Question 1

Which THREE of the followingwould typically indicate a finance lease?

Options :

A : An asset with a useful life of ten years is being leased for ten years.

B : The lessor is responsible for the annual maintenance of the asset.

C : The lessee has the option to buy the asset at the end of the lease for $1.

D : The lease contract for an asset includes an upgrade to the asset every two years.

E : A leased asset has been specifically modified for the lessee-s use.

Answer: A,C

Question 2

Entity A entered into a 3 year operating lease on 1 April 20X3. The rentals are 5,000 a year payable in advance with an additional payment of $1,800 payable on 1 April 20X3

The rental expense to be included in the statement of profit or loss for the year ended 31 December 20X3 will be:

Options :

A : $4,200

B : $5,000

C : $6,800

D : $5,600

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

Which TWO of the following are true in relation to IAS21 The Effects of Changes in Foreign Exchange Rates when consolidating an overseas subsidiary?

Options :

A : Acurrent period exchange gain or loss is shown within the consolidated statement of comprehensive income within other comprehensive income.

B : Goodwill is re-translated at the end of each reporting period and reflected at the period end exchange rate in the consolidated statement of financial position.

C :

Assets and liabilities of the subsidiary are translated at each reporting date using the average exchange rate for the period.

D : Goodwill is reflected in the consolidated statement of financial position translated at the exchange rate on the date of acquisition.

E : The statement of profit or loss of the subsidiary is translated for the reporting period using the closing exchange rate.

Answer: A,B

Question 5

WX acquired60% of theequitysharesof CD on 1 January 20X3. WX sold5% of the equityshares it heldfor $60,000on 31 December 20X5. At that datethe net assetsof CD were $120,000and thefair value of the non-controlling interestin CDwas 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?

Options :

A : A debit of $39,000

B : A credit of $54,000

C : A credit of $39,000

D : A debit of $54,000

Answer: B