Idec Peg May04

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com
CIMA F1
Financial Reporting
& Taxation
Workbook
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Mind Map 1 - Tax I
2
Illustration 1
In year ended 31/01/X1 Johnboy Co. had Profit Before Tax of $30,000. This was after the
deduction of personal expenses that were disallowable for tax purposes worth $4700. In
addition Johnboy Co. had $7000 of income exempt from taxation.
Johnboy Co’s Non Current Assets totaled $35,000 and these were being depreciated at
25% on cost.
Tax is Payable at 20%.
Calculate the Tax Payable for the year ended 31/01/X1.
Illustration 2
Jimmy Co. purchased an asset worth $500,000. WDAs are available on the asset at 25%
on the reducing balance basis.
Show the tax allowable depreciation (WDAs) for the first 5 years of the asset and the
Written Down Value (WDV) at the end of each year. (Round to the nearest $)
Illustration 3
Andy Co. purchased an asset in 20X1 worth $100,000. WDAs are available on the asset
at 25% on the reducing balance basis.
At the end of 20X3 Andy Co. sold the asset for $40,000.
Calculate the Balancing Charge/Allowance on the sale
3
Illustration 4
Welling Co. had assets at 01/02/20X2 with a carrying value in the financial statements of
$600,000 and a tax written down value of 400,000.
Accounting Depreciation was charged on the assets 10% reducing balance. WDAs are
available on the at 25% also on the reducing balance basis.
On 31/01/X4 20X4 Welling Co. sold all the assets for $500,000.
In year ended 31/01/X4 Welling Co. had Profit Before Tax of $2,000,000. This was after
the deduction of entertainment expenses that were disallowable for tax purposes worth
$30,000. In addition Welling Co. had $200,000 of income exempt from taxation.
Process to follow:
Be careful with the year ends.

Calculate the WDV at the year end 31/01/X4
That enables you to get the Balancing Charge
Calculate the Carrying Value at the year end 31/01/X4
That enables you to get the Accounting Profit on disposal & Dep’n Charge
Fill it all into the Pro-forma
Illustration 5
Using the taxable profit for the year ended 31/01/X4 from Illustration 4 of $2,070,000 and
tax rates of:
01/04/02 - 01/04/03 - 20%

01/04/03 - 01/04/03 - 25%
Assuming that profit accrues evenly across the period:
4
Illustration 6
In Fabbland it is possible to carry back losses to set against trading profit in previous years
and then forwards against trading profits in future years.
Kalls Co. has the following results:
Year Trading Profit/Loss
1 500,000
2 -1,400,000
3 2,000,000
4 400,000
Calculate the taxable profit based on the above information in each of the 4 years.
Illustration 7
In Lalaland it is possible to carry back losses in the year of cessation to set against trading
profit in previous years for up to 3 years on a LIFO (most recent first) basis.
Marbles Co. has the following results:
Year Trading Profit/Loss
1 500,000
2 600,000
3 200,000
Year of Cessation -900,000
Calculate the taxable profit based on the above information in each of the 4 years.
5
Objective Test Questions
1. There are certain principles that a tax system should have in an ideal situation. Which of
the following is NOT traditionally regarded as a principle of an ideal tax?
A. The cost of collecting the tax should bot outweigh the benefits of it.
B. The timing of the tax and the method to pay it should be convenient.
C. The amount to be paid should be certain.
D. The amount raised should be the maximum amount possible for the government.
2. Which of the following best describes Hypothecation?
A. A tax charges on the sale of goods to consumers.

