F2 Practice Questions

EF has redeemable 10% bonds which are currently trading at $94.00 for each $100 of nominal value. The bonds can be redeemed at par in five years' time. The corporate income tax rate is 22%.

The present value of the cash flows associated with $100 nominal value of these bonds at a discount rate of 7% is $9.28.

Calculate the post tax cost of debt.

Give your answer as a percentage to one decimal place.

   %

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:

RS has issued an instrument with a nominal value of $1 million, at a discount of 2.5%, and a coupon rate of 6%. The terms of the issue are that the instrument must either be redeemed at par, at the option of the holder, in three years' time, or alternatively converted into equity shares in RS.

The characteristics of this instrument taken as a whole indicates that it would be classifed as which of the following?

Entity A entered into a 3 year operating lease on 1 April 20X3.  The rentals are £5,000 a year payable in advance with an additional payment of $1,800 payable on 1 April 20X3. 

The rental expense to be included in the statement of profit or loss for the year ended 31 December 20X3 will be:

MNO has calculated its return on capital employed ratio for 20X4 and 20X5 as 41% and 56% respectively.

Taking each statement in isolation, which would explain the movement in the ratio between the 2 years?

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:

ST owns 75% of the equity share capital of GH. GH owns 80% of the equity share capital of RS.

The following balances relate to RS:

The non controlling interest in respect of RS had a fair value of $56,000 at acquisition. There has been no impairment to goodwill since acquisition.

What value should be included in ST's consolidated statement of financial position for the non controlling interest in RS at 31 December 20X9? 

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.

AB sold the majority of its operating equipment to LM for cash on 30 December 20X9 and then immediately leased it back under an operating lease.  

AB used the cash proceeds from the sale to reduce its long term borrowings significantly.  No early repayment charge was levied by the lender.

Which of the following statements is true in respect of AB's ratios calculated at 31 December 20X9?

LK acquired 100% of the equity shares of TU on 1 January 20X4. LK disposed of 60% of TU for £2,400,000 on 30 September 20X4. The sale proceeds reflected the fair value of TU's shares on that date.

The remaining 40% shareholding gave LK the ability to exercise significant influence over the activities of TU. TU reported profit of $1,800,000 for the year ended 31 December 20X4 and this accrued evenly throughout the year.

Calculate the investment in associate that will be presented in LK's consolidated statement of financial position as at 31 December 20X4.

Give your answer to the nearest whole $'000.

 $     000