CPA FR - Financial Reporting Exam

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Total 80 questions

Roland Ltd has loan of 6% redeemable preference shares in issue. They are redeemable on 31 December 2012. In accordance with IAS 32 Financial Instruments: Presentation, where are these to be disclosed in the statement of financial position as at 31 December
2012?

  • A. Non-current liabilities
  • B. Current liabilities
  • C. Equity
  • D. Non-current assets


Answer : A

Watson earns a bonus of 2% of net profit from his employers, ABC Co. In September 2012,
Watson received a payment-in-anticipation of $3,000. On 31 December 2012, the directors estimated that net profits for the year would probably be $170,000.
What figure should be included in the Statement of Comprehensive Income for the year ended 31 December 2012 as an employee benefit?

  • A. $3,400
  • B. $3,000
  • C. $400
  • D. Cannot be estimated


Answer : A

IAS 34 Interim Financial Report contains either a complete set of financial statements or a set of condensed financial statements for an interim period.
The treatment for non-mandatory intangible assets and depreciation during interim period should therefore be:
(i)Non-mandatory intangible assets: Costs of an intangible asset should be deferred and treated as an expense in the interim statement.
(ii)Depreciation: Depreciation should be charged on all non-current assets.
State whether the above treatments are either correct or incorrect.

  • A. Both (i) and (ii) are correct
  • B. (i) is correct but (ii) is incorrect
  • C. (i) is incorrect but (ii) is correct
  • D. Both (i) and (ii) are incorrect


Answer : D

Rich Ltd has prepared draft financial statements for the year to 31 March 2013. On 5 June
2013, the accountant received a letter regarding an accident which had taken place on 14
March 2013. The accident had destroyed a machine with a net book value of $578,000.
The companys insurance policy has an excess of $55,700. The accountant had taken this into consideration when drafting the accounts. The insurance company declined to pay the claim as they believed that the accident had been caused by negligence.
How should the information in the letter be reflected in the draft accounts?

  • A. A charge of $522,300 is required
  • B. A charge of $578,000 is required
  • C. A note should be included explaining the post balance sheet event
  • D. There will be no effect on the draft financial statements


Answer : A

Richard Ltd and McMagoo Inc. trades in shares and securities and are close rivals for many years. Richard Ltd accuses McMagoo Inc. of providing false information related to a particular PH plcs share; though Richard Ltd knows it is not true. McMagoo Inc. sues
Richard Ltd. for defamation. Richards and McMagoo Incs lawyers agree that it is likely that
McMagoo Inc. will win the case and receive damages of an amount of $1.5m. There is no possibility of the case being resolved before the financial statements are finished.
How the above litigation will be represented in the financial statements of both Richard Ltd and McMagoo Inc.?

  • A. Richard Ltd should provide for $1.5m. McMagoo Inc. has a contingent asset and should disclose in the financial statements.
  • B. Richard Ltd should provide for $1.5m. McMagoo Inc. should ignore as this is too remote.
  • C. Richard Ltd should ignore as this is too remote. McMagoo Inc. has a contingent asset and should disclose in the financial statements.
  • D. Richard Ltd should have a contingent asset and should disclose in the financial statements. McMagoo Inc. should provide for $1.5m.


Answer : A

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Total 80 questions