CIMA CIMA-F1 Online Practice Questions and Exam Preparation

CIMA CIMA-F1 Online Questions & Answers

• Question 1:

  HOTSPOT

  MN has a receivables ledger total balance of $160,000, which represents two months' sales. A factor will operate the ledger on a non-recourse basis for a fee of 2.8% of invoiced sales or on a recourse basis of 1% of sales.

  It is estimated that using the factor will deter some of the company's customers, and persuade them to buy from a competitor instead. Sales will fall by an estimated $28,000 each year, with a corresponding saving in cost of sales and distribution costs of 40% of this figure.

  If the factor is used, administrative savings for both options would be $26,000 each year. Irrecoverable debts are currently 2% of sales.

  

  

• Question 2:

  Which of the following would be capitalized as an intangible asset in accordance with IAS 38 Intangible Assets?

  A. The cost of market research into a new geographical market.
  B. The cost of assets used in the research and development department.
  C. The cost of testing a new process which will create efficiency savings of 10% once implemented.
  D. The cost of advertising the launch of a new product.
  C. The cost of testing a new process which will create efficiency savings of 10% once implemented.

• Question 3:

  The following information relates to AA. Extract of Trial Balance at 31 December 20X4;

  

  Notes

  (i)

  Inventory at 31 December 20X4 was valued at cost at $30.

  (ii)

  The loan which was received on 1 July 20X4 is repayable in 20X9.

  (iii) Corporate income tax represents an over-provision of tax for the year ended 31 December 20X3. AA reported a loss for tax purposes for the year ended 31 December 20X4 and a tax refund is expected amounting to $20. (iv) Cost of sales, administration and distribution costs need to be adjusted for the following:

  What figures should be entered in the Statement of Profit or Loss for the year ended 31 December 20X4 in relation to Administration and Distribution costs?

  A. Adminsitration $136 Distribution $120
  B. Administration $120 Distribution $87
  C. Administration $141 Distribution $117
  D. Administration $146 Distribution $114
  A. Adminsitration $136 Distribution $120

• Question 4:

  ABC uses an aggressive approach to managing its working capital. XYZ uses a conservative approach to managing its working capital. Which of the following is ABC more at risk of compared to XYZ?

  A. Inventory obsolescence
  B. Running out of cash
  C. High finance costs
  D. Receivables not paying on time
  B. Running out of cash

• Question 5:

  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.

  What is the value of the unrealized profit in inventory adjustment required to inventory in PQ's consolidated statement of financial position at 31 December 20X0?

  A. $3,333
  B. $2,000
  C. $4,000
  D. $1,667
  D. $1,667

• Question 6:

  Which of the following is an effect of using equity accounting to include an entity in the consolidated statement of financial position of a group?

  A. A single figure is included in net assets which is the sum of the initial cost of investment in the investee entity plus the group share of all changes in net assets since acquisition.
  B. 100% of each asset and liability of the investee entity is included with the investing entity's balances.
  C. The group share of each asset and liability of the investee entity is included with the investing entity's balances.
  D. The investment in the investee entity is included in non-current assets at cost to the investing entity.
  A. A single figure is included in net assets which is the sum of the initial cost of investment in the investee entity plus the group share of all changes in net assets since acquisition.

• Question 7:

  DRAG DROP

  The Conceptual Framework for Financial Reporting issued by the International Accounting Standards Board (known as the IASB's conceptual framework) includes one underlying assumption about the preparation of financial statements and two fundamental qualitative characteristics for financial information.

  Identify the underlying assumption and one of the fundamental characteristics by placing one of the options in each of the boxes below.

  Select and Place:

  

  

• Question 8:

  UV has recently been having cash flow issues due to its credit customers paying after the credit period they have been granted. UV is looking into factoring the receivables to a factoring company on a recourse basis to improve its cash flow.

  Which TWO of the following will UV encounter as a result of employing the factoring company?

  A. No irrecoverable debts
  B. Reduction in payables days
  C. Reduction in the need for management control
  D. Reduction in bank overdraft charges
  E. Increase in cash sales
  C. Reduction in the need for management control
  D. Reduction in bank overdraft charges

• Question 9:

  The following information is extracted from the statement of financial position for ZZ at 31 March 20X3:

  

  Included within cost of sales in the statement of profit or loss for the year ended 31 March 20X3 is $20 million relating to the loss on the sale of plant and equipment which had cost $100 million in June 20X1. Depreciation is charged on all plant and equipment at 25% on a straight line basis with a full year's depreciation charged in the year of acquisition and none in the year of sale.

  The revaluation reserve relates to the revaluation of ZZ's property.

  The total depreciation charge for property, plant and equipment in ZZ's statement of profit of loss for the year ended 31 March 20X3 is $80 million.

  The corporate income tax expense in ZZ's statement of profit or loss for year ended 31 March 20X3 is $28 million.

  ZZ is preparing its statement of cash flows for the year ended 31 March 20X3. What figure should be included within cash flows from investing activities for the proceeds of sale of plant and equipment?

  A. $55 million
  B. $95 million
  C. $80 million
  D. $120 million
  A. $55 million

• Question 10:

  OP holds an investment property purchased on 1 January 20X3 for $700,000 with a useful economic life of 25 years.

  At 31 December 20X5 the fair value of the investment property was $750,000 with a revised useful economic life of 25 years from that date.

  OP has been carrying the investment property using the cost model until 31 December 20X5. The directors wish to change their valuation method to fair value in accordance with IAS 40 Investment Property.

  Which of the following is the correct treatment of the revaluation gain and the value of the property in the statement of financial position at 31 December 20X5?

  A. A gain of $134,000 taken to the statement of profit or loss and $750,000 shown on the statement of financial position.
  B. A gain of $106,000 taken to the statement of profit or loss and $720,000 shown on the statement of financial position.
  C. A gain of $134,000 taken to other comprehensive income and $750,000 is shown on the statement of financial position.
  D. A gain of $106,000 taken to other comprehensive income and $720,000 is shown on the statement of financial position.
  A. A gain of $134,000 taken to the statement of profit or loss and $750,000 shown on the statement of financial position.