FR Quiz #14

Question 1

During the year to 31 July 20X7, Smartypants made a profit of $37,500 after accounting for depreciation of $2,500. During the year non‐current assets were purchased for $16,000, receivables increased by $2,000, inventories decreased by $3,600 and trade payables increased by $700.

What was the increase in cash and bank balances during the year?

• $21,300

• $30,300

• $24,900

• $26,300

Question 2

Germane has a number of relationships with other companies.

In which of the following relationships is Germane necessarily the parent?

(i) Foll has 50,000 non‐voting and 100,000 voting equity shares in issue with each share receiving the same dividend. Germane owns all of Foll’s non‐voting shares and 40,000  of its voting shares. 

(ii) Kipp has 1 million equity shares in issue of which Germane owns 40%. Germane also owns $800,000 out of $1 million 8% convertible loan notes issued by Kipp. These loan notes may be converted on the basis of 40 equity shares for each $100 of loan note,  or they may be redeemed in cash at the option of the holder. 

(iii) Germane owns 49% of the equity shares in Polly and 52% of its non‐redeemable  preference shares. As a result of these investments, Germane receives variable returns  from Polly and has the ability to affect these returns through its power over Polly. 

• (i) only

• (i) and (ii) only

• (ii) and (iii) only

• All three

Question 3

Wilmslow acquired 80% of the equity shares of Zeta on 1 April 20X4 when Zeta’s retained earnings were $200,000. During the year ended 31 March 20X5, Zeta purchased goods from Wilmslow totalling $320,000. At 31 March 20X5, one quarter of these goods were still in the inventory of Zeta. Wilmslow applies a mark‐up on cost of 25% to all of its sales. At 31 March 20X5, the retained earnings of Wilmslow and Zeta were $450,000 and $340,000 respectively.

What would be the amount of retained earnings in Wilmslow’s consolidated statement of financial position as at 31 March 20X5? $__,000

Question 4

The International Accounting Standards Board’s Conceptual Framework for Financial Reporting identifies qualitative characteristics of financial statements.

Which TWO of the following characteristics are enhancing qualitative characteristics according to the IASB’s The Conceptual Framework for Financial Reporting?

• Relevance

• Reliability

• Understandability

• Comparability

Question 5

On 1 October 20X3, Fresco acquired an item of plant under a five‐year lease agreement. The agreement had an implicit interest rate of 10% and required annual rentals of $6 million to be paid on 30 September each year for five years. The present value of the annual rental payments was $23 million.

What would be the current lease liability in Fresco’s statement of financial position as at 30 September 20X4?

• $19,300,000

• $4,070,000

• $5,000,000

• $3,850,000