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CIMA Financial Reporting Sample Questions:

1. An entity opens a new factory and receives a government grant of $25,000 towards the cost of new plant and equipment. This new plant and equipment originally costs $100,000.
The entity uses the net cost method allowed by IAS 20 Accounting for Government Grants and Disclosure of Government Assistance to record government grants of this nature. All plant and equipment is depreciated at
20% a year on a straight line basis.
Calculate the amount of depreciation to be included for this plant and equipment in the statement of profit of loss for the factory's first year of operation.
Give your answer to the nearest whole $.

2. Which of the following is the responsibility of the International Financial Reporting Standards Interpretations Committee?

A) To provide authoritative guidance on the application of international financial reporting standards where conflicting practice has developed.
B) To advise the International Accounting Standards Board on the agenda and priorities for future work.
C) The development and publication of new international financial reporting standards.
D) To provide a forum for interested parties to participate in the formulation of international financial reporting standards.

3. The statement of profit or loss for PQ, ST and AB for the year ended 31 December 20X0 are shown below:

1. PQ acquired 80% of its subsidiary, ST, on 1 January 20X0 and 40% of its associate, AB, on 1 September
20X0.
2. Since acquistion PQ has sold goods to ST and AB for $20,000 and $30,000 respectively. At the year end both ST and AB have 50% of these goods remaining in inventory. PQ uses a mark-up of 20% on all of its sales.
3. Since acquisition the goodwill in respect of ST has been impaired by $8,000 and the investment in AB has been impaired by $2,000.
4. PQ uses the fair value method for non-controlling interest at acquisition.
What is the revenue figure to be included in PQ's consolidated statement of profit or loss for the year ended 31 December 20X0?

A) $480,000
B) $450,000
C) $440,000
D) $476,000

4. Which of the following is NOT a primary need for regulating financial reporting information of incorporated entities?

A) To improve the reliability of information for users.
B) To ensure that information is consistent with its legal form.
C) To make information more comparable.
D) To make information more consistent.

5. In most developed countries employers deduct the tax from employees' pay each month and then pay the tax to the tax authorities on behalf of the employee on a monthly basis.
Which THREE of the following are advantages of this system to the employee?

A) The payment of tax is easier as the tax is deducted before the net salary is paid to the employee.
B) The tax is collected earlier than systems that assess earnings at the end of the year.
C) Most of the administration costs are borne by the employees.
D) The responsibility for the tax calculations rests with the employer and therefore there is less chance of mistakes being made.
E) There is less chance of interest and penalties being levied on the employee by the tax authorities.

Solutions: