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Country X levies corporate income tax at a rate of 25% and charges income tax on all profits irrespective of whether they are distributed by way of dividend. Country Y levies corporate income tax at a rate of 20%.
A, who is resident in Country X, pays a divided to B, who is resident in Country Y. B is required to pay corporate income tax on the dividend received from A, but a deduction can be made for the tax suffered on this dividend restricted to a rate of 20%.
Which method of relief for foreign tax does this describe?
For an incorporated business, the taxation of trading income is a form of direct taxation which is based on:
Which THREE of the following are costs that a business might incur as a result of holding insufficient inventory of raw materials?
KL has S90.000 of plant and machinery which was acquired on 1 June 20X4. Tax depreciation rates on plant and machinery are 20% reducing balance. All plant and machinery was sold for 560,000 on 1 June 20X6
Calculate the tax balancing allowance or charge on disposal tor the year ended 31 May 20X7 and state the effect on the taxable profit.
Which THREE of the following actions, considered in isolation, would increase the working capital cycle of an entity?
An asset cost $250,000 on 1 January 20X1 and on that date was assessed to have a residual value of $40,000 and a useful economic life of six years. On 1 January 20X4 management assessed that the remaining useful economic life of the asset was five years and that the asset had a residual value of nil.
What is the depreciation charge for this asset in the year ended 31 December 20X4?
Give your answer to the nearest whole number.
It costs PWR £7.50 to produce product H, per product. Product H is typically sold for £89.99. It costs £5.00 to package product H and £15 to deliver product H to customers.
PWR is currently selling faulty versions of product H from a defunct batch, (let's call this version product I), for 25% of the original price.
Which of the below options represent the correct inventory price for product I?
Why are excise duties an attractive method of raising tax for governments?
Select TWO that apply.
JKL prepares its financial statements to 31 December each year. For the year ended 31 December 20X5 inventory was held for 76 days on average.
The directors of JKL decide to reduce the average inventory level to $6.5 million from 1 January 20X6 JKL's revenue for 20X6 is $54 million on which a gross profit margin of 20% is earned.
Assuming that the average receivables and payables days remain constant what will be the effect of the expected reduction in inventory on JKL's working capital cycle for the year ended 31 December 20X6?
Which of the following is the most appropriate definition of the term 'factoring'?
In accordance with IAS 16 Property, Plant and Equipment, in which of the following situations would subsequent expenditure on a non-current asset be capitalised?
Which THREE of the following must an auditor consider in order to form an opinion on the truth and fairness of an entity's financial statements?
The following information is extracted from the trial balance of YY at 30 September 20X3.
i. Included in revenue is a refundable deposit of $20 million for a sales transaction that is due to take place on 14 October 20X3.
ii. The cost of closing inventory is $28 million, however, the net realisable value is estimated at $25 million.
iii. The interest free loan was obtained on 1 January 20X3. The loan is repayable in 12 quarterly installments starting on 31 March 20X3. All installments to date have been paid on time.
Calculate the figure that should be included within non-current liabilities in YY's statement of financial position at 30 September 20X3 in respect of both of the loans outstanding at the year end?
Give your answer to the nearest $ million.
Country X levies a duty on alcoholic drinks. Where the alcohol content is above 40% by volume the duty levied is $5 per 1 litre bottle.
What type of tax is this duty?
Below are extracts from LLL's financial statements for the year ended 31 December 20X2.
Depreciation of $25,000 was charged on properly, plant and equipment in the year and there were no disposals
What is the cash generated from operations for inclusion in LLL's statement of cash flows for the year ended 31 December 20X2?
EFG prepares financial statements to 31 December each year. EFG has the following receivable days based on the year end receivable balances:
Which of the following would be a reason for this decrease in receivable days?
Which of the following methods could be used by a tax authority to reduce tax evasion and avoidance?
BCD owns an item of plant which cost $20,000 and at the time of purchase was assessed to have a useful economic life of 8 years and a residual value of $2,000
The carrying amount of the plant at 1 January 20X8 is $11,000. On that date BCD's directors estimate that the plant's remaining useful life is now 6 years The residual value remains unchanged at $2,000
What is the depreciation charge for this plant for the year ended 31 December 20X8?
Give your answer to the nearest $.
FG purchased 40% of the equity shares of QR and exerted significant influence over the board of the directors.
QR will be classified as____of FG.
The following information relates to ABC.
Which of the following would be a reason for the movement in the trade receivable days?
The financial statements of JK for the year ended 31 August 20X4 were approved on 10 November 20X4.
Within these financial statements which of the following would have been treated as a non-adjusting event in accordance with IAS 10 Events After the Reporting Period?
Which of the following would be classified as a parent and subsidiary relationship in accordance with IFRS 10 Consolidated Financial Statements?
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?
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.
Calculate the amount that will be shown as the share of profit of associate in PQ's consolidated statement of profit or loss for the year ended 31 December 20X0.
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 figure should be included for corporate income tax paid in order to arrive at the net cash flow from operating activities?
Give your answer to the nearest $ million.
The development of an international financial reporting standard generally goes through a number of stages.
Which of the following is NOT a stage of development?
Which of the following is a condition that has to be met for an entity to be exempt the requirement to prepare consolidated financial statements?
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 value of the unrealized profit in inventory adjustment required to inventory in PQ's consolidated statement of financial position at 31 December 20X0?
