Download the Latest F2 Dumps - 2022 F2 Exam Questions
Latest CIMA F2 Certification Practice Test Questions
NEW QUESTION 58
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?
- A. Issue redeemable preference shares.
- B. Issue cumulative preference shares.
- C. Recognise the valuation surplus on AB's property, plant and equipment.
- D. Switch AB's fixed interest bearing borrowing to a lower variable rate borrowing.
Answer: C
NEW QUESTION 59
At 31 October 20X1 RS has in issue 10% debentures 20X8 with a carrying value of $350,000.
Extracts from its statement of profit or loss for the year ending 31 October 20X7 are as follows:
What is the interest cover for RS for the ended 31 October 20X7?
- A. 9.0 times
- B. 11.1 times
- C. 10.0 times
- D. 8.0 times
Answer: A
NEW QUESTION 60
The IAS definitions of financial instruments dictate their classification between debt and equity. Which of of the following factors might this classification impact?
Select ALL that apply.
- A. Financial risk
- B. Liquidity
- C. Profit distribution
- D. Profitability
Answer: A
NEW QUESTION 61
XY owned 80% of the equity share capital of AB at 1 January 20X5. XY disposed of 20% of AB's equity share capital on 31 December 20X5 for $200,000. The non controlling interest was measured at
$140,000 immediately prior to the disposal.
What was the amount of the credit to retained earnings that XY will process in respect of this disposal when it prepares its consolidated financial statements at 31 December 20X5?
- A. $200,000
- B. $80,000
- C. $60,000
- D. $140,000
Answer: C
NEW QUESTION 62
AB and EF are located in the same country and prepare their financial statements to 31 October in accordance with International Accounting Standards. EF supplies AB with a component that is vital to AB's product range. AB is considering acquiring a controlling interest in EF by 31 December 20X4 in order to guarantee future supply. The Board of EF has indicated that such an approach would be postively considered. AB would use its control to make AB the sole customer of EF.
The Finance Director of AB has been granted access to EF's management accounts and has conducted some initial analysis from the financial press. The results togther with comparisons for AB for the year to
31 October 20X4 are presented below:
AB and EF are forecasting revenues of S1,500,000 and $700,000 respectively for the year ended 31 October 20X5.
Which of the following independent options would explain the difference between the gearing ratios of AB and EF at 31 October 20X4?
- A. EF has a policy of revaluing non current assets whereas AB does not.
- B. EF made a bonus issue of shares from retained earnings during the year whereas AB did not.
- C. EF's market value of shares at 31 October 20X4 is lower than that of AB.
- D. EF's average cost of borrowing is significantly lower than that of AB and EF has taken advantage of that.
Answer: D
NEW QUESTION 63
Mr D, a CIMA qualified accountant, is working on the preparation of a long term profit forecast required by the local stock market prior to a new share issue of equity shares. At the most recent board meeting the directors requested that the forecast be inflated. In Mr D's view this would grossly overestimate the forecast profit. The board intends to publish the revised inflated forecast.
Which THREE of the following are the ethical options available to Mr D in this situation?
- A. Submit the original forecast without the board's approval.
- B. Discuss the situation with his line manager.
- C. Delegate the work to a subordinate.
- D. Consider reporting the situation to the appropriate authorities.
- E. Adjust the figures in line with the board's request as this is a forecast and not the financial statements.
- F. Consider resignation of his post as accountant.
Answer: B,D,F
NEW QUESTION 64
AB acquired an investment in a debt instrument on 1 January 20X5 at its nominal value of $25,000, which it intends to hold until maturity. The instrument carried a fixed coupon interest rate of 5%, payable in arrears. Transactions costs of $5,000 were paid in respect of this investment. The effective interest rate applicable to this instrument was estimated at 9%.
Calculate the value of this investment that AB will include in its statement of financial position at 31 December 20X5.
Give your answer to the nearest whole number.
$ ?
Answer:
Explanation:
31450
NEW QUESTION 65
AB and EF are located in the same country and prepare their financial statements to 31 October in accordance with International Accounting Standards. EF supplies AB with a component that is vital to AB's product range. AB is considering acquiring a controlling interest in EF by 31 December 20X4 in order to guarantee future supply. The Board of EF has indicated that such an approach would be postively considered. AB would use its control to make AB the sole customer of EF.
The Finance Director of AB has been granted access to EF's management accounts and has conducted some initial analysis from the financial press. The results togther with comparisons for AB for the year to
31 October 20X4 are presented below:
AB and EF are forecasting revenues of S1,500,000 and $700,000 respectively for the year ended 31 October 20X5.
AB's Finance Director met with one of the directors of EF to discuss the potential impact of the acquisition.
Which of the director's statements below is correct?
- A. Redundancy costs arising from reorganisation following acquisition will be provided for by charging EF's profit for the year ended 31 October 20X4.
- B. The gross profit margin of EF will increase if AB's bargaining power is used to negotiate lower material costs for the whole group.
- C. Dividend yield for both entities will be identical after the acquisition.
- D. The P/E ratio of EF will increase to 12 after acquisition in line with that of AB.
Answer: B
NEW QUESTION 66
AB acquired 90% of the equity of YZ on 31 December 20X2. On the same date YZ acquired 60% of the equity shares of VW for $750,000. AB has no other subsidiaries.
The following information regarding YZ and VW was available:
What amount will AB include in its consolidated statement of financial position in respect of non controlling interest at 31 May 20X6?
- A. $811,000
- B. $816,400
- C. $840,600
- D. $741,400
Answer: D
NEW QUESTION 67
When preparing a consolidated statement of cash flows, which of the following describes the correct presentation of an associate's dividends?