B. A tax system that collects the tax at source.
C. A tax charge that is imposed directly on an entity and paid to the authorities.
D. A tax charge that has the proceeds raised from it earmarked for a specific purpose.
3. ABC Ltd. earns profit of $500,000 and pays tax of $100,000. In the same country, CBD
Ltd. earns profit of $130,000 and pays tax of $26,000.
The income tax regime in this country could be described as:
A. Progressive
B. Proportional
C. Regressive
D. Fixed Amount
4.In year ended 31/01/X4 Endeavor Co. had Profit Before Tax of $220,000. This was after
the deduction of entertainment expenses that were disallowable for tax purposes worth
$30,000. In addition Endeavor Co. had $25,000 of income exempt from taxation.
Endeavor Co. had Non Current Assets with a carrying value of $500,000 at the start of the
year and these were being depreciated at 10% reducing balance.
What is the tax payable for the year?
A. $47,300
B. $71,500
C. $60,500
D. $49,599
6
Mind Map 2 - Tax II
7
Illustration 1
In year ended 31/01/X1 ABD Co. decided to sell an asset that they had bought 10 years
previously. The asset had cost $40,000 and was sold for $100,000. Indexation allowance
of 25% of the cost of the asset was allowed for the effects of inflation.
Capital gains are taxed at 30%
Calculate the capital tax payable.
Illustration 2
In year ended 31/01/X1 ABD Co. decided to sell an building that they had bought 10 years
previously. The building had cost $300,000 plus legal fees of $3,000 and was sold for
$600,000. Indexation allowance of 30% of the cost of the asset was allowed for the effects
of inflation.
The building had been extended when purchased initially costing $100,000 and costs to
sell of $6,000 were incurred on the sale.
8
Illustration 3
On 01/01/X5 DFT Co. sold a building they had purchased on 01/01/X0. The building had
cost $500,000 plus legal fees of $1,000 and was sold for $900,000.
The building had been extended on 01/01/X3 costing $50,000 and costs to sell of $2,000
were incurred on the sale.
Indexation allowance is available on assets bought/built at the below times at the following
rates:
01/01/X1 - 31/12/X2 = 20%

01/01/X3 - 01/01/X5 = 15%
Illustration 4
In Fabbland it is not possible to carry back capital losses to set against capital gains in
previous years. However losses can be relieved against other current year capital gains,
and then forward against future capital gains
Kalls Co. has the following results:
Year Capital Gains/(Losses)
1 5,000
2 -12,000
3 10,000
4 7,000
Calculate the taxable gains based on the above information in each of the 4 years.
9
1. LM recently disposed of a building for £600,000 on 31 December 2009. The original

cost of the building was £110,000 which reflected its dilapidated condition. £40,000 was
spent to repair the roof on 31 December 2015 to bring it into occupation. ..A further
£75,000 was spent on an extension on 31 December 20X7.
The indexation factors are as follows:
20X5 to 20X9 30%

20X7 to 20X9 20%
Calculate the capital gains tax arising on the disposal assuming a tax rate of 20%
(rounded to the nearest £)
2. MM purchases an asset on 1 April 20X0 for 375,000, incurring legal fees of 12,000 .MM
is resident in country X. There was no indexation allowed on the asset.
MM sold the asset on 31 March 20X3 for 450,000 incurring transaction charges of 15,000.
Tax is charded at 25%.
Calculate the capital gains tax due from MM on the disposal of the asset. (Round to the
nearest £)
3. Capital losses in the year must first be offset against capital gains in the year before
being carried forward to offset against the first available gains in the future. During the year
ended 30 April 20X4 SM made two disposals resulting in a capital gain of 15,000 and a
capital loss of 18,000. In the year ended 30 April 20X5, the entity also disposed of a
chargeable asset for 90,000. The asset originally cost 30,000 in 20X0 and maintenance
costs of 5,000 were incurred in 20X3. In 20X4 there was enhancement expenditure of
10,000.
The indexation factors were:

20X0 – 20X2 40%
20X3 – 20X4 38%
20X4 – 20X5 28%
Which of the following options correctly shows the capital gains tax due for 31 March 20X4
and 20X5. You should assume a tax rate of 20% and no annual exemption throughout.
A. 2004 Nil 2005 7,040

B. 2004 (600) 2005 6,440
C. 2004 Nil 2005 6,440
D. 2004 (3,000) 2005 6,440
10
4. Profit Ltd and Loss Ltd are in a group for corporation tax purposes. Profit Ltd relevant
trading profit of 150,000. Loss Ltd relevant trading loss of 90,000 and capital losses of
40,000.
Calculate the group taxable profit.
5. An entity makes a taxable profit of 300,000 and pays corporate income tax at 20%.
The entity pays a dividend to its shareholders. A shareholder receiving 7,000 dividend then
pays the standard personal income tax rate 12% on the divided, paying a further 960 tax.
The tax system could be said to be