AA manufactures computers. These are sold to BB at $100 a computer plus a 5% sales tax. BB subsequently sells the computers to CC for $200 a computer plus a 5% sales tax. C sells the computers to customers at $300 a computer plus a 5% sales tax.
The total tax received by the tax authority is $30.
Which type of tax is described above?
BCD's financial statements for the year ending 30 November 20X3 include the following:
Inventory at 30 November 20X2 was $220,000.
What is BCD's average inventory holding period for the year ended 30 November 20X3?
An entity bought a capital item for $110,000 on 1 March 20X4 incurring legal fees at the date of purchase of $2,500.
On 1 May 20X4 additional costs classified as capital expenditure by the tax rules of the country of $25,000 were incurred in respect of the asset. On 1 June 20X4 repairs not classified as capital expenditure were incurred at a cost of $15,000.
The asset was sold for $250,000 on 30 November 20X8 and costs to sell were incurred of $4,300.
Calculate the chargeable gain on the disposal.
Give your answer to the nearest $.
Which THREE of the following statements about government grants are INCORRECT?
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 $.
OP is considering investing in government bonds. The current price of a $100 bond with 8 years to maturity is $88.
The bonds have a coupon rate of 6% and repay face value of $100 at the end of the 8 years.
Calculate the yield to maturity.
Give your answer to one decimal place.
Which THREE of the following statements are NOT true of the IFRS Foundation trustees?
Company RET's financing activities are exactly 35% of their operating activities expenses each month. Below is a list of Company RET's total expenses for this month:
Inventory supplies purchased: £145,000
Employee wages: £65,000
Purchase of a shop: £105,000
Dividend payments: ??
Cash repayments on loan: £61,000
What is company RET's total dividends payment for this month?
When a trading loss is incurred by an entity, the entity may be able to claim loss relief. The way in which loss relief is claimed vanes from country to country.
Which of the following is NOT normally a way of claiming loss relief for a trading loss?
Which of the following is a characteristic of a defined contribution post-employment benefit scheme?
PZ has the following working capital ratios:
Which of the following could be the reason for the movements?
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 one of the following is NOT a step in the development of an International Financial Reporting Standard (IFRS)?
MN recently took out a 5 year term loan to buy raw materials to take advantage of a supplier's bulk discount that had been offered to them.
What approach to financing working capital has MN undertaken?
TUV owns property that has a carrying amount greater than its original cost due to a revaluation 2 years ago. The property continues to be used by TUV up lo the date of its disposal and is sold for more than its carrying amount.
Which THREE of the following correctly describe the accounting treatment for the disposal of the property?
An entity's policy is to finance the investment in working capital using short-term financing to fund all of its investment in fluctuating net current assets as well as some of its investment in permanent net current assets.
What is this working capital financing policy known as?
From the list below identify the item that appears in the statement of financial position.
The following data has been extracted from GH's accounting records:
What is GH's average inventory days for the year ended 31 March 20X3?
AB has prepared its financial statements for the year ended 31 July 20X5. On 15 September 20X5 a major fraud was uncovered by the external auditors which had taken place during the year to 31 July 20X5 The financial statements have not yet been authorised
In accordance with IAS 10 Events After the Reporting Period, AB should treat the fraud as:
Which of the following would NOT be a source of taxation rules for a country?
Which of the following would NOT be assessed for tax under a Pay-As-You-Earn system?
Which THREE of the following are part of the International Accounting Standards Committee (IASC) Foundation structure?
WX is considering an investment in ST.
At 31 December 20X2 ST had the following balances in its statement of financial position:
Which of the following would cause ST to become an associate investment of WX?
STU has a non-current asset which originally cost $250,000, has an expected life of 8 years and an estimated residual value of $25,000. The asset is depreciated at 25% a year on a reducing balance basis On 1 July 20X5 the accumulated depreciation for this asset is $109,375
What is the depreciation charge for the year ending 30 June 20X6?
Give your answer to the nearest whole number.
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?
A conservative policy for financing working capital is one where short-term finance is used to fund:
On 1 May 20X8 DEF enters into a contract to lease plant with a fair value of $200,000. Annual lease payments of $50,000 are to be paid in advance and DEF incurred direct costs to arrange the lease of S2.000 The present value of future lease payments at 1 May 20X8 is $190,000.
What is the amount to be recognised as a right-of-use asset on 1 May 20X8?
The Conceptual Framework for Financial Reporting issued by the International Accounting Standards Board (known as the IASB's conceptual framework) includes one underlying assumption about the preparation of financial statements and two fundamental qualitative characteristics for financial information.
Identify the underlying assumption and one of the fundamental characteristics by placing one of the options in each of the boxes below.
Which of the following is NOT a primary need for regulating financial reporting information of incorporated entities?
An entity purchased an asset for $375,000 on 1 November 20X0 incurring legal fees of $33,000. Improvements were made to the asset for $65,000 on 1 December 20X2 which qualified as capital expenditure under the local tax rules. The entity also incurred repair costs on the asset on 1 February 20X3 amounting to $10,000.
The asset was sold for $680,000 on 1 December 20X5 incurring allowable costs on disposal of $15,000.
Indexation on the purchase cost and the improvement are allowable.
The index increased by 20% between November 20X0 and December 20X5,15% between December 20X2 and December 20X5 and 10% between February 20X3 and December 20X5
Calculate the chargeable gain on the disposal of the asset on 1 December 20X5.
Extreme nepotism within Company E shows a failure to correctly observe which of the following principles of corporate governance?