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Financial Reporting

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Total Questions : 248

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Question # 1

Country ZZ allows the cost of a capital asset to be adjusted for an indexation allowance which takes into consideration the effect of inflation, although the indexation allowance cannot convert a chargeable gain into a chargeable loss.

The following data relates to the sale of an asset during the year ended 31 March 20X4:

Question # 1

Calculate the chargeable gain or loss in respect of the sale of this asset.

Give your answer to the nearest $.

Options:

Discussion 0
Question # 2

GH's tax liability at 30 June 20X3 in respect of the tax charge on the profits for the year ended 30 June 20X3 is $876,000.

There was an over provision of $105,000 that related to the tax charge on the profits for the year ending 30 June 20X2.

What amount should be shown in GH's statement of profit or loss for the year ending 30 June 20X3?

Give your answer to the nearest $.

Options:

Discussion 0
Question # 3

The statement of profit or loss for PQ, ST and AB for the year ended 31 December 20X0 are shown below:

Question # 3

1. PQ acquired 80% of its subsidiary, ST, on 1 January 20X0 and 40% of its associate, AB, on 1 September 20X0.

2. Since acquistion PQ has sold goods to ST and AB for $20,000 and $30,000 respectively. At the year end both ST and AB have 50% of these goods remaining in inventory. PQ uses a mark-up of 20% on all of its sales.

3. Since acquisition the goodwill in respect of ST has been impaired by $8,000 and the investment in AB has been impaired by $2,000.

4. PQ uses the fair value method for non-controlling interest at acquisition.

Calculate the amount that will be shown as the share of profit of associate in PQ's consolidated statement of profit or loss for the year ended 31 December 20X0.

Options:

A.  

$10,000

B.  

$2,000

C.  

$4,000

D.  

$3,200

Discussion 0
Question # 4

Which THREE of the following are costs that a business might incur as a result of holding insufficient inventory of raw materials?

Options:

A.  

Lost production

B.  

Purchasing inventory at a higher price

C.  

Additional storage costs

D.  

Increased risk of obsolescence

E.  

Loss of sales

Discussion 0
Question # 5

What is the correct classification of a 90-day government bond?

Question # 5

Options:

Discussion 0
Question # 6

Indicate the possible reasons for the changes identified below to working capital ratios by placing the appropriate reason against each change.

Question # 6

Options:

Discussion 0
Question # 7

OP has five main geographic segments and reports segmental information in accordance with IFRS 8 Operating Segments.

Question # 7

Which THREE of the following would be regarded as operating segments of OP in accordance with IFRS 8?

Options:

A.  

North America

B.  

Europe

C.  

Asia

D.  

Middle east

E.  

South America

F.  

All other segments

Discussion 0
Question # 8

Statements of financial position for YZ, BC and DE at 31 March 20X2 include the following balances:

Question # 8

YZ purchased 90% of BC's equity shares for $508,000 on 1 January 20X2. On 1 January 20X2 BC's retained earnings were $183,000. YZ uses the proportion of net assets method to value non-controlling interest at acquisition.

YZ purchased 30% of DE's equity shares on 1 April 20X1 for $112,000. DE's retained earnings at 1 April 20X1 were $88,000.

On 1 February 20X2 YZ sold goods to BC for $28,000 at a mark up of 25% on cost. All the goods were still in BC's inventory at 31 March 20X2.

Calculate the value of the investment in associate to be recognised in the consolidated statement of financial position at 31 March 20X2.

Give your answer to nearest whole $.

Options:

Discussion 0
Question # 9

Which of the following methods could be used by a tax authority to reduce tax evasion and avoidance?

Options:

A.  

Increase tax rates to compensate for losses due to evasion.

B.  

Reduce penalties for avoidance.

C.  

Reduce requirements to have tax returns audited.

D.  

Simplify the tax structure, minimizing allowances and exemptions.

Discussion 0
Question # 10

Which THREE of the following must an auditor consider in order to form an opinion on the truth and fairness of an entity's financial statements?

Options:

A.  

Whether the entity has kept proper accounting records.

B.  

Whether the entity has complied with the relevant legislator requirements in respect of the necessary disclosures.

