Free CIMA F2 Practice Exam with Questions & Answers | Set: 2

Which THREE of the following statements about preference shares are true?

VW acquired 240,000 of the 300,000 $1 equity shares of EF for $1,440,000 on 1 January 20X2. Goodwill arising from the acquisition, using the proportionate method for measuring non controlling interest, was $540,000. On 1 January 20X3 VW disposed of 30,000 of the equity shares in EF for $200,000 cash when the net assets of EF were £1,200,000. Goodwill arising on the acquisition of EF had not suffered any impairment.

Prepare the accounting adjustment that will be processed by VW to reflect the disposal of shares in EF when it prepares its consoldiated financial statements.

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?

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

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 statements is true?

XY acquired 75% of the equity shares of LM on 31 December 20X3.  LM acquired 60% of the equity shares of JK on 31 December 20X4 for $950,000.  XY measured the non controlling interest in JK at the date of acquisition using the proportionate share of the fair value of the net assets acquired. The fair value of JK's net assets was $850,000 at 31 December 20X4.

What is the value of goodwill that XY will include in its consolidated statement of financial position at 31 December 30X4 in respect of JK as a result of gaining indirect control?

The directors of AB want to reduce the entity's gearing ratio in the year to 31 December 20X9.  

Which of the following independent actions could the directors take during 20X9 to achieve this?

Information from the financial statements of RST for the year ended 30 April 20X9 is as follows:

At 30 April 20X9 the ordinary shares are trading at $4.75.

What is the price earnings (P/E) ratio for RST at 30 April 20X9?

PQ is a retail business. In recent years they have improved their financial performance and increased their revenue. The following ratios have been calculated for the years ended 31 December 20X4 and 20X3:

Which of the following explanations of PQ's financial performance is consistent with these ratios?

YZ issued $100,000 6% convertible bonds at par on 1 January 20X5. The bondholders have the option to convert into equity shares in 3 years' time or redeem at par for cash on the same date.

Interest is paid annually in arrears and bonds issued by similar entities without conversion rights pay interest at 8%.

What is the value of equity to be recognised in YZ's statement of financial position as at 31 December 20X5?

Give your answer to the nearest whole $.

$?