F1 CIMA Financial Reporting exact Exam Questions

Financial Reporting

Last Update 2 hours ago Total Questions : 248

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Question # 41

An entity purchased an asset on 1 April 20X4 for $320,000, exclusive of import duties of $32,000.

The entity sold the asset on 31 March 20X9 for $480,000 incurring legal fees of $12,000.

The entity is resident in Country Y where chargeable capital gains are taxed at 20% and no indexation is allowed.

Calculate the amount of capital tax that the entity is due to pay.

Give your answer to the nearest whole $.

Question # 42

Statements of financial position as at 31 December 20X8 for JK, LM and PQ are as follows:

[1] JK purchased 80% of LM ' s $1 equity shares on 1 January 20X8 for $260,000 when the retained earnings of JK were $110,000. At that date the non-controlling interest had a fair value of $63,000.

[2] JK purchased 25% of PQ ' s $1 equity shares on 1 January 20X8 for $90,000 when the retained earnings of PQ were $96,000.

[3] During the year JK sold goods to LM for $32,000 at a mark up of 33.33% on cost. Half of the goods were still in LM ' s inventory at 31 December 20X8.

[4] LM transferred $32,000 to JK on 30 December 20X8 in settlement of the inter-group trade. JK did not record the cash in its financial records until 2 January 20X9.

Calculate the goodwill arising on the acquisition LM.

Give your answer to the nearest $.

Question # 43

A non-executive director of a company is somebody who:

is involved in making operational decisions m the company

need not have experience of the industry in which the company operates

does not earn remuneration from the company

can be appointed Chief Executive Officer of the company.

Question # 44

An entity acquires 100% of the equity shares in another entity.

The consideration paid for the shares is less than the fair value of the net assets acquired.

Which of the following is the correct accounting treatment for the difference between the consideration paid and the fair value of the net assets acquired, in accordance with IFRS 3 Business Combinations?

Recognise as a gain in the consolidated statement of profit or loss.

Recognise as a deferred credit and release to consolidated profit or loss over its useful economic life.

Recognise as a deduction from goodwill in the consolidated statement of financial position.

Recognise as a gain in the statement of changes in equity.

Question # 45

Which of the following is the most appropriate definition of the term ' factoring ' ?

Where a business sells its accounts receivable to a third party at a discount

Where a business borrows a loan with short-term conditions from a third party

Where a business sells equity to third parties to gain short-term finance

Where a business is provided with a highly flexible regular source of short-term finance by a bank

Question # 46

Company RET ' s financing activities are exactly 35% of their operating activities expenses each month. Below is a list of Company RET ' s total expenses for this month:

Inventory supplies purchased: £145,000

Employee wages: £65,000

Purchase of a shop: £105,000

Dividend payments: ??

Cash repayments on loan: £61,000

What is company RET ' s total dividends payment for this month?

£12,500

£49,250

£131,600

£26,500

Question # 47

For an incorporated business, the taxation of trading income is a form of direct taxation which is based on:

business profits where the tax is paid by the shareholders to the tax authorities.

dividends paid to shareholders where the tax is paid by the business to the tax authorities.

dividends paid to shareholders where the tax is paid by the shareholders to the tax authorities.

business profits where the tax is paid by the business to the tax authorities.

Question # 48

030d49a3-3c4c-45ad-9aee-710302f219f1: Entities normally pay taxation on their worldwide income in the country in which they are deemed to be resident.

Residency is determined by the

Question # 49

UV ' s financial statements for the year ended 31 March 20X8 were approved for publication on 30 June 20X8.

In accordance with IAS 10 Events After the Reporting Period, which of the following material events would have been classified as a non-adjusting event in these financial statements?

On 1 June 20X8 UV ' s auditors discovered that an error in valuation had caused the closing inventory to be overvalued by $150,000.

On 10 April 20X8 UV received a communication stating that one of its customers had ceased trading and gone into liquidation. The balance outstanding at 31 March 20X8 was unlikely to be paid.

On 1 June 20X8 UV was awarded damages of $70,000 in respect of a legal claim that it had made against the local government authority in October 20X7.

On 28 April 20X8 a fire destroyed half of UV ' s main production facility. Output was severely reduced for six months.

Question # 50

Country X charges corporate income tax at the rate of 20% on all income irrespective of whether it is paid out as a dividend. Country Y charges corporate income tax at the rate of 25% on all income.

An entity, AA, which is resident in Country X pays a dividend of $100,000 to another entity, BB, which is resident in Country Y.

Countries X and Y have a double taxation treaty which adopts the exemption method in respect of this type of transaction.

What is BB ' s liability to tax in Country Y in respect of the dividend income received?

No tax will be payable.

Tax will be payable at 20%.

Tax will be payable at 25%.

Tax will be payable at 25% less a credit given for the 20% already paid by AA in Country X.