CIMA F2 Advanced Financial Reporting CIMAPRA19-F02-1 Exam Practice Test

GH is seeking to finance a substantial new project that is guaranteed to enhance the profitability of the entity.Its keydeterminants in deciding upon the best source of finance are to balance the following requirements:

1) to minimise the costs of issue of the finance;

2) to avoid the need to find cash to repay the source of finance; and

3) to ensure that the long-term gearing level does not increase.

Whichof the following financing options best meets these requirements?

You are a Financial Controller at BCD and are in the process of preparing the year-end financial statements. A member of your finance team has come to see you about her provisions balance at year-end.

She says that the Managing Director has asked her to increase the provisions balance by $1 million overall. She thinks this is because BCD has had a very good year in terms of profit, and the Managing Director wants to put some profit aside to protect against any future reductions in profit. $1 million is material to BCD.

Youbelieve that the provisions balance wasfairly stated without the additional $1 million.

Which TWO of the following would be appropriate actions in this scenario?

AB owned 80% of the equity share capital of FG at 1 January 20X6. AB disposed of 10% of FG's equity share capital on 31 December 20X6 for $400,000. The non controlling interest was measured at $700,000 immediately prior to the disposal.

Which of the following represents the adjustment that AB made to non controlling interest in respect of the disposal when it prepared its consolidated financial statements at 31 December 20X6?

XY has a weighted average cost of capital (WACC) of 12%.Thedebt:equity ratiois 1:3 and this is considered low for the industry. XY needs to raise finance to purchase newmachinery in the coming year.

Which of the following forms of finance is most likely to increase the WACC?

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?

Mr D, a CIMA qualified accountant, is working on the preparation of a long term profit forecast required by the local stock marketprior to a new share issue of equity shares. At the most recent board meeting the directors requested that the forecast be inflated. In Mr D's view this wouldgrossly overestimate the forecast profit. Theboard intends to publish the revised inflated forecast.

Which THREE of the following are the ethical options available to Mr D in this situation?

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?