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Sample Questions

Question No 1:

Drag&Drop The Conceptual Framework for Financial Reporting issued by the International Accounting Standards Board (known as the IASB's conceptual framework) includes one underlying assumption about the preparation of financial statements and two fundamental qualitative characteristics for financial information.

Identify the underlying assumption and one of the fundamental characteristics by placing one of the options in each of the boxes below.

Answer:

Question No 2: Statements of financial position for FG, IJ and KL at 31 December 20X5 include the following balances:

FG acquired 90% of IJ's equity shares for $358,000 on 1 July 20X5 when IJ's retained earnings were $98,000.

FG acquired 100% of KL's equity shares for $360,000 on 1 January 20X5 when KL's retained earnings were $155,000.

FG used the proportion of net assets method to value non-controlling interests at acquisition.

KL sold a piece of land to FG for $130,000 on 1 September 20X5. At the date of transfer the land had a carrying value of $50,000.

The management of FG expect KL to make profits in the future and no impairment ot its goodwill was proposed at 31 December 20X5.

Calculate the value of property, plant and equipment to be recognized in FG's consolidated statement of financial position at 31 December 20X5.

Give your answer to the nearest whole $.

Answer: $1180000

Question No 3: The statement of profit or loss for PQ, ST and AB for the year ended 31 December 20X0 are shown below:

1.PQ acquired 80% of its subsidiary, ST, on 1 January 20X0 and 40% of its associate, AB, on 1 September 20X0.

2.Since acquistion PQ has sold goods to ST and AB for $20,000 and $30,000 respectively. At the year end both ST and AB have 50% of these goods remaining in inventory. PQ uses a mark-up of 20% on all of its sales.

3.Since acquisition the goodwill in respect of ST has been impaired by $8,000 and the investment in AB has been impaired by $2,000.

4. PQ uses the fair value method for non-controlling interest at acquisition.

Calculate the profit attributable to the non-controlling interests disclosed in PQ's consolidated statement of profit or loss for the year ended 31 December 20X0.

Give your answer to the nearest whole $.

Answer: $8000 Question No 4: An entity purchased an asset for $375,000 on 1 November 20X0 incurring legal fees of $33,000. Improvements were made to the asset for $65,000 on 1 December 20X2 which qualified as capital expenditure under the local tax rules. The entity also incurred repair costs on the asset on 1 February 20X3 amounting to $10,000.

The asset was sold for $680,000 on 1 December 20X5 incurring allowable costs on disposal of $15,000.

Indexation on the purchase cost and the improvement are allowable.

The index increased by 20% between November 20X0 and December 20X5,15% between December 20X2 and December 20X5 and 10% between February 20X3 and December 20X5 Calculate the chargeable gain on the disposal of the asset on 1 December 20X5.

A. $90,650 B. $100,650 C. $89,650 D. $107,250

Answer: B Question No 5: WX is considering an investment in ST. At 31 December 20X2 ST had the following balances in its statement of financial position:

Which of the following would cause ST to become an associate investment of WX? A. B. C. D.

WX purchases 15,000 of ST's $1 equity shares and 20,000 of ST's $1 preference shares.

WX purchases 25,000 of ST's $1 equity shares.

WX purchases 75,000 of ST's $1 equity shares.

WX purchases 50,000 of ST's $1 preference shares.

Answer: B

Question No 5: Which of the following would be classified as a parent and subsidiary relationship in accordance with IFRS 10 Consolidated Financial Statements?

A. Entity A owns 30% of another entity's equity shares and has the power to appoint or remove the majority of the members of the board of directors and control of the entity is through that board.

B. Entity B owns 20% of another entity's equity shares and has an agreement with other equity shareholders of that entity that gives it power over a further 20% of the equity voting rights.

C. Entity C owns 45% of another entity's equity shares and can exercise significant influence over that entity's financial and operating policy decisions.

D. Entity D owns 25% of another entity's equity shares and associated voting rights and 100% of its preference shares.

Answer: A

Question No 6: PP supplies zero-rated and standard-rated goods. During the year ended 30 March 20X3, the standard-rated goods made up 50% of the total supplies. During the year ended 30 March 20X4 this percentage increased to 60%.

What percentage of input tax suffered can PP claim back in the year ended 30 March 20X4?

Give your answer as a whole number.

Answer: 100% Question No 7: AA manufactures computers. These are sold to BB at $100 a computer plus a 5% sales tax. BB subsequently sells the computers to CC for $200 a computer plus a 5% sales tax. C sells the computers to customers at $300 a computer plus a 5% sales tax.

The total tax received by the tax authority is $30.

Which type of tax is described above?

A. B. C. D.

Single-stage sales tax Value added tax Retail tax Multi-stage cumulative sales tax

Answer: D Question No 8: Which of the following methods could be used by a tax authority to reduce tax evasion and avoidance?

A. B. C. D.

Increase tax rates to compensate for losses due to evasion.

Reduce penalties for avoidance.

Reduce requirements to have tax returns audited.

Simplify the tax structure, minimizing allowances and exemptions.

Answer: D Question No 9:

Valid for All Countries

Which of the following is NOT a principle in the CIMA Code of Ethics for Professional Accountants?

A. B. C. D.

Integrity Professional competence and due care Timeliness Objectivity

Answer: C Question No 10: Which THREE of the following must an auditor consider in order to form an opinion on the truth and fairness of an entity's financial statements?

A. Whether the entity has kept proper accounting records.

B. Whether the entity has complied with the relevant legislator requirements in respect of the necessary disclosures.

C. Whether all the information and explanations necessary for the purposes of the audit have been received.

D. Whether every transaction that underpins the financial statements has been correctly recorded.

E. Whether the entity has been exposed to any fraud.

Answer: A, B, C

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