Pass Using F2 Exam Dumps

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Question 20

LM has made the following share purchases during the year:

• Purchased 55% of the equity share capital of OP.

• Purchased 45% of the equity share capital of QR. LM have the power to appoint the majority of board members on the QR board.

• Purchased 30% of the equity share capital of ST. LM is represented by one director on the main board of ST which has five members in total. The other 70% of ST's equity share capital is owned by a single company, UV.

The Managing Director has told you that OP has performed well, but both QR and ST have not performed as expected. He is therefore pleased that OP will be included as a subsidiary and that QR and ST will only be included as investments in the group financial statements.

In accordance with the ethical principle of professional competence and due care how should the investments in OP, QR and ST be treated in the group financial statements?

Options:

OP and QR should be consolidated and ST should be equity accounted.

OP should be consolidated and QR and ST should be equity accounted.

OP should be consolidated, QR should be equity accounted and ST should be valued at cost.

OP and QR should be equity accounted and ST should be valued at cost.

Question 21

Which of the following is the correct calculation for basic earnings per share in accordance with IAS 33 Earnings Per Share?

Options:

Question 22

AB and EF are located in the same country and prepare their financial statements to 31 October in accordance with International Accounting Standards. EF supplies AB with a component that is vital to AB's product range. AB is considering acquiring a controlling interest in EF by 31 December 20X4 in order to guarantee future supply. The Board of EF has indicated that such an approach would be postively considered. AB would use its control to make AB the sole customer of EF.

The Finance Director of AB has been granted access to EF's management accounts and has conducted some initial analysis from the financial press. The results togther with comparisons for AB for the year to 31 October 20X4 are presented below:

AB and EF are forecasting revenues of S1,500,000 and $700,000 respectively for the year ended 31 October 20X5.

Which of the following independent options would explain the difference between the gearing ratios of AB and EF at 31 October 20X4?

Options:

EF's average cost of borrowing is significantly lower than that of AB and EF has taken advantage of that.

EF has a policy of revaluing non current assets whereas AB does not.

EF made a bonus issue of shares from retained earnings during the year whereas AB did not.

EF's market value of shares at 31 October 20X4 is lower than that of AB.

Question 23

XY owned 60% of the equity share capital of AB at 1 January 20X6. XY acquired a further 20% of AB's equity share capital on 31 December 20X6 for $500,000. The non controlling interest in AB was measured at $720,000 immediately prior to the 20% acquisition.

Calculate the amount that XY debited to non controlling interest when it accounted for the 20% acquisition in its consolidated financial statements at 31 December 20X6.

Give your answer to the nearest $000.

$ ? 000