Which of the following actions would be most likely to improve an entity's gross profit margin?
A. Negotiating with trade suppliers for a bulk purchase discount
B. Offering increased credit to customers
C. Reducing administrative expenses by 10%
D. Writing down the value of obsolete inventories
Which TWO of the following are true for an entity raising equity finance using a rights issue rather than a placing of equity shares to new investors?
A. The administration is more complex and therefore likely to be more costly.
B. The shares will sell at a higher price and therefore generate more funds.
C. The voting rights of existing shareholders will be unaffected if the shareholders take up their rights.
D. The cost of underwriting will be lower because the risk of the issue is lower.
E. The issue will widen the base of shareholders if all shareholders take up their rights.
AB sold the majority of its operating equipment to LM for cash on 30 December 20X9 and then immediately leased it back under an operating lease.
AB used the cash proceeds from the sale to reduce its long term borrowings significantly. No early repayment charge was levied by the lender.
Which of the following statements is true in respect of AB's ratios calculated at 31 December 20X9?
A. AB's return on capital employed would be lower as a result of this sale being recorded.
B. AB's current ratio would be lower as a result of this sale being recorded.
C. AB's non-current asset turnover would be lower as a result of this sale being recorded.
D. AB's gearing ratio would be lower as a result of this sale being recorded.
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:
A. gearing of 15% and interest cover of 6.
B. gearing of 16% and interest cover of 6.
C. gearing of 15% and interest cover of 4.
D. gearing of 16% and interest cover of 4.
ST has in issue unquoted 7% debentures which were issued at par and are redeemable in 1 year's time. These debentures cannot be traded. The yield to maturity on these debentures has been calculated at 5%.
Which of the following would explain why the yield to maturity is lower than the coupon?
A. ST will benefit from the tax relief on the interest payment.
B. The debentures will be redeemed at a discount to their par value.
C. The debentures will be redeemed at their par value.
D. The market value of the debentures must be higher than their par value.
WX acquired 60% of the equity shares of CD on 1 January 20X3. WX sold 5% of the equity shares it held for $60,000 on 31 December 20X5. At that date the net assets of CD were $120,000 and the fair value of the non-controlling interest in CD was measured at $21,000. No goodwill arose on the original acquisition of CD.
When preparing its consoldiated financial statements, WX will process which of the following adjustments to its group retained earnings?
A. A debit of $39,000
B. A credit of $54,000
C. A credit of $39,000
D. A debit of $54,000
When accounting for a finance lease under IAS 17 Leases, which TWO of the following are recognised in the statement of profit or loss?
A. Finance cost element of the lease payments
B. Depreciation of the leased asset
C. Lease payments paid
D. Lease payments payable
E. Capital repayment element of the lease payments
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?
A. Debit investment in equity shares $3,000 and credit profit or loss $3,000.
B. Debit investment in equity shares $3,000 and credit other reserves $3,000.
C. Debit investment in equity shares $2,375 and credit profit or loss $2,375.
D. Debit investment in equity shares $2,375 and credit other reserves $2,375.
RS has issued an instrument with a nominal value of $1 million, at a discount of 2.5%, and a coupon rate of 6%. The terms of the issue are that the instrument must either be redeemed at par, at the option of the holder, in three years' time, or alternatively converted into equity shares in RS.
The characteristics of this instrument taken as a whole indicates that it would be classified as which of the following?
A. Compound instrument
B. Debt instrument
C. Equity instrument
D. Discounted instrument
On 30 November 20X9 OPQ acquires a financial asset that is classified as Available for Sale. Which of the following describes the value of the financial asset on the date of acquisition?
A. Fair value excluding transaction costs.
B. Fair value including transaction costs.
C. Present value including transaction costs.
D. Present value excluding transaction costs.
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