Changed F2 Exam Questions

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Question 16

CD granted 1,000 share options to its 100 employees on 1 January 20X8.To be eligible, employees must remain employed for 3 years from the grant date. In the year to 31 December 20X8, 15 staff left and a further 25 were expected to leave over the following two years.

The fair value of each option at 1 January 20X8 was $10 and at 31 December 20X8 was $15.

Which THREE of the following are true in respect of recording these share options in the year ended 31 December 20X8?

Options:

The credit entry will be to equity.

The credit entry will be to non-current liabilities.

Fair value at 1 January 20X8 will be used to value the options.

Fair value at 31 December 20X8 will be used to value the options.

The calculation of the charge for the year will be adjusted for actual leavers only.

The calculation of the charge for the year will be adjusted for actual and estimated leavers.

Question 17

XY puchased 2% of the equity shares of FG on 1 October 20X3.

XY paid $25,000 for the shares as well as a transaction cost of 2.5% of the purchase price.

The shares are being held for short term trading and XY intend to sell them in December 20X3.

At the year end of 31 October 20X3, the shares in FG could be sold for $28,000.

What is the journal entry to record the subsequent measurement for this investment at 31 October 20X3?

Options:

Debit investment in equity shares $3,000 and credit profit or loss $3,000.

Debit investment in equity shares $3,000 and credit other reserves $3,000.

Debit investment in equity shares $2,375 and credit profit or loss $2,375.

Debit investment in equity shares $2,375 and credit other reserves $2,375.

Question 18

An entity undertakes an issue of new debt which has the effect of reducing the entity's weighted average cost of capital (WACC).

Which of the following would best explain why the WACC will have fallen?

Options:

The entity was 100% equity financed prior to the issue of the debt.

The risk to the shareholders has reduced leading to a fall in the cost of equity.

The new debt is being used to replace existing debt that had a lower cost.

The new debt is being used to replace existing debt that had the same cost.

Question 19

Which of the following would limit the effectiveness of analysis performed on the operating profit margins of two separate entities with the same total revenue over a12 month period?