C.  

Whether all the information and explanations necessary for the purposes of the audit have been received.

D.  

Whether every transaction that underpins the financial statements has been correctly recorded.

E.  

Whether the entity has been exposed to any fraud.

Discussion 0
Question # 11

Company R use a defined benefit plan pension scheme. Employee UW has been working for Company R for 25 years. The defined benefit plan is 1.5% of the employee's annual salary during their time at the company,

for every year of employment.

Employee UW started on a £18,000 per annum salary. After 10 years of employment. Employee UW received a promotion and began earning £22,000. After another 3 years of employment. Employee UW got promoted

to a wage of £35,000, and is still on this salary now. How much pension has Employee UW accumulated since working at Company R?

Options:

A.  

£9,900

B.  

£18,000

C.  

£6,750

D.  

£9,375

Discussion 0
Question # 12

XY is an entity incorporated in Country B but operates in several countries. Monthly management meetings to decide on strategic matters take place in Country A, where the majority of its production happens. XY sells most of its goods to Country

C.  

In accordance with the Organization for Economic Co-operation and Development (OECD) rules on corporate residence which of the following statements is true?

Options:

A.  

XY is resident in Country B because this is the country of its incorporation.

B.  

XY is resident in Country C because this is the country where XY generates most of its revenue.

C.  

XY is resident in Country A because this is the country of its effective management.

D.  

XY is resident in Country A because this is the country where XY undertakes most of its production.

Discussion 0
Question # 13

Which of the following would NOT be a risk or impact of overtrading?

Options:

A.  

Increase in interest payments

B.  

Increased borrowings

C.  

Shortage of working capital

D.  

Expanding too quickly

Discussion 0
Question # 14

XY purchased a building on 1 April 20X1 for $300,000 with a useful economic life of 30 years. On 1 April 20X7 the building was revalued at $525,000.

What will the new depreciation charge be following the revaluation?

Give your answer as a whole number.

Options:

Discussion 0
Question # 15

The following information is extracted from the statement of financial position for ZZ at 31 March 20X3:

Question # 15

Included within cost of sales in the statement of profit or loss for the year ended 31 March 20X3 is $20 million relating to the loss on the sale of plant and equipment which had cost $100 million in June 20X1.

Depreciation is charged on all plant and equipment at 25% on a straight line basis with a full year's depreciation charged in the year of acquisition and none in the year of sale.

The revaluation reserve relates to the revaluation of ZZ's property.

The total depreciation charge for property, plant and equipment in ZZ's statement of profit of loss for the year ended 31 March 20X3 is $80 million.

The corporate income tax expense in ZZ's statement of profit or loss for year ended 31 March 20X3 is $28 million.

ZZ is preparing its statement of cash flows for the year ended 31 March 20X3.

What figure should be included within cash flows from investing activities for the proceeds of sale of plant and equipment?

Options:

A.  

$55 million

B.  

$95 million

C.  

$80 million

D.  

$120 million

Discussion 0
Question # 16

Which of the following would be capitalized as an intangible asset in accordance with IAS 38 Intangible Assets?

Options:

A.  

The cost of market research into a new geographical market.

B.  

The cost of assets used in the research and development department.

C.  

The cost of testing a new process which will create efficiency savings of 10% once implemented.

D.  

The cost of advertising the launch of a new product.

Discussion 0
Question # 17

The following information relates to a single asset:

*Original cost of $186,000

*Estimated residual value of $6,000

*Expected useful life of 10 years

*Accumulated depreciation at 31 December 20X5 of $66,960

*Annual depreciation rate of 20% on a reducing balance basis

Calculate the amount of depreciation that should be charged to profit or loss for the year ended 31 December 20X6.

Give your answer to the nearest whole number.

Options:

Discussion 0
Question # 18

The following data has been extracted from GH's accounting records:

Question # 18

What is GH's average inventory days for the year ended 31 March 20X3?

Options:

A.  

39 days

B.  

43 days

C.  

25 days

D.  

28 days

Discussion 0
Question # 19

An entity has a working capital cycle of 120 days which has been calculated in part from the following data:

Question # 19

What is the stock holding period on the basis of 365 days in a year?

