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Question No 1:

Which TWO of the following statements about bonds and their issue are true?
A. Credit rating agencies assign risk categories to bond issues.
B. Bonds are a form of loan capital, traded on stock exchanges.
C. Bonds are a risk-free form of investing because they will always be repaid.
D. All bonds have the same terms and conditions when issued.
E. A bond issue is never underwritten because the return is fixed and guaranteed.

Answer: A, B

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Question No 1:

Which TWO of the following statements about bonds and their issue are true?
A. Credit rating agencies assign risk categories to bond issues.
B. Bonds are a form of loan capital, traded on stock exchanges.
C. Bonds are a risk-free form of investing because they will always be repaid.
D. All bonds have the same terms and conditions when issued.
E. A bond issue is never underwritten because the return is fixed and guaranteed.

Answer: A, B

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Question No 2:

RS is a listed entity that has no subsidiaries although its Finance Director is also a
director of TU, an unconnected entity. It is preparing its financial statements to 30
September 20X6. Which of the following substantial transactions must be disclosed in
these financial statements in accordance with IAS 24 Related Party Disclosures?
A. Pension payments made on behalf of the Managing Director of RS.
B. Purchase of production materials from TU at a discounted price to the current
market value.
C. Sale of finished goods to TU at normal selling price.
D. Performance related bonus payments made to the office staff for the year.

Answer: A
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Question No 3:

ST acquired 75% of the 2 million $1 equity shares of CD on 1 January 20X3, when the retained earnings
of CD were S3,550,000. CD has no other reserves. ST paid $5,600,000 for the shares in CD and the non-
controlling interest was measured at its fair value of S1,400,000 at acquisition. At 1 January 20X3, the
fair value of CD's net assets was equal to their carrying amount, with the exception of a building. This
building had a fair value of $1,000,000 in excess of its carrying amount and a remaining useful life of 25
years on 1 January 20X3. At 31 December 20X5, the retained earnings of ST and CD were $8,500,000
and $5,250,000 respectively. What is the value of goodwill to be included in the consolidated statement
of financial position of ST as at 31 December 20X5?

A. $450,000
B. $1,450,000
C. $950,000
D. $570,000
Answer: A https://www.exactcert.com/F2-exam-questions.html
Question No 4:

An entity has declared a dividend of $0.12 a share. The cum dividend market price of
one equity share is $1.40. Assuming a dividend growth rate of 7% a year, what is the
entity's cost of equity?

A. 17.0%
B. 8.6%
C. 16.2%
D. 9.4%

Answer: A
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Question No 5:

LM granted 100 share options to each of its 400 employees on 1 January 20X7. The options will only
vest if employees remain with LM for 3 years from the grant date. The fair value of each share option
was $5 on 1 January 20X7. 20 employees left in the year to 31 December 20X7 and at that date it was
estimated that a further 35 would leave over the following two years. Which of the following journal
entries did LM process to account for the share options in the year to 31 December 20X7, in accordance
with IFRS2 Share-based Payments?

A. Dr Profit or loss $57,500 ; Cr Other reserves within equity $57,500

B. Dr Profit or loss $57,500 ; Cr Liabilities $57,500
C. Dr Profit or loss $172,500 ; Cr Other reserves within equity $172,500
D. Dr Profit or loss $172,500 ; Cr Liabilities $172,500

Answer: A
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Question No 6:

HJ is currently in dispute with an employee, who is claiming $400,000 in a legal case against them. HJ's
legal advisors have stated that it is probable that they will lose the case and will have to pay the
amount claimeD. Also, HJ are claiming $250,000 from a supplier of defective goods and the legal
advisors have stated that it is probable that HJ will be successful in this claim. What is the correct
accounting treatment for these two items in HJ's financial statements?

A. Provide for the $400,000 potential outflow and disclose the $250,000 potential inflow.
B. Provide for the $400,000 potential outflow and recognise the $250,000 potential inflow.
C. Disclose the $400,000 potential outflow and disclose the $250,000 potential inflow.
D. Disclose the $400,000 potential outflow and recognise the $250,000 potential inflow.

Answer: A

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Question No 7:

AB acquired its subsidiary on 1 January 20X7 when the fair value of net assets was the
same as book value with the exception of property, plant and equipment that had a
fair value $500,000 higher than carrying value. These assets were assessed to have a
remaining useful life of 5 years from the date of acquisition. What is the net
consolidation adjustment to the property, plant and equipment balance at 31
December 20X9? Give your answer to the nearest whole number (in '$000s). $?

Answer: 200000, 200

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Question No 8:

LM is preparing its consolidated financial statements for the year ended 30 April 20X5.
During the year LM acquired 30% of the equity shares of AB giving it significant
influence over AB. LM conducted ratio analysis comparing the financial performance
of the group for 30 April 20X4 and 20X5. Which of the following ratios would not be
comparable as a result of the acquisition of AB?

A. Operating profit margin.

B. Return on capital employeD.
C. Earnings per share.
D. Interest cover.
Answer: C
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Question No 9:

How would KL account for its investment in MN in its consolidated financial

statements for the year to 31 December 20X9?

A. Joint venture
B. Joint arrangement
C. Financial asset
D. Subsidiary

Answer: A

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Question No 10:

LM acquired 15% of the equity share capital of ST on 1 January 20X6 for $18 million.
LM acquired a further 50% of the equity share capital of ST for $50 million on 1
January 20X7 when the fair value of ST's net assets was $82 million. The original 15%
investment in ST had a fair value of $20 million at 1 January 20X7. The non controlling
interest in ST was measured at its fair value of $30 million at the date control in ST was
acquireD. Calculate the goodwill arising on the acquisition of ST that LM included in
its consolidated financial statements at 31 December 20X7. Give your answer to the
nearest $ million. $ ? Million

Answer: 18, 18000000

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