CIMA CIMAPRA19-F01-1 Exam Practice Test Instant Access

Question 1

An entity acquires 100% of the equity shares in another entity.

The consideration paid for the shares is less than the fair value of the net assets acquired.

Which of the following is the correct accounting treatment for the difference between the consideration paid and the fair value of the net assets acquired, in accordance with IFRS 3 Business Combinations?

ARecognise as a gain in the consolidated statement of profit or loss.

BRecognise as a deferred credit and release to consolidated profit or loss over its useful economic life.

CRecognise as a deduction from goodwill in the consolidated statement of financial position.

DRecognise as a gain in the statement of changes in equity.

Answer : A

Question 2

Which of the following is a characteristic of a defined contribution post-employment benefit scheme?

AThe amount of the post-employment benefits paid to former employees depends on how well the scheme's investments have performed.

BThe employer would make additional contributions into the scheme if the actuary predicted a shortfall in the funds available to pay post-employment benefits.

CThe amount of the post-employment benefits paid to former employees is determined at the date of their retirement using a predefined formula.

DThe employer may take a contributions holiday and stop paying contributions for a period, if the scheme's assets appear to be more than are required to meet the scheme's obligations.

Answer : A

Question 3

RS purchased an asset on 1 May 20X1 for $200,000, exclusive of import duties of $25,000.

The asset was sold on 1 December 20X3 for $450,000, incurring costs to sell of $15,000.

RS is resident in Country Y where indexation is allowable from the date of purchase to the date of sale.

The indexation factor increased by 40% in the period 1 May 20X1 to 1 December 20X3.

Capital gains are taxed at 25%.

What is the capital tax due from RS on disposal of the asset?

A$120,000

B$38,750

C$30,000

D$28,500

Answer : C

Question 4

DEF is considering introducing a Pay-As-You-Earn (PAYE) system but unsure of the advantages of using it.

Which of the following statements are advantages from the employees perspective of an entity using a PAYE system for collecting taxes from employees.

Select ALL that apply.

AThe employee will be able to deal with tax authority directly to make payments.

BThe employee will avoid being charged penalties for paying late.

CThe employee will calculate their own tax payment.

DThe employee does not have to complete a self assessment tax return.

EThe employee does not have to budget for their tax payments because the tax is deducted at source.

Answer : B, D, E

Question 5

An asset has the following values:

If the asset was sold for its fair value, selling costs of $1,500 would be incurred.

Which of the following is the value of the impairment loss to be recognised for this asset in accordance with IAS 36 Impairment of Assets?

A$0

B$300

C$1,200

D$2,000

Answer : C

Question 6

Country X levies corporate income tax at a rate of 25% and charges income tax on all profits irrespective of whether they are distributed by way of dividend. Country Y levies corporate income tax at a rate of 20%.

A, who is resident in Country X, pays a divided to B, who is resident in Country Y. B is required to pay corporate income tax on the dividend received from A, but a deduction can be made for the tax suffered on this dividend restricted to a rate of 20%.

Which method of relief for foreign tax does this describe?

AExemption

BDeduction

CTax credit

DRestricted

Answer : C

Question 7

Country X charges corporate income tax at the rate of 20% on all income irrespective of whether it is paid out as a dividend. Country Y charges corporate income tax at the rate of 25% on all income.

An entity, AA, which is resident in Country X pays a dividend of $100,000 to another entity, BB, which is resident in Country Y.

Countries X and Y have a double taxation treaty which adopts the exemption method in respect of this type of transaction.

What is BB's liability to tax in Country Y in respect of the dividend income received?

ANo tax will be payable.

BTax will be payable at 20%.

CTax will be payable at 25%.

DTax will be payable at 25% less a credit given for the 20% already paid by AA in Country X.

Answer : A

CIMAPRA19-F01-1 F1 Financial Reporting Exam Practice Test