Give your answer to the nearest whole day.

Options:

Discussion 0
Question # 20

The following information relates to A

A.  

Extract of Trial Balance at 31 December 20X4;

Question # 20

Notes

(i) Inventory at 31 December 20X4 was valued at cost at $30.

(ii) The loan which was received on 1 July 20X4 is repayable in 20X9.

(iii) Corporate income tax represents an over-provision of tax for the year ended 31 December 20X3. AA reported a loss for tax purposes for the year ended 31 December 20X4 and a tax refund is expected amounting to $20.

(iv) Cost of sales, administration and distribution costs need to be adjusted for the following:

Calculate gross profit for the year ended 31 December 20X4.

Give your answer as a whole $.

Options:

Discussion 0
Question # 21

Question # 21

Options:

Discussion 0
Question # 22

BBB has been experiencing liquidity problems and currently has an overdraft with the bank.

Which THREE of the following would be appropriate measures to help address this problem?

Options:

A.  

Reduce the selling price of goods to reduce the holding of stock.

B.  

Offer early settlement discounts to encourage debtors to pay more quickly.

C.  

Sell some surplus fixed assets.

D.  

Invest in a short term deposit with the bank.

E.  

Shorten the time taken to pay creditors.

F.  

Pay a dividend to shareholders.

Discussion 0
Question # 23

It costs PWR £7.50 to produce product H, per product. Product H is typically sold for £89.99. It costs £5.00 to package product H and £15 to deliver product H to customers.

PWR is currently selling faulty versions of product H from a defunct batch, (let's call this version product I), for 25% of the original price.

Which of the below options represent the correct inventory price for product I?

Options:

A.  

£2.50

B.  

£7.50

C.  

£20.00

D.  

£3.50

Discussion 0
Question # 24

Which of the following is NOT a source of short-term finance?

Options:

A.  

Increase in trade receivables

B.  

Increase in trade payables

C.  

Debt factoring

D.  

Increase in a bank overdraft

Discussion 0
Question # 25

Statements of financial position as at 31 December 20X8 for JK, LM and PQ are as follows:

Question # 25

[1] JK purchased 80% of LM's $1 equity shares on 1 January 20X8 for $260,000 when the retained earnings of JK were $110,000. At that date the non-controlling interest had a fair value of $63,000.

[2] JK purchased 25% of PQ's $1 equity shares on 1 January 20X8 for $90,000 when the retained earnings of PQ were $96,000.

[3] During the year JK sold goods to LM for $32,000 at a mark up of 33.33% on cost. Half of the goods were still in LM's inventory at 31 December 20X8.

[4] LM transferred $32,000 to JK on 30 December 20X8 in settlement of the inter-group trade. JK did not record the cash in its financial records until 2 January 20X9.

Calculate the goodwill arising on the acquisition LM.

Give your answer to the nearest $.

Options:

Discussion 0
Question # 26

The external auditors have completed their audit and have discovered a material but not pervasive error in the financial statements of JK.

The directors of JK have refused to change the financial statements.

What type of modified audit report should be issued?

Options:

A.  

Disclaimer of opinion

B.  

Emphasis of matter opinion

C.  

Adverse opinion

D.  

Qualified opinion

Discussion 0
Question # 27

Which THREE of the following statements are NOT true of the IFRS Foundation trustees?

Options:

A.  

Are involved in the technical matters relating to accounting standards

B.  

Are mainly from Europe and the USA

C.  

Receive funding by donations from the general public

D.  

Responsible for appointing members of the IA5B

E.  

Responsible of appointing members of the IFRS interpretations committee

Discussion 0
Question # 28

The following data relates to Company A

B.  

Statement of Profit or Loss for the year ended 30 June 20X4:

Question # 28

During the year ending 30 June 20X4, which was not a leap year, the average stock holding period was 102 days.

Calculate the working capital cycle in days.

Give your answer to the nearest full day.

Options:

Discussion 0
Question # 29

The United Kingdom (UK) uses a principle based approach to corporate governance which means:

Question # 29

Options:

Discussion 0
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