Question 1

XY's investments enable it to exercisecontrol over AB and havesignificant influence over FG and JK.

The Managing Director of XY is a non-executive director of LM. XYdoes not hold any investment inLM.

XYispreparingitsconsolidated financial statements for the year ended 30 September 20X9.

Which of the followingtransactions during the year will be disclosed in these financial statements in accordance with IAS 24 Related Party Disclosures?

Options :

A : Sale of goods with a trade discount to a major customer of XY.

B : Sale of a motor vehicle from XY toa Director of AB'sspouse at its current market value.

C : Sale of non current assets from XY to LM at their current market value.

D :

Sale of goods from FG to JK at their current market value.

Answer: B

Question 2

GG's gearing is currently 50% compared to the industry average of 40% (both measured as debt/equity). GG's debt is all in the form of a single bank loan that is repayable in five years' time. The directors of GG are seeking to raise finance for a new project and they are considering an additional bank loan from the same bank.

Which of the following would prevent the bank from lending the finance for the project in the form of a new bank loan?

Options :

A : A covenant on the existing bank loan that restricts the level of dividend that can be paid.

B :

A projected decrease in interest cover that would breach a covenant on the existing loan.

C : The revaluation of GG-s property that shows an increase in its value since the existing bank loan was taken out.

D : A projected lack of profits to be able to claim tax relief on the additional interest arising from the new loan.

Answer: B

Question 3

The dividend yield of ST hasfallen in theyear to 31 May 20X5, compared to the previous year.

The share price on 31 May 20X4 was $4.50 and on 31 May 20X5 was $4.00. There were no issues of share capital during the year.

Whichof the following should explain the reduction in the dividend yield for the year to 31 May 20X5 compared to the previous year?

Options :

A : The dividend paid in the year was reduced in order to pay for new assets.

B : Surplus cash was used to pay a special dividend in additionto the normal dividend in the year.

C :

The profit for the year fell significantly and the dividend per share stayed the same.

D : To compensate investors for thereduction in share price a higher dividend per share was paid.

Answer: A

Question 4

On 1 January 20X7 GH purchased plant and equipment at a cost of $400,000. The temporary differences in respect of this plant and equipment at 31 December 20X7 and 20X8 have been calculated as follows:

Assume that there are no other temporary differences in the periods and that the corporate income tax rate is 25%. GH is expected to have significant taxable profits in the future.

Which of the following is the correct impact in GH's statement of financial position at 31 December 20X8 in respect of deferred tax?

Options :

A : Increase in the deferred tax asset.

B : Increase in the deferred tax liability.

C : Decrease in the deferred tax asset.

D : Decrease in the deferred tax liability

Answer: A

Question 5

A group presents its financial statements in A$.

The goodwill of its only foreign subsidiary was measured at B$100,000 at acquisition. There have been no impairments to this goodwill.

Exchange rates (where A$/B$ is the number of B$'s to each A$) are as follows:

The value of goodwill to be included in the group's statement of financial position in respect of its foreign subsidiary for the year ended 31 December 20X4 is:

Options :

A : A$75,758.

B : A$66,667.

C : A$150,000.

D : A$132,000.

Answer: A

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