Question 1

ST acquired 75% of the 2 million $1 equity shares of CD on 1 January 20X3, when the retained earnings of CD were S3,550,000. CD has no other reserves.

ST paid $5,600,000 for the shares in CD and the non controlling interest was measured at its fair value of S1,400,000 at acquisition.

At 1 January 20X3, the fair value of CD's net assets were equal to their carrying amount, with the exception of a building. This building had a fair value of $1,000,000 in excess of its carrying amount and a remaining useful life of 25 years on 1 January 20X3.

At 31 December 20X5, the retained earnings of ST and CD were $8,500,000 and $5,250,000 respectively.

What is thefigure fornon-controlling interestto be shown in the consolidated statement of financial position of STas at 31 December 20X5?

Options :

A : $1,795,000

B : $1,607,500

C : $1,825,000

D : $1,805,000

Answer: A

Question 2

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

Question 3

Which of the following are limitations of financial statement figures for ratio analysis? Select the ALL that apply.

Options :

A : Only provides historic data

B : Only provides financial information

C : Limited information to identify trends over time

D : Provide only summarised information

E : Contains complicated information that needs to be summarised

F : Only provides forecast data

Answer: A,B,C,D

Question 4

Which THREE of the followingwould typically indicate a finance lease?

Options :

A : An asset with a useful life of ten years is being leased for ten years.

B : The lessor is responsible for the annual maintenance of the asset.

C : The lessee has the option to buy the asset at the end of the lease for $1.

D : The lease contract for an asset includes an upgrade to the asset every two years.

E : A leased asset has been specifically modified for the lessee-s use.

Answer: A,C

Question 5

GG's gearing is currently 50% compared to the industry average of 40% (both measured as debt/equity). GG's debt is all in the form of a single bank loan that is repayable in five years' time. The directors of GG are seeking to raise finance for a new project and they are considering an additional bank loan from the same bank.

Which of the following would prevent the bank from lending the finance for the project in the form of a new bank loan?

Options :

A : A covenant on the existing bank loan that restricts the level of dividend that can be paid.

B : A projected decrease in interest cover that would breach a covenant on the existing loan.

C : The revaluation of GG-s property that shows an increase in its value since the existing bank loan was taken out.

D : A projected lack of profits to be able to claim tax relief on the additional interest arising from the new loan.

Answer: B

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