A A classical system
B An Imputation system
C A partial imputation system
D A split rate system
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Mind Map 3 - Tax III
12
Illustration 1
In Lalaland the rate of VAT is 15%. The following purchases and sales of a computer
happen before it is eventually sold to the consumer.
Abel manufactures the computer and sells it to a distributor for $200.
The distributor sells it to a retailer for $300.
The retailer sells it to the consumer for $500.
The figures above are exclusive of VAT.
Calculate the VAT payable by each of the parties above.
Illustration 2
Arttie Co. is registered for VAT and the VAT rate applicable is 12%.
In the most recent VAT period they made sales of $120,000 and purchases of $50,000.
Both of these figures are exclusive of VAT.
Calculate the VAT payable in the period.
13
Illustration 3
Jenny’s business is registered for sales tax purposes. During the quarter ending 31
December 2011, she made the following sales and purchases, all of which were subject to
VAT at 20%:
Sales $ Purchases $
Sales of Goods (Excludes Tax) 550 Purchase of Goods (Excludes Tax) 1,055
Sales of Goods (Includes Tax) 900 Purchase of Goods (Includes Tax) 720
Sales of Goods (Excludes Tax) 945 Purchase of Goods (Includes Tax) 420
Sales of Goods (Includes Tax) 660 Purchase of Goods (Includes Tax) 1,140
What is the amount of VAT payable or receivable on 31 December 2011?

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1. Which of the following is not an indirect tax?

A Wealth Tax
B Excise Duty
C Property Tax
D Income Tax
2. Zoe is in the process of completing her VAT return for the quarter ended 31 March
2013. The following information is available:
• Sales invoices totalling £128,000 were issued in respect of standard rated sales.
• Standard rated expenses amounted to £24,800.
• On 15 February 2013 Gwen purchased machinery at a cost of £24,150. This figure is

inclusive of VAT.
Unless stated otherwise all of the above figures are exclusive of VAT. The standard rate of
tax is 20%.
What is the Vat payable?
3. Correctly identify the difference between exempt and zero rated supplies. The options
cannot be used more than once.
Type of Supply
Zero Rated
Exempt
Options
Entity must be registered for VAT purposes
Entity does not register for VAT purposes
Vat can be claimed back on purchases
Vat cannot be claimed back on purchases
15
Mind Map 4 - Tax IV
No Illustrations Just OTQs

16
1. Which of the following is a characteristic of transfer pricing?

A This does not have an effect on individual entity purposes
B The results in transactions not taking place at “arms length” and profits being
effected by the group members.
C A legal way of reducing your tax bill
D An illegal way of reducing your tax bill
2. Identify which of the following is a Benefit in Kind

A Company Car
B Time in Lieu
C Gym Membership
D Overtime
3. Which of the following describes Avoidance of Tax?

A Illegal means to avoid tax
B Legal means to avoid tax
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Mind Map 5 - International

Tax
18
1. What determines a company’s country of residence?
A. Where the company’s income is earned

B. Where the company’s place of control is
C. Where they receive dividends
D. Where the majority of their subsidiaries are located
2. Which of the following statements is correct about the deduction method of double
taxation relief?
A. Tax relief is obtained by deducting foreign tax as an expense in the statement of profit
and loss
B. Tax relief is obtained by treating foreign tax as a loss
C. Tax relief is obtained by deducting the foreign tax from the foreign income so that only
the net amount is subject to tax in the country of residency
D. Tax relief is obtained by deducting foreign tax from revenue in the statement of profit
or loss.
3. Which of the following is a concept of a Branch of a company?
A. Loss relief is available

B. Loss relief is not available
C. Separate company
D. Asset transfers can result in a gain or loss
4. Which of the following is an advantage for the tax authority of deduction of tax at
source?
A. Administration costs are borne by the entity deducting tax

B. Tax is deducted after income is paid to the taxpayer
C. Tax is collected later
D. The total amount of tax due for the period is difficult to calculate
19
5. Which of the following cannot be classed as a permanent establishment under the

OECD Model?
A. Factory
B. Office/Branch
C. Construction project
D. Pop up Restaurant
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Mind Map 6 - Intro to Groups
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1. What does NCI stand for in terms of Group Accounting?

