2021 Realistic F2 Dumps Exam Tips Test Pdf Exam Material
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NEW QUESTION 79
A local council is one year into a two year project to renovate local parks. The project is on track to be completed within the set time-scale, however it has proved more costly than initially expected.
The project is on track to be completed within its two year period. Contracts for the labour and materials needed to renovate the parks were agreed at the start of the project and no changes have arisen. Despite the fact that the council has yet to fully settle these contracts, costs are set to be as budgeted.
Why would this example not be recognised as a provision?
- A. Neither the timing nor the amount of the provision is uncertain.
- B. The council doesn't have a present obligation from the project.
- C. The council has no potential future obligations arising from the project.
- D. The settlement of the contract is unlikely to result in an outflow from the council.
Answer: A
NEW QUESTION 80
Mr. Rodgers is an accountant for JK Pic. He is asked to record a particular share-based payment in the company's accounts and obliges by debiting as an expense the first relevant account and crediting the corresponding double-entry as a liability.
Which type of share-based payment has Mr. Rodgers recorded?
- A. Cash-settled immediately
- B. Equity-settled immediately
- C. Equity-settled in the future
- D. Neither cash nor equity-settled
- E. Cash-settled in the future
Answer: E
NEW QUESTION 81
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. Switch AB's fixed interest bearing borrowing to a lower variable rate borrowing.
- B. Recognise the valuation surplus on AB's property, plant and equipment.
- C. Issue cumulative preference shares.
- D. Issue redeemable preference shares.
Answer: B
NEW QUESTION 82
FGH plans to issue a large number of shares to the public via an IPO.
It is considering either an offer for sale at a fixed price or an offer for sale by tender.
Which of the following would be an advantage to FGH of using the offer for sale by tender compared to the fixed price offer?
- A. There would be more certainty over the issue price of the shares.
- B. Tenders are more attractive to less sophisticated investors thus maximising potential investment.
- C. The shares will be sold to different investors at differing values thus maximising the capital raised.
- D. There is potential for reaching a higher share price thus maximising capital raised.
Answer: D
NEW QUESTION 83
FG and RS operate in the same retail sector within the same country and are of a similar size. The following ratios have been calculated based on the financial statements for the year ended 30 September 20X4:
Which of the following factors would limit the usefulness of these ratios as a basis for assessing the comparative performances of FG and RS?
- A. RS operates at the low margin end of the market whilst FG operates at the high margin end.
- B. RS sold a piece of land for a sum much greater than its carrying value.
- C. RS has a higher level of borrowings and associated finance costs.
- D. FG has a higher level of deferred tax liabilities than RS.
Answer: A
NEW QUESTION 84
The following information is extracted from the financial statements of RS for the year ended 30 June 20X7:
RS has no other liability balances and has no associate investments.
Calculate return on capital employed for RS at 30 June 20X7.
Give your answer to the nearest whole %.
? %
Answer:
Explanation:
20
NEW QUESTION 85
Which of the following actions would be most likely to improve an entity's gross profit margin?
- A. Offering increased credit to customers
- B. Writing down the value of obsolete inventories
- C. Negotiating with trade suppliers for a bulk purchase discount
- D. Reducing administrative expenses by 10%
Answer: C
NEW QUESTION 86
What is the total comprehensive income attributable to the non-controlling interest that will be presented in GHI's consolidated statement of changes in equity for the year ended 31 December 20X4?
- A. $595,000
- B. $95,000
- C. $190,000
- D. $575,000
Answer: B
NEW QUESTION 87
AB owned 80% of the equity share capital of FG at 1 January 20X6. AB disposed of 10% of FG's equity share capital on 31 December 20X6 for $400,000. The non controlling interest was measured at
$700,000 immediately prior to the disposal.
Which of the following represents the adjustment that AB made to non controlling interest in respect of the disposal when it prepared its consolidated financial statements at 31 December 20X6?
- A. Debit of $350,000
- B. Credit of $50,000
- C. Debit of $400,000
- D. Credit of $350,000
Answer: D
NEW QUESTION 88
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?
- A. A bank loan has high issue costs compared to an issue of equity shares because it takes longer to arrange.
- B. The interest on a bank loan is deducted from profit before dividends can be declared to equity shareholders each year.
- C. Because the assets of a business belong to the equity shareholders, a bank loan should NOT be secured on the assets of the business.
