. A held to maturity financial asset subsequently measured at fair value with gains and losses in reserves.

Which of the following examples of contracts will use cost of sales as the balancing figure when calculating profit or loss?

Select ALL that apply.

A. Contract A has a total value of£50m, costs to date of£42m and expected costs to completion of£15m. The project's % stage of completion is 74% using the cost method.

B. Contract A has a total value of£55m, costs to date of£33m and expected costs to completion of£18m.

C. Contract A has a total value of£75m, costs to date of£61m and expected costs to completion of£20m. The contracts % stage of completion was calculated by dividing its value to date of£45m by£75m.

D. Contract A has a total value of£60m, costs to date of£42m and expected costs to completion of£15m. The project's % stage of completion is 80% using the value method.

E. Contract A has a total value of£85m, costs to date of£69m and expected costs to completion of£22m. The contracts % stage of completion was calculated by dividing its costs incurred to date of£69m by £75m.

KL sells luxury leather handbags and has 3 stores in exclusive shopping areas. Following years of static revenues and margins, in August 20X6 KL opened a fourth store at a busy airport terminal which is proving to be successful.

The revenue and gross profit of KL for the years ended 31 March 20X7 and 20X6 are as follows:

Which of the following would be a contributing factor to the movement in the gross profit margin of KL?

A. A worldwide shortage of leather resulting in increased prices from suppliers.

B. The opportunity to sell handbags in the airport store at a premium price.

C. KL locating a new supplier prepared to supply handbags at a cheaper price.

D. KL locating a new supplier closer to the warehouse, reducing distribution costs.

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?

A. Associate

B. Joint venture

C. Joint arrangement

D. Financial asset

XY has a weighted average cost of capital (WACC) of 10% based on its gearing level (measured as debt/debt+equity) of 40%. It is considering a signficant new project.

In which of the following situations would it be appropriate to appraise this project using XY's existing WACC of 10%?

A. The project is in a different industry to XY's current operations and funded entirely by equity.

B. The project is an extension of XY's current operations and is funded 40% by debt and 60% by equity.

C. The project is an extension of XY's current operations and is funded by equal amounts of debt and equity.

D. The project is in a different industry to XY's current operations and is funded by equal amounts of debt and equity.

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 $3,000 and credit other reserves $3,000.

C. Debit investment in equity shares $2,375 and credit profit or loss $2,375.

D. Debit investment in equity shares $2,375 and credit other reserves $2,375.

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.

? %

A. 58.4, 58, 58.44, 59, 58.5, 58.0

CORRECT TEXT

YZ issued $100,000 6% convertible bonds at par on 1 January 20X5. The bondholders have the option to convert into equity shares in 3 years' time or redeem at par for cash on the same date.

Interest is paid annually in arrears and bonds issued by similar entities without conversion rights pay interest at 8%.

What is the value of equity to be recognised in YZ's statement of financial position as at 31 December 20X5?

Give your answer to the nearest whole $.

$?

A. 5138