A. Nuclear Control Institute
B. Non Coded Information
C. Non Controlling Interest
D. Non Conforming Image
2. Which of the following can constitute “control” of a company after an undertaking?

A. Has the right to exercise a dominant influence over an undertaking
B. Owns 35% of the shares
C. Has not got the right to appoint or remove a majority of its board of directors
D. Has no right to returns from the company
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Mind Map 7 - Introduction to

Group SFP
23
Illustration 1
Almeria Murcia
Non Current Assets
Tangible 100 100
Investment in Murcia 300
Current Assets
Inventory 40 200
Receivables 60 100
Cash 200 200
700 600
Ordinary Shares 160 100
Accumulated Profits 240 200
Equity 400 300
Non Current Liabilities 100 200
Current Liabilities 200 100
700 600
Additional Information
Almeria today acquired all the shares in Murcia for $300m.
The Fair Value of the NCI at acquisition was 0.
Required
Prepare the consolidated statement of financial position for the Almeria group
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Pro-Forma
Working 1 - Group Structure
Almeria
Murcia
Date Acquired
Parent Share
NCI
Working 2 - Equity Table

At Acquisition At Year End
Share Capital
Accumulated Profits
Working 3 - Goodwill
Cost of Parent Investment
Fair Value of NCI at acquisition
Less net assets at acquisition (W2)
Goodwill
25
Working 4 - NCI
NCI% of Sub Post-Acq Profits
Value of NCI at Year End
Working 5 - Accumulated Profits
Parent’s Accumulated Profits
Add: Parent % of the subsidiary’s post acquisition profits
26
SFP for Almeria Group
Almeria Murcia Group
Non Current Assets
Goodwill
Tangible 100 100
Investment in Murcia 300
Current Assets
Inventory 40 200
Receivables 60 100
Cash 200 200
700 600
Non Controlling Interest
Equity 400 300
700 600
27
Information for Illustration 2 - OTQs for Lecture 7
Ant Dec
Assets 500 500
Investment in Dec 350
850 500
Equity 350 300
Liabilities 500 200
850 500
Ant today acquired 160m of the 200m shares in Dec.
The Fair Value of the NCI was 50.
OTQ 1
What is the percentage ownership and the date of acquisition for Ant Group?
A. 70% & Today

B. 80% & 1 year ago
C. 80% & Today
D. 100% & Today
OTQ 2
What is the value of the net assets acquired by Ant in Dec on the date of acquisition
A. 200
B. 300
C. 100
D. 600
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OTQ 3
What is the value of the Goodwill in Dec on the date of acquisition?
A. 100
B. 350
C. 50
D. 400
OTQ 4
What is the value of the non controlling interest in Dec at the year end?
A. 100
B. 300
C. 100
D. 50
OTQ 5
What is the value of the retained earnings for the group at the year end?
A. 200
B. 300
C. 250
D. 50
OTQ 6
What is the value of the total assets and the share capital that will appear in the statement
of financial position for Ant Group?
A. 1000 & 100

B. 100 & 100
C. 1,100 & 300
D. 1,100 & 100
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Mind Map 8 - Group SFP

continued
30
Illustration 1
Evan Dando
Assets 200 350
Investment in Dando 500
Current Assets 200 300
900 650
Ordinary Shares ($1) 200 200
Equity 450 300
Liabilities 170 150
900 650
Evan acquired 150m shares in Dando one year ago when the reserves of Dando were
$40m. The Fair Value of the NCI on the date of acquisition was $100m.
Required
Prepare the consolidated statement of financial position for the Evan group.
31
Solution
Working 1- Group Structure
↓
Date Acquired
Parent Share
NCI
Working 2 - Equity Table
At Acquisition At Year End
Share Capital
Accumulated Profits
Working 3 - Goodwill
Cost of Parent Investment
Less net assets at acquisition (W2)
Goodwill
32
Working 4 - NCI
NCI% of Sub Post-Acq Profits
Value of NCI at Year End
Working 5 - Accumulated Profits
Parent’s Accumulated Profits
Add: Parent % of the subsidiary’s post acquisition profits
33
Statement of Financial Position for Evan Group
Evan Dando Group
Goodwill
Assets 200 350
Investment in 500
Dando
900 650
Ordinary 200 200

