Question 1

JKL measure gearingas debt:equity, based on book values.At 31 December 20X5the ratio is 2:3 and JKL would like this to be 2:5.

Which of the following transactions individually would achieve this?

Options :

A : Bonus issue from the share premium account.

B : Revaluationof investment propertyto an increased fair value.

C : Repayment of a6 year termloan with the issue of 5 year redeemable debentures.

D : Issue of redeemable preference shares at par.

Answer: B

Question 2

MNO is listed on its local stock exchange. It has a high level of gearing compared to the industry average as a result of rapid expansion funded by debt. The directors of MNO would like to reduce the level of gearing by raising equity to fund the next expansion project. The directors are considering whether to use a placing of new shares or a rights issue.

Which of the following statementsis true?

Options :

A : A rights issue would not need to be underwritten because the risk of the shares not being taken up is small compared to a placing.

B : The administration costs associated with a placing are usually more expensive than a rights issue because less investors are involved.

C : A placing will increase the proportion of the total number of MNO-s shares held by large investors.

D : The directors must use a placing before offering the rights issue to existing shareholders.

Answer: C

Question 3

When accounting for a finance lease under IAS 17 Leases, which TWO of the following are recognised in the statement of profitor loss?

Options :

A : Finance cost element of the lease payments

B : Depreciationof the leased asset

C : Lease payments paid

D :

Lease payments payable

E : Capital repayment element of the lease payments

Answer: A,B

Question 4

XY's investments enable it to exercisecontrol over AB and havesignificant influence over FG and JK.

The Managing Director of XY is a non-executive director of LM. XYdoes not hold any investment inLM.

XYispreparingitsconsolidated financial statements for the year ended 30 September 20X9.

Which of the followingtransactions during the year will be disclosed in these financial statements in accordance with IAS 24 Related Party Disclosures?

Options :

A : Sale of goods with a trade discount to a major customer of XY.

B : Sale of a motor vehicle from XY toa Director of AB'sspouse at its current market value.

C : Sale of non current assets from XY to LM at their current market value.

D :

Sale of goods from FG to JK at their current market value.

Answer: B

Question 5

A group presents its financial statements in A$.

The goodwill of its only foreign subsidiary was measured at B$100,000 at acquisition. There have been no impairments to this goodwill.

Exchange rates (where A$/B$ is the number of B$'s to each A$) are as follows:

The value of goodwill to be included in the group's statement of financial position in respect of its foreign subsidiary for the year ended 31 December 20X4 is:

Options :

A : A$75,758.

B : A$66,667.

C : A$150,000.

D : A$132,000.

Answer: A

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