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Which of the following defines the calculation of interest cover?
AB and CD are competitors supplying components to the car manufacturing industry. AB operates in Country X and CD operates in Country Y. Both entities were incorporated onthe same day, are the same size and prepare financial statements to 31 March each year using international accounting standards. Which of the following statements taken individually would limit the usefulness of the comparison of the return on capital employed ratio between the two entities?
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 classifedas which of the following?
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?
AB, a listed entity, prepared its financial statements to 31 December 20X7, in accordance with international accounting standards. Which THREE of the following were disclosed as related parties of AB in its financial statements?
ST has in issue unquoted 7% debentures which were issuedat 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?
AB acquired its one subsidiary, CD, on 1 January 20X1. At this date the fair value of CD's property, plant and equipment was found to be $40 million higher than its carrying value. The relevant items had a remaining estimated useful life of 10 years from the date of acquisition. At 31 December 20X4 AB and CD presented property, plant and equipment of $100 millionand $50 million respectively in their individual financial statements. The value of property, plant and equipment presented in AB's consolidated statement of financial position at 31 December 20X4 is:
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?
JJ's current share price is $1.80, with a dividend of $0.20 a share just about to be paid. Dividends have increased at an average annual growth rate of 4.5% and this is expected to continue into the future. What is JJ's cost of equity?
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?
GH acquired 3,000,000 of the 12,000,000 equity shares of JK. All shares carried equal voting rights and no other single shareholder of JK held more than 10% of the equity shares. GH has the power to participate in the financial and operating policy decisions but Based on the information provided above, how would GH's investment in JK be accounted for in its consolidated financial statements?
FG has a weighted average cost of capital of 12% based on its existing: • level of gearing of 30% (measured as debt/(debt + equity)); and • business operations. This would be used as an appropriate discount factor to assess which of the following significantprojects?
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?
XY purchased $100,000 of quoted 8% bonds in the current year which it intends to hold until redemption. Which of the following identifies the correct classification and subsequent measurement basis for this financial instrument?
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?
AB acquired a financial investment on 1 January 20X9, incurring $5,000 related agency fees. AB initially classified the investment as held for trading, in accordance with IAS 32 Financial Instruments: Presentation. Which of the following statements reflects the accounting treatment that AB adopted in respect of this investment when it prepared its financial statements to 31 December 20X9?
EF obtained a government licence, free of charge, to operate a silver mine in 20X7 and $5 million was spent on preparing the site. The mine commenced operation on 1 January 20X8. The licence requires that at the end of the mine's useful life of 20 years, the site above ground must be reinstated to its original position. EF estimated that the cost in 20 years' time of this reinstatement will be $3 million, which has a present value of $1 million at 1 January 20X8. Which THREE of the following describe how the cost of the reinstatement of the site shouldbe treated in the financial statements of EF in the year ended 31 December 20X8?
A group presents its financial statements in A$. 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:
Which of the following actions would be most likely to improve an entity's gross profit margin?
AB and CD are separate entities that prepare financial statements to 31 May using international accounting standards. AB and CD provide technical support services to the financial services industry and operate in the same country. The financial statements are identical except for the following: • AB purchased all operating equipment, paying $100,000, using a 5 year bank loan. The useful life of the equipment was 5 years. • CD signed an operating lease agreement for all operating equipment for 5 years paying $20,000 per year. Both entities charge all expenses relating to the equipment to cost of sales. From the information provided, which ofthe following ratios would be reliably comparable for AB andCD?
JK is seeking to raise finance for a project and the directors would prefer to take out a fixed rate bank loan repayable over the next 5 years. The project will increase the profit of JK even after taking into account the additional interest costs. Which of the following statements about the use of a bank loan in this situation is true?
XYZ had 600,000 ordinary shares in issue on 1 July 20X4. On 1 January 20X5, the entity made a 1 for 2 bonus issue. The profit attributable to ordinary shareholders for the year ended 30 June 20X5 was $2,925,000. What is the basic earnings per share for the year ended 30 June 20X5?