Shares ($1)
Accumulated 250 100

Profits
NCI
Equity 450 300
Non Current 280 200

Liabilities
Liabilities 170 150
900 650
34
Illustration 2
Virtual Insanity
Assets 1000 800
Investment in Insanity 600
2000 1000
Equity 1550 500
Liabilities 200 200
2000 1000
Virtual acquired 60m shares in Insanity one year ago when the reserves of Insanity were
$60m. The Fair Value of the NCI at that date was $120m.
Required
Prepare the consolidated statement of financial position for the Virtual group
35
Illustration 3
Brad acquires 80% of Angelina’s share capital for $800. Angelina has 100
shares in issue with a nominal value of $1 and Angelina’s share price is $8. At
the date of acquisition the net assets of Angelina are $600.
Calculate the gross goodwill arising on the acquisition.
Illustration 4
Brad acquires 80% of Angelina’s share capital for $800. Angelina has 100
shares in issue with a nominal value of $1 and Angelina’s share price is $8. At
the date of acquisition the net assets of Angelina are $600.
Calculate the goodwill arising using the proportionate method.
Illustration 5
Archie acquires 60% of Mitchell’s share capital with consideration of $900.

Mitchell has 200 shares in issue with a share price is $5. At the date of
acquisition the net assets of Mitchell were $800 and are $950 at the year end.
At the year end the retained earnings of Archie were $1,000.
An impairment review has been carried out on the goodwill at the year end
which has found it to be impaired by $40.
Calculate the gross goodwill, the retained earnings and the NCI at the year
end.
36
Illustration 6
French acquired 75% of Shambles several years ago.
Cost of Fair Value of Net assets at Net assets at Goodwill

Investment NCI at acquisition year end Impairment at
acquisition Y/E
$ $ $ $ $
1,000 300 800 3,000 200
If French has $1500 of retained earnings at the year end, calculate the gross
goodwill, retained earnings for the group and the NCI at the year end.
37
Illustration 7
Pinky acquired 80% of Brain 4 years ago. The following information is

relevant:
Net Assets at Net Assets at Cost of Fair Value of

year end acquisition investment NCI at
acquisition
$ $ $ $
150 100 175 25
Goodwill is calculated gross and is subject to an annual impairment review. In

the current year goodwill has been impaired by $20.
Pinky Brain
Investment in Pinky 175
Assets 100 100
Inventory 140 200
Receivables 160 100
Bank 125 200
700 600
Equity 400 150
Non current liabilities 100 250
Liabilities 300 100
700 600
38
Illustration 8
George owns 80% of the subsidiary Bungle. Goodwill has been calculated on a
proportionate basis and at acquisition was $400m.
During the impairment review in the current year it was found that the carrying value of the
goodwill has been impaired by $50m
What is the required treatment to deal with the impairment of goodwill?
39

1. PRT acquired 90% of SUB’s ordinary shares on 1 January 2012 for $1,250,000 when
SUB’s retained earnings were $300,000. At 1 January 2011 the fair value of the Non-
Controlling Interest was $200,000.
The equity of SUB as at 31 December 2013:
Ordinary share capital 430,000

