CIMA CIMA Certifications CIMAPRA19-F02-1 Questions & Answers

• Question 41:

  CORRECT TEXT

  WX acquired 20% of the equity share capital of MN for $135 million in 20X5. WX acquired a further 40% of the equity share capital of MN for $400 million on 1 October 20X8 when the fair value of the net assets of MN were $800 million.

  The fair value of the initial 20% investment in MN was $175 million at 1 October 20X8. There has been no impairment of the investment in MN. WX uses the proportion of net assets method to value non-controlling interest at acquisition.

  Calculate the goodwill arising on the acquisition of MN.

  Give your answer to the nearest $ million.

  $ ? million

  A. 95, 95000000

  Correct Answer: A

• Question 42:

  CORRECT TEXT

  GH's financial statements show the following:

  What is the value of the dividend received from the associate to be included in GH's consolidated statement of cash flows for the year?

  Give your answer to the nearest $000.

  $ ? 000

  A. 300, 300000

  Correct Answer: A

• Question 43:

  CORRECT TEXT

  The following is extracted from MN's statement of financial position at 30 September 20X1.

  Calculate the gearing (measured as debt:equity) ratio of MN at 30 September 20X1.

  Give your answer to one decimal place.

  %

  A. 63.8, 63.78, 63.7, 63.80

  Correct Answer: A

• Question 44:

  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 will lose the case and will have to pay the amount claimed.

  Also, HJ are claiming $250,000 from a supplier of defective goods and the legal advisors have stated that it is probable that HJ will be successful in this claim.

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

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

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

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

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

  Correct Answer: A

• Question 45:

  On 1 January 20X4 JK had 1,500,000 ordinary shares in issue. On 1 September 20X4 JK issued 600,000 ordinary shares at the market value of $2.50 a share. For the financial year ended 31 December 20X4 the statement of profit or loss shows profit before tax of $625,000 and profit after tax of $500,000.

  What is the earnings per share for the year ended 31 December 20X4?

  A. 23.8 cents

  B. 36.8 cents

  C. 26.3 cents

  D. 29.4 cents

  Correct Answer: D

• Question 46:

  LM acquired an asset under a 5-year non-cancellable operating lease agreement on 1 January 20X8. Under the terms of the agreement, LM paid nothing for the first year and then made four payments of $50,000 in each subsequent year. LM adopted the provisions of IAS 17 Leases when accounting for this agreement.

  Which of the following is correct in respect of this operating lease in LM's financial statements for the year to 31 December 20X8?

  A. An accrual of $40,000 was recognised.

  B. An accrual of $50,000 was recognised.

  C. A prepayment of $10,000 was recognised.

  D. An expense of $50,000 was recognised.

  Correct Answer: A

• Question 47:

  The consolidated statement of profit or loss for VW for the year ended 30 September 20X7 includes the following:

  What is VW's interest cover for the year ended 30 September 20X7?

  A. 4.5

  B. 3.3

  C. 4.1

  D. 5.1

  Correct Answer: A

• Question 48:

  Which of the following reduce the usefulness of ratio analysis when comparing entities that operate in the same industry? Select ALL that apply.

  A. The revenue figure being aggregated from many different activities and sources.

  B. Accounting estimates in respect of depreciation being different between entities.

  C. The effect of a material and unusual item being disclosed separately in the notes.

  D. An entity adopting a policy of revaluing its non current assets.

  E. Ratio calculations being based on historical information.

  F. Ratios being quick and easy to calculate.

  Correct Answer: ABDE

• Question 49:

  LM acquired 80% of the equity shares of ST when ST's retained earnings were $50 million. The fair value of the net assets of ST included a contingent liability with a fair value of $100 million at the date of acquisition and a fair value of $40 million at 31 December 20X6. No other fair value adjustments were required at the date of acquisition.

  LM and ST had retained earnings of $200 million and $80 million respectively at 31 December 20X6.

  The consolidated retained earnings of LM at 31 December 20X6 were:

  A. $164 million

  B. $176 million

  C. $272 million

  D. $284 million

  Correct Answer: C

• Question 50:

  Which THREE of the following statements are true in relation to financial assets designated as fair value through profit or loss under IAS 39 Financial Instruments: Recognition and Measurement?

  A. Shares in another entity held for short term trading purposes fall within this category.

  B. Transaction costs in relation to these assets are expensed to profit or loss on acquisition.

  C. Transaction costs in relation to these assets are added to the initial cost of the asset on acquisition.

  D. The gain or loss on the subsequent measurement of these assets is recorded within other comprehensive income.

  E. The gain or loss on the subsequent measurement of these assets is recorded within profit for the year.

  F. Once the asset has been subsequently measured to fair value an impairment review is undertaken.

  Correct Answer: ABE