CIMA CIMAPRA19-F01-1 Exam Practice Test Instant Access

Question 1

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

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.

A$10,000

B$2,000

C$4,000

D$3,200

Answer : B

Question 2

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 3

In accordance with IFRS 3 Business Combinations, acquisition accounting of an investment in another entity within the consolidated statement of financial position means that the:

AParent's and 100% of the other entity's assets and liabilities are added together line by line.

BGroup's share of the net assets of the other entity are shown as one line under non-current assets.

CParent's and group share of the other entity's assets and liabilities are added together line by line.

DGroup's share of the net assets of the other entity are shown as one line within equity.

Answer : A

Question 4

In accordance with IAS 16 Property, Plant and Equipment, in which of the following situations would subsequent expenditure on a non-current asset be capitalised?

AAn entity purchased an aircraft five years ago, when its engines were separately identified in the accounting records. The engines now need to be replaced at a cost of $2 million each. When the engines are replaced the aircraft is expected to be airworthy for a further 5 years.

BAn entity's head office building suffered a major fire, the upper floors and roof were completely destroyed. The entity proposes to restore the building at a cost of $1 million and move back in to the building to use it as a head office again.

CAn entity's delivery vehicle was in a car park when the car park was flooded. The engine and interior of the vehicle needed extensive repair and renovation costing $25,000.

DA manufacturing entity closes its factory for two weeks each summer for routine maintenance and repairs. The current year's cost of maintenance and repairs was $62,000.

Answer : A

Question 5

LM is preparing its cash forecast for the next three months.

Which of the following items should be left out of its calculations?

ATax payment due, that relates to last year's profits.

BReceipt of a new bank loan raised for the purpose of purchasing new machinery.

CExpected loss on the disposal of a piece of land.

DRental payment on a leased vehicle.

Answer : C

Question 6

Which of the following would be classified as a parent and subsidiary relationship in accordance with IFRS 10 Consolidated Financial Statements?

AEntity A owns 30% of another entity's equity shares and has the power to appoint or remove the majority of the members of the board of directors and control of the entity is through that board.

BEntity B owns 20% of another entity's equity shares and has an agreement with other equity shareholders of that entity that gives it power over a further 20% of the equity voting rights.

CEntity C owns 45% of another entity's equity shares and can exercise significant influence over that entity's financial and operating policy decisions.

DEntity D owns 25% of another entity's equity shares and associated voting rights and 100% of its preference shares.

Answer : A

Question 7

WX is considering an investment in ST.

At 31 December 20X2 ST had the following balances in its statement of financial position:

Which of the following would cause ST to become an associate investment of WX?

AWX purchases 15,000 of ST's $1 equity shares and 20,000 of ST's $1 preference shares.

BWX purchases 25,000 of ST's $1 equity shares.

CWX purchases 75,000 of ST's $1 equity shares.

DWX purchases 50,000 of ST's $1 preference shares.

Answer : B

CIMAPRA19-F01-1 F1 Financial Reporting Exam Practice Test