- D. In the long term servicing a bank loan is more expensive than servicing equity shares due to the higher risk for the lender.
Answer: B
NEW QUESTION 89
PQ entered into a $300,000 contract on 1 January 20X9 to provide computer hardware to WX with support services for the 3 years from the date of installation.
The contract is made up as follows:
The hardware was delivered to WX on 1 January 20X9 and installed immediately. WX paid the full value of the contract on 30 June 20X9.
What journal entry records PQ's revenue from this contract for the year ended 31 December 20X9?
- A. Option D
- B. Option B
- C. Option A
- D. Option C
Answer: D
NEW QUESTION 90
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 goodwill to be included in the consolidated statement of financial position of ST as at 31 December 20X5?
- A. $570,000
- B. $1,450,000
- C. $950,000
- D. $450,000
Answer: D
NEW QUESTION 91
Which TWO of the following would be the primary disadvantages of producing the disclosures required in IFRS12 Disclosure of Interests in Other Entities?
- A. The disclosures take time and therefore incur costs which erodes shareholder value.
- B. The auditors will have to audit these disclosures.
- C. The disclosures will highlight the risks associated with interests in other entities.
- D. The disclosures will give competitors commercially sensitive information.
- E. The users of the financial statements may feel overburdened with information.
Answer: A,E
NEW QUESTION 92
The following information relates to DEF for the year ended 31 December 20X7:
* Property, plant and equipment has a carrying value of $3,500,000 and a tax written down value of
$2,500,000.
* There are unused tax losses to carry forward of $1,250,000. These tax losses have arisen due to poor trading conditions which are not expected to improve in the foreseeable future.
* The corporate income tax rate is 25%.
In accordance with IAS 12 Income Taxes, the financial statements of DEF for the year ended 31 December 20X7 would recognise deferred tax balances of:
- A. Option D
- B. Option B
- C. Option A
- D. Option C
Answer: C
NEW QUESTION 93
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?
- A. $202,500
- B. $567,500
- C. $440,000
- D. $330,000
Answer: D
NEW QUESTION 94
Operating segments are separately reportable where they exceed 15% of revenue / profits / assets.
These must in total cover 80% of total revenue. Is this statement true or false?
- A. False
- B. True
Answer: A
NEW QUESTION 95
Which TWO of the following are TRUE in respect of preparing a consolidated statement of cash flows where there has been an acquisition of a subsidiary part way through the year?
- A. Any shares that were issued on acquisition of the subsidiary will be shown separately on the statement of cash flows within financing activities.
- B. The working capital held by the subsidiary at acquisition will be excluded from the year end figures based on the percentage shareholding in the subsidiary.
- C. The year end cash and cash equivalents balance will be reduced by the cash and cash equivalents that were held by the subsidiary at the acquisition date.
- D. Non-controlling interest will arise in relation to the subsidiary and any dividends paid to the non- controlling interest will be shown within financing activities as a cash outflow.
- E. Investing activities will include a total cash outflow for the acquisition comprising the cash paid for the subsidiary less the cash held by the subsidiary at the acquisition date.
Answer: D,E
NEW QUESTION 96
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 on the 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?
- A. The currency is Dollar in Country X and Krona in Country Y.
- B. The average rate of inflation is 3% in Country X and 10% in Country Y.
- C. The average rate of borrowing is 2% in Country X and 7% in Country Y.
- D. The corporate tax rate is 25% in Country X and 40% in Country Y.
Answer: B
NEW QUESTION 97
RST sells computer equipment and prepares its financial statements to 31 December.
On 30 September 20X5 RST sold computer software along with a two year maintenance package to a customer. The customer is given the right to return the goods within six months and claim a full refund if they are not satisfied with the computer software. The risk of return is considered to be insignificant for RST.
How should the revenue from this transaction and the right of return be recognised in the financial statements for the year ended 31 December 20X5?
- A. Recognise 12.5% of the revenue from both the sale of goods and the maintenance contract and do not create a provision for the anticipated level of returns.
- B. Do not recognise any revenue from the sale of goods or the maintenance contract and do not create a provision for the anticipated level of returns.
- C. Recognise 100% of the revenue from both the sale of goods and the maintenance contract and create a provision for the anticipated level of returns.
- D. Recognise 100% of the revenue from the sale of goods,12.5% of the revenue from the maintenance contract and create a provision for the anticipated level of returns.
Answer: D
NEW QUESTION 98
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