Question 1

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:

Options :

A : gearing of 15% andinterest 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.

Answer: A

Question 2

GH owned 70% of the equity share capital of XY at 1 January 20X6. GH acquired a further 20% of XY's equity share capital on 31 December 20X6 for $430,000. Non controlling interest was measured at $600,000 immediately prior to the 20?quisition.

Which of the following amounts will GH debit to non controlling interest when the 20?quisition is adjusted for in its consolidated financial statements at 31 December 20X6?

Options :

A : $400,000

B : $120,000

C : $200,000

D : $430,000

Answer: A

Question 3

W and Y are very similar entities with the same level of profit before interest and tax. However, W has gearing of 95% and Y has gearing of 30%.

Which of the following statements is true?

Options :

A : Investing in W carries a higher level of risk than investing in Y.

B : A greater proportion of profit will be available out of which to declare a dividend in W.

C : Investors in Y will expect a higher return than investors in W.

D : Y has a greater commitment to meet interest payments than W.

Answer: A

Question 4

STacquired 70% of the equitysharesofDE for $87,500 on 30 September 20X5. Atthe date of acquisition the net assets of DE were $54,700 and the fair value of the non controlling interest wasmeasured at $19,700. There has been no impairment of goodwill.

On 30 September 20X9 ST disposedofits entire investmentinDE for $262,500 whenthe net assets of DEwere $96,250.

What is the gain or loss on disposal of DEthat will be included in ST'sconsolidated profit or lossfor the year ended30 September 20X9?

Options :

A : $113,750 loss

B : $166,250 loss

C : $166,250 gain

D : $113,750 gain

Answer: D

Question 5

ST has sold its main office property, which had a carrying value of $360,000,to AB, a property management entity.

The property was sold for $400,000 which isequal to itsfair value and was immediately leased back under an operating lease agreement.

Which of the following journals will record this transaction?

Options :

A :

B :

C :

D :

Answer: A

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