F1 Financial Reporting Questions and Answers

Which of the following are techniques that can be used by a company to ensure they receive timely payment of receivables? Select ALL that apply:

Mr AM is the owner of Waxco Ltd. Mr AM was born in India, but currently resides in the USA. He has gained dual Indian and American citizenship.

Mr AM first registered Waxco Ltd in the USA when he started the company ten years ago. However, because of lower costs, the company moved its central management station to Germany two years ago. Waxco Ltd

has other smaller offices such as call centres across Asia, in locations such as Pakistan and Cambodia, however Waxco Ltd only currently sell goods in the USA.

Which of the countries mentioned are relevant for determining Waxco Ltd's competent jurisdiction?

The following information is extracted from OO's statement of financial position at 31 March:

Included in other payables is interest payable of $80,000 at 31 March 20X2 and $73,000 at 31 March 20X1.

The following information if included within OO's statement of profit or loss for the year ended 31 March 20X2:

Included within finance cost is $124,000 which relates to interest paid on a finance lease. 00 includes finance lease interest within financing activities on its statement of cash flows.________________

Within OO's statement of cash flow for the year ended 31 March 20X2 which figures should be included to reflect the changes in working capital within the net cash flow from operating activities?

Indicate the possible reasons for the changes identified below to working capital ratios by placing the appropriate reason against each change.

AAA has the following working capital ratios at 30 March 20X4:

During the year ended 30 March 20X4 credit purchases were $3,600 and at 30 March 20X4 the outstanding trade payables amounted to $522.

The year ended 30 March 20X4 was not a leap year.

Calculate the working capital cycle for AAA.

Give your answer to one decimal place.

The following information relates to a single asset:

*Original cost of $186,000

*Estimated residual value of $6,000

*Expected useful life of 10 years

*Accumulated depreciation at 31 December 20X5 of $66,960

*Annual depreciation rate of 20% on a reducing balance basis

Calculate the amount of depreciation that should be charged to profit or loss for the year ended 31 December 20X6.

Give your answer to the nearest whole number.

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 $.

Statements of financial position for YZ, BC and DE at 31 March 20X2 include the following balances:

YZ purchased 90% of BC's equity shares for $508,000 on 1 January 20X2. On 1 January 20X2 BC's retained earnings were $183,000. YZ uses the proportion of net assets method to value non-controlling interest at acquisition.

YZ purchased 30% of DE's equity shares on 1 April 20X1 for $112,000. DE's retained earnings at 1 April 20X1 were $88,000.

On 1 February 20X2 YZ sold goods to BC for $28,000 at a mark up of 25% on cost. All the goods were still in BC's inventory at 31 March 20X2.

Calculate the amount of the non-controlling interest to be included in YZ's consolidated statement of financial position at 31 March 20X2.

Give your answer to the nearest whole $.

Which THREE of the following are conditions that must be met to allow an asset to be categorised as held for sale?

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.

What is the revenue figure to be included in PQ's consolidated statement of profit or loss for the year ended 31 December 20X0?

A conservative policy for financing working capital is one where short-term finance is used to fund:

AB has been asked to analyze the receivables days of an entity with a view to improving the working capital cycle.

The following results have been produced for receivable days:

Which of the following is NOT an explanation of why the days have increased?

In most developed countries employers deduct the tax from employees' pay each month and then pay the tax to the tax authorities on behalf of the employee on a monthly basis.

Which THREE of the following are advantages of this system to the employee?

RST operates in Country X where the tax rules state entertaining costs and accounting depreciation are disallowable for tax purposes.

In year ending 31 May 20X4, XYZ made an accounting profit of $480,000.

Profit included $16,300 of entertaining costs and $15,150 of income exempt from taxation.

XYZ has plant and machinery with accounting depreciation amounting to $24,200 and tax depreciation amounting to $45,200.

Calculate the tax charge for the year ended 31 May 20X4 assuming all profits are taxed at 25%.

The following information relates to AA.

Extract of Trial Balance at 31 December 20X4;

Notes

(i) Inventory at 31 December 20X4 was valued at cost at $30.

(ii) The loan which was received on 1 July 20X4 is repayable in 20X9.

(iii) Corporate income tax represents an over-provision of tax for the year ended 31 December 20X3. AA reported a loss for tax purposes for the year ended 31 December 20X4 and a tax refund is expected amounting to $20.

(iv) Cost of sales, administration and distribution costs need to be adjusted for the following:

Calculate gross profit for the year ended 31 December 20X4.

Give your answer as a whole $.

Which of the following is an example of a progressive tax?

Which of the following statements about trade payables management is false?

DE purchased an asset on 1 January 20X1 for $60,000 with a useful economic life of six years and a residual value of $3,000.

DE uses straight line depreciation for this asset.

On 31 December 20X3 the asset has a value in use of $ $28,000 and a fair value of $26,000.

Which of the following values should be used for the asset in DE's statement of financial position as at 31 December 20X3?

The following information is extracted from the statement of financial position for ZZ at 31 March 20X3:

Included within cost of sales in the statement of profit or loss for the year ended 31 March 20X3 is $20 million relating to the loss on the sale of plant and equipment which had cost $100 million in June 20X1.

Depreciation is charged on all plant and equipment at 25% on a straight line basis with a full year's depreciation charged in the year of acquisition and none in the year of sale.

The revaluation reserve relates to the revaluation of ZZ's property.

The total depreciation charge for property, plant and equipment in ZZ's statement of profit of loss for the year ended 31 March 20X3 is $80 million.

The corporate income tax expense in ZZ's statement of profit or loss for year ended 31 March 20X3 is $28 million.

ZZ is preparing its statement of cash flows for the year ended 31 March 20X3.

What cash outflow figure should be included within cash flows from investing activities for the purchase of property, plant and equipment?

For the year ending 31 March 20X2, MN made an accounting profit of $120,000. Profit included $8,500 of political donations which are disallowable for tax purposes and $8,000 of income exempt from taxation.

MN has $15,000 of plant and machinery which was acquired on 1 April 20X0 and purchased a new machine costing $25,000 on 1 April 20X1. This new machine is entitled to first year allowances of 100% instead of the usual tax depreciation of 20% reducing balance. All plant and machinery is depreciated in the accounts at 10% on cost.

MN also has a building that cost $120,000 on 1 April 20X0 and is depreciated in the accounts at 4% on a straight line basis. Tax depreciation is calculated at 3% on a straight line basis.

Calculate the taxable profit.

Give your answer to the nearest $.

In Country X corporate income tax is levied on profits as follows:

Which of the following describes the tax rate structure in Country X?

Statements of financial position for YZ, BC and DE at 31 March 20X2 include the following balances:

YZ purchased 90% of BC's equity shares for $508,000 on 1 January 20X2. On 1 January 20X2 BC's retained earnings were $183,000. YZ uses the proportion of net assets method to value non-controlling interest at acquisition.

YZ purchased 30% of DE's equity shares on 1 April 20X1 for $112,000. DE's retained earnings at 1 April 20X1 were $88,000.

On 1 February 20X2 YZ sold goods to BC for $28,000 at a mark up of 25% on cost. All the goods were still in BC's inventory at 31 March 20X2.

Calculate the goodwill arising on the acquisition of BC.

Give your answer to the nearest whole $.

Which of the following does the phrase 'events after the reporting period' refer to?

XY is an entity incorporated in Country B but operates in several countries. Monthly management meetings to decide on strategic matters take place in Country A, where the majority of its production happens. XY sells most of its goods to Country C.

In accordance with the Organization for Economic Co-operation and Development (OECD) rules on corporate residence which of the following statements is true?