Question 1

LM acquired an asset under a 5-year non-cancellable operating lease agreement on 1 January 20X8. Under the terms of the agreement, LM paid nothing for the first year and then made fourpayments of $50,000 in each subsequent year. LM adopted the provisions of IAS 17 Leases when accounting for this agreement.

Which of the following is correct in respect of this operating lease in LM's financial statements for the year to 31December 20X8?

Options :

A : An accrual of $40,000 was recognised.

B : An accrual of $50,000 was recognised.

C : A prepayment of $10,000 was recognised.

D : An expense of $50,000 was recognised.

Answer: A

Question 2

Information from the financial statements of RST for the year ended 30 April 20X9 is as follows:

At 30 April 20X9 the ordinary shares are trading at $4.75.

What is the price earnings (P/E) ratio for RST at 30 April 20X9?

Options :

A : 15.83

B : 7.92

C : 10.56

D : 9.31

Answer: A

Question 3

RS has issued an instrument with a nominal value of $1 million, at a discount of 2.5%, and a coupon rate of 6%. The terms of the issue are that the instrument must eitherbe redeemed at par, at the option of the holder, in three years' time, or alternativelyconverted into equity shares in RS.

The characteristics of this instrument taken as a whole indicates that it would be classifed as which of the following?

Options :

A : Compound instrument

B :

Debt instrument

C : Equity instrument

D : Discounted instrument

Answer: A

Question 4

AB's financial information shows that thenon current assets' carrying value is greater than the tax base at the year end.

What is the journal entry to record the movement in the provision for deferred tax resulting from this difference?

Options :

A : Dr Deferred tax provisionCr Tax expense

B : Dr Deferred tax provisionCr Other comprehensive income

C : Dr Tax expenseCr Deferred tax provision

D : Dr Other comprehensive incomeCr Deferred tax provision

Answer: C

Question 5

Which THREE of the following statements are true in relation to financial assets designated as fair value through profit or loss under IAS 39 Financial Instruments: Recognition andMeasurement?

Options :

A : Sharesin another entity held for short term trading purposes fall within this category.

B : Transaction costs in relation to these assets are expensed to profit or loss on acquisition.

C : Transaction costs in relation to these assets areadded to theinitial cost of the asset on acquisition.

D : The gainor loss on thesubsequent measurement of these assetsisrecordedwithin other comprehensive income.

E : The gain or loss on the subsequent measurement of these assets is recorded within profit for the year.

F : Oncethe asset has beensubsequentlymeasured to fair value an impairment review is undertaken.

Answer: A,B

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