- A. Dividends paid by the associate in cash flows from financing activities
- B. Dividends paid by the associate in cash flows from investing activities
- C. Dividends received from the associate in cash flows from investing activities
- D. Dividends received from the associate in cash flows from operating activities
Answer: C
NEW QUESTION 68
Company A are approached by a wealthy and internationally famous investor shortly before the launch date of their IPO. He tells them that the company do not need to incur all of the cost and risk of an IPO, as he will give them S55 million for 65% equity in the company.
Which of the following statements are also true of the offer? Select ALL that apply.
- A. The investor will probably want to manage the company
- B. This offer is from an angel investor
- C. The investor will want a long term commitment in the company
- D. The offer may ultimately require the majority stakeholder to sell his shares in the company
Answer: A,B,D
NEW QUESTION 69
Following the impairment review of the investment in BC, what would be the carrying value of this associate in KL's consolidated statement of financial position at 31 December 20X9?
- A. $1,800,000
- B. $1,960,000
- C. $1,240,000
- D. $1,050,000
Answer: D
NEW QUESTION 70
Which TWO of the following are true for an entity raising equity finance using a rights issue rather than a placing of equity shares to new investors?
- A. The voting rights of existing shareholders will be unaffected if the shareholders take up their rights.
- B. The issue will widen the base of shareholders if all shareholders take up their rights.
- C. The administration is more complex and therefore likely to be more costly.
- D. The shares will sell at a higher price and therefore generate more funds.
- E. The cost of underwriting will be lower because the risk of the issue is lower.
Answer: A,C
NEW QUESTION 71
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 $.
$?
Answer:
Explanation:
5138
NEW QUESTION 72
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?
- A. 10.56
- B. 15.83
- C. 9.31
- D. 7.92
Answer: B
NEW QUESTION 73
AB acquired 10% of the equity share capital of XY on 1 January 20X7 for $180,000 when the fair value of XY's net assets was $190,000. On 1 January 20X9 AB purchased a further 50% of the equity share capital for $550,000 when the fair value of XY's net assets was $820,000.
The original 10% investment had a fair value of $200,000 at the date control of XY was gained. The non controlling interest in XY was measured at its fair value of $300,000 at 1 January 20X9.
Which of the following represents the correct value of goodwill arising on the acquisition of XY that would have been included by AB when it prepared its consolidated financial statements at 31 December
20X9?
- A. $40,000
- B. $30,000
- C. $230,000
- D. $210,000
Answer: C
NEW QUESTION 74
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?
- A. $120,000
- B. $200,000
- C. $430,000
- D. $400,000
Answer: D
NEW QUESTION 75
AB acquired its subsidiary on 1 January 20X7 when the fair value of net assets was the same as book value with the exception of property, plant and equipment that had a fair value $500,000 higher than carrying value.
These assets were assessed to have a remaining useful life of 5 years from the date of acquisition.
What is the net consolidation adjustment to the property, plant and equipment balance at 31 December
20X9?
Give your answer to the nearest whole number (in '$000s).
$?
Answer:
Explanation:
200000, 200
NEW QUESTION 76
LM has made the following share purchases during the year:
* Purchased 55% of the equity share capital of OP.
* Purchased 45% of the equity share capital of QR. LM have the power to appoint the majority of board members on the QR board.
* Purchased 30% of the equity share capital of ST. LM is represented by one director on the main board of ST which has five members in total. The other 70% of ST's equity share capital is owned by a single company, UV.
The Managing Director has told you that OP has performed well, but both QR and ST have not performed as expected. He is therefore pleased that OP will be included as a subsidiary and that QR and ST will only be included as investments in the group financial statements.
In accordance with the ethical principle of professional competence and due care how should the investments in OP, QR and ST be treated in the group financial statements?
- A. OP should be consolidated and QR and ST should be equity accounted.
- B. OP and QR should be consolidated and ST should be equity accounted.
- C. OP and QR should be equity accounted and ST should be valued at cost.
- D. OP should be consolidated, QR should be equity accounted and ST should be valued at cost.
Answer: B
NEW QUESTION 77
ST owns 75% of the equity share capital of GH. GH owns 80% of the equity share capital of RS.
The following balances relate to RS:
The non controlling interest in respect of RS had a fair value of $56,000 at acquisition. There has been no impairment to goodwill since acquisition.
What value should be included in ST's consolidated statement of financial position for the non controlling interest in RS at 31 December 20X9?
- A. $93,500
- B. $116,000
- C. $86,000
- D. $146,000
Answer: B
NEW QUESTION 78
XY has a weighted average cost of capital (WACC) of 12%. The debt:equity ratio is 1:3 and this is considered low for the industry. XY needs to raise finance to purchase new machinery in the coming year.
Which of the following forms of finance is most likely to increase the WACC?
- A. 6% bank loan
- B. Finance lease
- C. 8% preference shares
- D. Rights issue of equity shares
Answer: D
NEW QUESTION 79
WX acquired 60% of the equity shares of CD on 1 January 20X3. WX sold 5% of the equity shares it held for $60,000 on 31 December 20X5. At that date the net assets of CD were $120,000 and the fair value of the non-controlling interest in CD was measured at $21,000. No goodwill arose on the original acquisition of CD.
When preparing its consoldiated financial statements, WX will process which of the following adjustments to its group retained earnings?
- A. A debit of $54,000
- B. A credit of $39,000
- C. A credit of $54,000
- D. A debit of $39,000
Answer: C
NEW QUESTION 80
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