Share premium 86,000
Retained earnings 324 ,000
The retained earnings of PRT were $2,100,000 at 31 December 2013.
What is the amount that PRT should include in its consolidated statement of financial
position as at 31 December 2013 for the Non-Controlling Interest?
A. $250,000
B. $204,600
C. $205,000
D. $206,400
2. HX acquired 70% of SA’s equity shares on 1 July 2010 for $452,000.The fair value of
the NCI on the 1 July 2010 was $60,000 SA has $200,000 $1 equity shares in issue and at
1 July 2010 its reserves comprised share premium of $40,000 and retained earnings of
$62,000.
What is the value of the gross goodwill arising on the acquisition of SA?
A. $235,000
B. $210,000
C. $245,000
D. $135,000
40
3. HP acquired 70% of SA’s equity shares on 1 July 2010 for $652,000. Sauce has
$400,000 $1 equity shares in issue and at 1 July 2010 its reserves comprised share
premium of $220,000 and retained earnings of $122,000.
What is the value of the proportionate goodwill arising on the acquisition of SA?
A. $235,000
B. $210,000
C. $132,600
D. $135,000
SUB’s retained earnings were $260,000. At 1 January 2011 the fair value of the Non-
Controlling Interest was $300,000.
SUB has not issued any new shares since acquisition by PRT. SUB is PRT’s only
subsidiary. PRT calculated that goodwill in its subsidiary was impaired by 20% at 31
December 2013. The equity of SUB as at 31 December 2013:
$000
Ordinary share capital 430
Share premium 86
Retained earnings 324
position as at 31 December 2013 for Goodwill?
A. $250,000
B. $200,000
C. $440,000
D. $528,000
41
SUB’s retained earnings were $341,000.
subsidiary. PRT calculated that proportionate goodwill in its subsidiary was impaired by
10% at 31 December 2013. The equity of SUB as at 31 December 2013:
$000
Share premium 24
position as at 31 December 2013 for Goodwill?
A. $195,000
B. $1,395,000
C. $1,234,000
D. $155,000
42
Mind Map 9 - Inter Company

Transactions
43
Illustration 1
A Parent company has recorded an asset of $500 goods receivable with a subsidiary.
The subsidiary had recorded this as a payable of $500.
How should this be adjusted for on consolidation?
Illustration 2
A Parent company has recorded an asset of $300 goods receivable with a subsidiary.
The subsidiary had recorded this as an initial liability payable of $300 but has just recorded
and sent a cheque payment to the parent of $50 leaving the payable balance of $250.
Illustration 3
Parent has been selling goods to subsidiary. The parent has recorded an asset of $500
receivable from the subsidiary.
The $500 includes goods worth $100 sent prior to the year end to the subsidiary who has
not received them. As a result the subsidiary has a balance of $400 recorded as a liability
in payables.
How should this be treated on consolidation?
44
Illustration 4
Arctic is the parent of a subsidiary Monkeys. Extracts of their SFPs are below
Arctic Monkeys
Current Assets
Inventory 300 100
Receivables 200 250
Bank 100 50
600 400
The trade payables of Monkeys includes $35m due to Arctic. This was after the deduction
of $10m in respect of cash sent by Monkeys but not yet received by Arctic.
The receivables of Arctic at the year end include $70m due from Monkeys. $25m of these
goods had been dispatched by Arctic, but were not yet received by Monkeys.
Show the treatment on consolidation.
45
Illustration 5
Sea is the parent of a subsidiary Lion. Extracts of their SFPs are below
Sea Lion
Current Assets
Inventory 400 250
Receivables 100 100
Bank 150 100
650 450
The trade payables of Lion includes $20m due to Arctic. This was after the deduction of
$15m in respect of cash sent by Lion but not yet received by Sea.
The receivables of Sea at the year end include $50m due from Lion. $15m of these goods
had been dispatched by Sea, but were not yet received by Lion.
Show the treatment on consolidation.
46
Illustration 6
Inter company sales of $400 have occurred in Attila group at a mark up on cost of 25%. At
the year end 1/4 of these goods had been sold on. Attila has an 80% interest in Hun.
I. Calculate the PURP.
II. Show the accounting treatment if the parent company is the seller.
III. Show the accounting treatment if the subsidiary company is the seller.
IV. Do parts I - III if the goods had been sold at a margin of 30%.
Illustration 7
Avco Co. owns 60% of Strappo Co. and on the first day of this accounting period a Non
Current Asset with a carrying value of $100,000 and a useful economic life of 5 years was
sold between the two for $120,000.
I. Show the accounting treatment if the parent company is the seller
II.Show the accounting treatment if the subsidiary company is the seller
47
1. A Parent company has recorded an asset of $800 goods receivable with a subsidiary.
The subsidiary had recorded this as a payable of $800.
The treatment on consolidation has been recorded as:
Less Payables $800 (CR)
Less Receivables $800 (DR)
Is this treatment:
A Correct
B Incorrect
2. A Parent company has recorded an asset of $2,000 goods receivable with a subsidiary.
The subsidiary had recorded this as an initial liability payable of $2000 but has just
recorded and sent a cheque payment to the parent of $230 leaving the payable balance of
$1,770.
Less Payables $1,770 (DR)
Plus Cash at bank $230 (DR)
Less Receivables $2,000 (CR)
Is this treatment:
A Correct
B Incorrect
48
3. Dafo has sold goods to their subsidiary Aldo during the year and at the year end has
recorded a receivable of $4,690 due from Aldo.
Aldo has sent a cheque which has not yet been received by Dafo which means that the
payable due to Dafo is recorded as $3,240 in the financial statements of Aldo.
Before adjustment for any of the above the group cash balance stood at $134,880.
What will the balance on cash be after making an adjustment for the above?
A. $139,570
B. $138,120
C. $136,330
D. $133,430
4. DW sold goods to PR. DW is PR’s 80% owned subsidiary on 1 February 2011. The
goods were sold to PR for $90,000. HW made a profit of 25% on the original cost of the
goods.
At the year end, 30 June 2011, 30% of the goods had been sold by PR, the balance were
still in PR’s inventory and PR had not paid for any of the goods.
Which ONE of the following states the correct adjustments required in the HW group’s
consolidated statement of financial position at 30 June 2011?
A. Reduce inventory and retained earnings by $12,600 and Reduce payables and
receivables by $12,600.
B. Reduce inventory by $12,600, the NCI by $2,520, retained earnings by $10,080 and
Reduce payables and receivables by $90,000.
C. Reduce inventory and retained earnings by $15,750 and Reduce payables and
receivables by $15,750.
D. Reduce inventory by $15,750, the NCI by $3,150, retained earnings by $12,600 and
Reduce payables and receivables by $90,000.
49
5. Dando Co. owns 80% of Pobo Co. and on the first day of this accounting period Pobo
Co. sold a Non Current Asset to Dando Co. The asset had a carrying value of $250,000
and a useful economic life of 4 years was sold between the two for $300,000.
What amount will go to NCI to account for the above transaction?
A. $7,500 CR
B. $7,500 DR
C. $10,000 DR
D. $2,500 CR
50
Mind Map 10 - Associates