EF has redeemable 10% bonds which are currently trading at $94.00 for each $100 of nominal value.Thebondscan be redeemed at par in five years' time. The corporate income tax rate is 22%. The present value of the cash flows associated with $100 nominal value of these bonds at a discount rate of 7% is $9.28.Calculate the post tax cost of debt. Give your answer as a percentage to one decimal place. %
On 1 January 20X1 KL acquired 75% of the equity shares of PQ. Goodwill arising on the acquisition was $480,000. On 31 December 20X3 KL sold the full investment of PQ to XY Group for $2,000,000. On this date the net assets of PQ were $1,340,000 and the noncontrolling interests stood at $410,000.What is the gain on disposal to be recognised in the consolidated statement of profit or loss of KL?
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 successfully this claim. What is the correct accounting treatment for these two items in HJ's financial statements?
What figure will be presented in GHI's consolidated statement of changes in equity for the year ended 31 December 20X4, in respect of dividends paid to non-controlling interest?
EF has redeemable 10% bonds which are currently trading at $94.00 for each $100 of nominal value.Thebondscan be redeemed at par in five years' time. The corporate income tax rate is 22%. The present value of the cash flows associated with $100 nominal value of these bonds at a discount rate of 7% is $9.28. Calculate the post tax cost of debt. Give your answer as a percentage to one decimal place. %
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 the value of retained earnings that will be presented in the consolidated statement of financial position of ST as at 31 December 20X5?
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:
An entity undertakes an issue of new debt which has the effect of reducing the entity's weighted average cost of capital (WACC). Which of the following would best explain why the WACC will have fallen?
Which of the following actions should XY's management take in order to reduce its investment in working capital?
Which of the following reduce the usefulness of ratio analysis when comparing entities that operate in the same industry?Select ALL that apply.
You are a Financial Controller at BCD and are in the process of preparing the year-end financial statements. A member of your finance team has come to see you about her provisions balance at year-end. She says that the Managing Director has asked her to increase the provisions balance by $1 million overall. She thinks this is because BCD has had a very good year in terms of profit, and the Managing Director wants to put some profit aside to protect against any future reductions in profit. $1 million is material to BCD. You believe that the provisions balance was fairly stated without the additional $1 million. Which TWO of the following would be appropriate actions in this scenario?
LM acquired 15% of the equity share capital of ST on 1 January 20X6 for $18 million. LM acquired a further 50% of the equity share capital of ST for $50 million on 1 January 20X7 when the fair value of ST's net assets was $82 million. The original 15% investment in ST had a fair value of $20 million at 1 January 20X7. The non controlling interest in ST was measured at its fair value of $30 million at the date control in ST was acquired. Calculate the goodwill arising on the acquisition of ST that LM included in its consolidated financial statements at 31 December 20X7. Give your answer to the nearest $ million. $ ? million
How would KL account for its investment in MN in its consolidated financial statements for the year to 31 December 20X9?
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% acquisition.Which of the following amounts will GH debit to non controlling interest when the 20% acquisition is adjusted for in its consolidated financial statements at 31 December 20X6?
The dividend yield of ST has fallen in the year to 31 May 20X5, compared to the previous year. The share price on 31 May 20X4 was $4.50 and on 31 May 20X5 was $4.00. There were no issues of share capital during the year. Which of the following should explain the reduction in the dividend yield for the year to 31 May 20X5 compared to the previous year?
Which of the following, in accordance with IFRS 2 Share-based Payments, are only applicable to the accounting treatment of cash settled rather than equity settled sharebased payment schemes? Select ALL that apply
AB and FG incorporated on 1 January 20X1 in the same country and had similar investment in net assets. Both entities are financed entirely by equity. In the year to 31 December 20X1 both entities generated the same volume of sales. Which of the following, taken individually, would explain why AB's return on capital employed ratio was lower than that of FG?
JJ's current share price is $1.80, with a dividend of $0.20 a share just about to be paid. Dividends have increased at an average annual growth rate of 4.5% and this is expected to continue into the future. What is JJ's cost of equity?
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