CIMA CIMAPRA19-F01-1 Exam Practice Test Instant Access

Question 1

Which of the following is NOT an appropriate description of the meaning of the term incidence of tax?

AIt refers to the distribution of the tax burden.

BIt only relates to the person or entity that actually pays the tax authorities.

CIt can be formal or actual.

DIt relates to the person or entity that ultimately bears the cost of the tax.

Answer : B

Question 2

The financial statements of JK for the year ended 31 August 20X4 were approved on 10 November 20X4.

Within these financial statements which of the following would have been treated as a non-adjusting event in accordance with IAS 10 Events After the Reporting Period?

AInventory which was originally valued at its cost of $45,000 being sold for $37,000 in September 20X4.

BA fire in JK's main warehouse on 3 September 20X4 destroying 60% of the inventory that had been held at the year end.

CNotification received on 31 August that one of JK's major customers had gone into liquidation and was unlikely to pay any outstanding invoices.

DThe completion of a court case on 5 November 20X4 in which JK was ordered to pay damages of $150,000.

Answer : B

Question 3

Which THREE of the following are conditions that must be met to allow an asset to be categorised as held for sale?

AManagement is committed to a plan to sell

BThe asset is being actively marketed at a reasonable price

CThe asset is available for immediate sale

DA buyer has already expressed interest

EThe sale of the asset is likely to generate a significant profit

Answer : A, B, C

Question 4

Which TWO of the following would improve a company's short term cash flow position?

APostponing non essential capital expenditure

BIncreasing the working capital cycle by making payments to suppliers early

CTaking advantage of bulk discounts offered on inventory purchases

DReducing levels of inventory by implementing a just in time system for purchasing

EPaying a bonus to staff for exceptional performance

Answer : A, D

Question 5

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?

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

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

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

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

Answer : C

Question 6

The IV Group is formed of I Ltd and its subsidiary company V Ltd. I Ltd purchased 67% of V Ltd's ordinary share capital on 31 March 20X3.

The purchase cost I Ltd 129,000. At the date of purchase V Ltd's net assets were 155,000 while its share capital was 37,000. NCI fair value on the date of acquisition was 31,000.

What was the amount of goodwill I Ltd paid as part of the acquisition. Calculate this figure using both the proportion of net assets method and the full good will method for valuing the non-controlling interest.

AProportion of net assets method = 25,150

BFull goodwill method = 5,000

CProportion of net assets method = 5,000

DFull goodwill method = 25,150

EProportion of net assets method = 77,150

FFull goodwill method = 57,000

Answer : A, B

Question 7

Which of the following are techniques that can be used by a company to ensure they receive timely payment of receivables? Select ALL that apply:

AOffering cash or early payment discount

BCharging interest on late payments

CAssessing credit risk of customers before they are given credit

DOffering extended credit to return customers

EOffering free items

Answer : A, B, C

CIMA F1 Financial Reporting CIMAPRA19-F01-1 Exam Practice Test