(IAS 28)
51
Illustration 1
3 years ago Star Ltd. bought 25% of the share capital of Wars Ltd. for consideration of
$400,000. Since that time Wars Ltd.has had the following results:
Year Profit Dividend Paid By

Associate
1 $200,000 0
2 $160,000 $150,000
3 $30,000 0
Due to poor trading results and customer service issues, Star Ltd feel that in the current
year the investment in Wars Ltd. has been impaired by $20,000.
Show the treatment of War Ltd. in the statement of financial position of Star Group
and in the Income statement for each of the 3 years of the investment.
Illustration 2
Inter company sales of $1,300 have occurred in Attila group at a mark up on cost of 30%.
At the year end 1/2 of these goods had been sold on. Attila has an 30% interest in Hun.
I. Calculate the PURP.
II. Show the accounting treatment if the parent company is the seller.
III. Show the accounting treatment if the Associate company is the seller.
52
1. An associate is an entity in which an investor has significant influence over the investee.
Which of the following indicate(s) the presence of significant influence?
I. The investor owns 330,000 of the 1,500,000 equity voting shares of the investee
II. The investor has representation on the board of directors of the investee
III. The investor is able to insist that all of the sales of the investee are made to a
subsidiary of the investor
IV. The investor controls the votes of a majority of the board members
A (i) and (ii) only

