CIMA cimapra19-f02-1 practice test

Question 1

Operating segments are separately reportable where they exceed 15% of revenue / profits / assets.
These must in total cover 80% of total revenue. Is this statement true or false?
A. True
B. False

Answer:

B
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Question 2

Which of the following are limitations of financial statement figures for ratio analysis? Select the ALL
that apply.

• A. Only provides historic data 108/109 Questions & Answers PDF P-
• B. Only provides financial information
• C. Limited information to identify trends over time
• D. Provide only summarised information
• E. Contains complicated information that needs to be summarised
• F. Only provides forecast data

Answer:

A, B, C, D

Question 3

The basic earning per share computed by a company for year ended 31st March 20X7 is 2 per share.
The company had certain convertible debentures outstanding as on 31st March 20X7. The conversion
of debentures to equity shares would result in the earnings per share to be 2.2. Which of the
following should the company disclose?

• A. Basic earnings per share only
• B. Diluted earnings per share only
• C. Both basic and diluted earnings per share
• D. Neither basic nor diluted earnings per share

Answer:

A

Question 4

Mr. Rodgers is an accountant for JK Pic. He is asked to record a particular share-based payment in the
company's accounts and obliges by debiting as an expense the first relevant account and crediting
the corresponding double-entry as a liability.
Which type of share-based payment has Mr. Rodgers recorded?

• A. Cash-settled in the future
• B. Cash-settled immediately
• C. Equity-settled immediately
• D. Equity-settled in the future
• E. Neither cash nor equity-settled

Answer:

A

Question 5

Which of the following statements are INCORRECT with regards to impairment of financial
instruments; Select ALL that apply.

• A. Held to maturity instruments and available for sale assets are both measured at amortised cost and are therefore impacted by impairment.
• B. If a loss is suspected following an impairment review, a financial asset is written down to its fair value.
• C. If a contract relating to a financial instrument is breached then this might be an indication of 107/109 Questions & Answers PDF P- impairment.
• D. In the result of an impairment loss, the carrying amount of the asset is directly reduced, or reduced through an allowance account.
• E. The impairment loss on held to maturity instruments is the difference between the assets carrying amount and the present value of its future cashflows.

Answer:

A, B

Question 6

The IAS definitions of financial instruments dictate their classification between debt and equity.
Which of of the following factors might this classification impact?
Select ALL that apply.

• A. Financial risk
• B. Profitability
• C. Profit distribution
• D. Liquidity

Answer:

A

Question 7

The tax benefit on a company's asset is 180,000 and the useful life on that asset is five years. The
company creates a deferred tax provision to spread this benefit over the asset's useful life.
What entry is needed to reduce this deferred tax provision in the company's year two accounts?

• A. DR Deferred tax liability (SOFP) £36,000
• B. CR Deferred tax liability (SOFP) £36,000
• C. DR Corporation tax (income statement) £36,000
• D. CR Corporation tax (income statement) £36,000
• E. DR Deferred tax liability (SOFP) £144,000
• F. CR Deferred tax liability (SOFP) £144,000
• G. DR Corporation tax (income statement) £144,000
• H. CR Corporation tax (income statement) £144,000

Answer:

A

Question 8

A local council is one year into a two year project to renovate local parks. The project is on track to be
completed within the set time-scale, however it has proved more costly than initially expected.
The project is on track to be completed within its two year period. Contracts for the labour and
materials needed to renovate the parks were agreed at the start of the project and no changes have
arisen. Despite the fact that the council has yet to fully settle these contracts, costs are set to be as
budgeted.
Why would this example not be recognised as a provision?

• A. Neither the timing nor the amount of the provision is uncertain.
• B. The settlement of the contract is unlikely to result in an outflow from the council.
• C. The council doesn't have a present obligation from the project.
• D. The council has no potential future obligations arising from the project. 106/109 Questions & Answers PDF P-

Answer:

A

Question 9

Which of the following examples would be classed as related parties ofJH Ltd due to the power they
possess to directly influence the company?
1: JH Ltd's managing director
2: The son of JH Ltd's managing director, who is an intern in the company's office
3: The brother of JH Ltd's managing director, whose business supplies a large amount of production
material for the company
4: JH Ltd's subsidiary company, AL Ltd
5: BR PLC, one of JH Ltd's regular customers

• A. 1&4
• B. 1
• C. 1, 2, 3 & 4
• D. 2, 3 & 4
• E. 1, 2 & 3
• F. All of the above

Answer:

B

Question 10

Which of the following examples of contracts will use cost of sales as the balancing figure when
calculating profit or loss?
Select ALL that apply.

• A. Contract A has a total value of£50m, costs to date of£42m and expected costs to completion of£15m. The project's % stage of completion is 74% using the cost method.
• B. Contract A has a total value of55m, costs to date of33m and expected costs to completion of18m. 105/109 Questions & Answers PDF P-
• C. Contract A has a total value of£75m, costs to date of£61m and expected costs to completion of£20m. The contracts % stage of completion was calculated by dividing its value to date of£45m by£75m.
• D. Contract A has a total value of£60m, costs to date of£42m and expected costs to completion of£15m. The project's % stage of completion is 80% using the value method.
• E. Contract A has a total value of£85m, costs to date of£69m and expected costs to completion of£22m. The contracts % stage of completion was calculated by dividing its costs incurred to date of£69m by £75m.

Answer:

C, D