Question 1

On 30 November 20X9 OPQ acquires a financial asset that is classified as Available for Sale.

Which of the following describes the value of the financial asset on the date ofacquisition?

Options :

A : Fair value excluding transaction costs.

B : Fair value including transaction costs.

C : Present value including transaction costs.

D : Present value excluding transaction costs.

Answer: B

Question 2

ST has sold its main office property, which had a carrying value of $360,000,to AB, a property management entity.

The property was sold for $400,000 which isequal to itsfair value and was immediately leased back under an operating lease agreement.

Which of the following journals will record this transaction?

Options :

A :

B :

C :

D :

Answer: A

Question 3

STacquired 70% of the equitysharesofDE for $87,500 on 30 September 20X5. Atthe date of acquisition the net assets of DE were $54,700 and the fair value of the non controlling interest wasmeasured at $19,700. There has been no impairment of goodwill.

On 30 September 20X9 ST disposedofits entire investmentinDE for $262,500 whenthe net assets of DEwere $96,250.

What is the gain or loss on disposal of DEthat will be included in ST'sconsolidated profit or lossfor the year ended30 September 20X9?

Options :

A : $113,750 loss

B : $166,250 loss

C : $166,250 gain

D : $113,750 gain

Answer: D

Question 4

W and Y are very similar entities with the same level of profit before interest and tax. However, W has gearing of 95% and Y has gearing of 30%.

Which of the following statements is true?

Options :

A : Investing in W carries a higher level of risk than investing in Y.

B : A greater proportion of profit will be available out of which to declare a dividend in W.

C : Investors in Y will expect a higher return than investors in W.

D : Y has a greater commitment to meet interest payments than W.

Answer: A

Question 5

Whatis meant by the term 'a placing of ordinary shares'?

Options :

A : Selling new ordinary shares to a financial institution on a pre-arranged basis.

B : Selling new ordinary shares directly to the public.

C : Selling existing ordinary shares to new investors through a stock exchange.

D : Selling new ordinary shares to existing shareholders.

Answer: A