CIMA CIMAPRA19-F02-1 Exam Practice Test Instant Access

Question 1

Which of the following statements are INCORRECT with regards to impairment of financial instruments; Select ALL that apply.

AHeld to maturity instruments and available for sale assets are both measured at amortised cost and are therefore impacted by impairment.

BIf a loss is suspected following an impairment review, a financial asset is written down to its fair value.

CIf a contract relating to a financial instrument is breached then this might be an indication of impairment.

DIn the result of an impairment loss, the carrying amount of the asset is directly reduced, or reduced through an allowance account.

EThe impairment loss on held to maturity instruments is the difference between the assets carrying amount and the present value of its future cashflows.

Answer : A, B

Question 2

The IAS definitions of financial instruments dictate their classification between debt and equity. Which of of the following factors might this classification impact?

Select ALL that apply.

AFinancial risk

BProfitability

CProfit distribution

DLiquidity

Answer : A

Question 3

The tax benefit on a company's asset is 180,000 and the useful life on that asset is five years. The company creates a deferred tax provision to spread this benefit over the asset's useful life.

What entry is needed to reduce this deferred tax provision in the company's year two accounts?

ADR Deferred tax liability (SOFP) 36,000

BCR Deferred tax liability (SOFP) 36,000

CDR Corporation tax (income statement) 36,000

DCR Corporation tax (income statement) 36,000

EDR Deferred tax liability (SOFP) 144,000

FCR Deferred tax liability (SOFP) 144,000

GDR Corporation tax (income statement) 144,000

HCR Corporation tax (income statement) 144,000

Answer : A

Question 4

When establishing a group structure, which of the following factors need to be considered: Select ALL that apply.

AWhether control has been established

BThe percentage ownership

CThe date of acquisition

DNon-controlling interests

EGoodwill

FIntra-group investments

GWhether control is direct or indirect

Answer : A, B, C

Question 5

Information from the financial statements of an entity for the year to 31 December 20X5:

The gearing ratio calculated as debt/equity and interest cover are:

Agearing of 15% andinterest cover of 6.

Bgearing of 16% and interest cover of 6.

Cgearing of 15% and interest cover of 4.

Dgearing of 16% and interest cover of 4.

Answer : A

Question 6

On 1 January 20X4 EF grants each of its 125 employees500 share options on the condition that they remain in employment for 3 years. During the year to 31 December 20X4 10 employees left and It is expected that a further 25 will leave before the end of the vesting period.

The fair value of each shareoption is $30 on 1 January 20X4 and $45 on 31 December 20X4.

What is the journal entry in respect of these share options in EF's financial statements for the year ended 31 December 20X4?

AOption

BOption

COption

Answer : A

Question 7

HJ is currently in dispute with an employee, who is claiming $400,000 in a legal case against them.

HJ's legal advisors have stated that it is probable that they willlose the case and will have to pay the amount claimed.

Also, HJ areclaiming $250,000 from a supplierof defective goods and the legal advisors have stated that it is probable that HJ will besuccessful in this claim.

What is the correct accounting treatment for these two items in HJ'sfinancial statements?

AProvide for the $400,000 potential outflow and disclose the $250,000 potential inflow.

BProvide for the $400,000 potential outflow and recognise the $250,000 potential inflow.

CDisclose the $400,000 potential outflow and disclose the $250,000 potential inflow.

DDisclose the $400,000 potential outflow and recognise the $250,000 potential inflow.

Answer : A

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