B (i), (ii) and (iii)
C (ii) and (iii) only
D All four
2. The Caddy group acquired 240,000 of August’s 800,000 equity shares for $6 per share
on 1 April 2014. August’s profit after tax for the year ended 30 September 2014 was
$400,000 and it paid an equity dividend on 20 September 2014 of $150,000.
On the assumption that August is an associate of Caddy, what would be the carrying
amount of the investment in August in the consolidated statement of financial position of
Caddy as at 30 September 2014?
A $1,455,000
B $1,500,000
C $1,515,000
D $1,395,000
3. HB sold goods to AT, its 30% owned associate, on 1 November 20X0. The goods were
sold to S2 for $33,000. HB made a profit of 25% on the original cost of the goods.
At the year end, 31 March 20X1, 50% of the goods had been sold by S2. The remaining
goods were included in inventory.
What is the amount of the adjustment required to retained earnings in the consolidated
statement of financial position at 31 March 20X1.
A. $660
B. $1,238
C. $3,300
D. $990
53
4. The HC group acquired 30% of the equity share capital of AF on 1 April 2010 paying
$25,000.
At 1 April 2010 the equity of AF comprised:
$1 equity shares 50,000

Share premium 12,500
Retained earnings 10,000
AF made a profit for the year to 31 March 2011 (prior to dividend distribution) of $6,500
and paid a dividend of $3,500 to its equity shareholders.
What is the value of HC’s investment in AF for inclusion in HC’s statement of financial
position at 31 March 2011.
A $26,950
B $31,500
C $28,000
D $25,900
5. Which of the following statements relating to the method of consolidation are true?
A. All subsidiaries of the parent are consolidated using equity accounting.

B. All associates of the parent are consolidated using equity accounting.
C. The only way to gain control of a subsidiary is to purchase 50% or more of the share
capital.
D. If a company buys some shares but owns less than 50% of another entity it is
accounted for as a subsidiary.
54
Mind Map 11 - Group

Statement of Comprehensive
Income
55
Illustration 1
Nero Co. purchased 80% of Jax Co. on 01/06/X2. The figures for Profit and Loss items for
the year ended 01/12/X2 were as follows:
Nero Jax
Revenue 8000 3000
Cost of Sales -4000 -1000
Gross Profit 4000 2000
Operating Costs -1500 -1500
Finance Costs -1000 -200
Profit Before Tax 1500 300
Tax -700 -100
Profit for the year 800 200
Show the figures to be shown in the Group Statement of Profit or Loss and calculate
the Group Profit or Loss for the year ended 01/12/12.
56
Illustration 2
Simo Co. purchased 80% of Loco Co. on 01/03/X2. The figures for Profit and Loss items
for the year ended 01/12/X2 were as follows:
Simo Loco
Revenue 9000 2000
Finance Income 300 0
Profit Before Tax 3000 -200
Tax -800 -60
Profit for the year 2200 -260
During the period since acquisition Simo sold goods to Loco during the year at a margin of
40% and worth $1000. Half of these goods have been sold on by Loco by the year end.
Loco paid interest of $200 to Simo after acquisition.
Simo paid dividend of $125 on 31/11/X2.
Show the figures to be shown in the Group Statement of Profit or Loss and calculate
the Group Profit or Loss for the year ended 01/12/12.
57
Illustration 3
Argentina owns an 80% share of Messi which it purchased one year ago.
The information below relates to Messi at the date of acquisition.
Ordinary Reserves Fair Value of Fair value of Cost of the

Share Capital the net assets the NCI investment
$m $m $m $m $m
200 400 800 200 1900
The income statements for both are:
Argentina Messi
Revenue 8000 3000
Profit Before Tax 1500 300
Tax -700 -100
Profit for the year 800 200
Other information
I. Messi sold goods to Argentina during the year at a margin of 40% and worth $100m.
Half of these goods have been sold on by Messi by the year end.
II. Calculate goodwill using the fair value of the NCI at the date of acquisition. At the year
end an impairment review has found that the goodwill has been impaired by 10%.
Produce a consolidated Income Statement for the Argentina group.
58
1. On 1 July 2014, Walter acquired 70% of the equity share capital of White. Extracts of
their statements of profit or loss for the year ended 30 September 2014 are:
Walter White
‘000 ‘000
Revenue 35,000 26,000
COS -23,000 -14,000
What would be the cost of sales in Walter’s consolidated statement of profit or loss for the
year ended 30 September 2014?
A $37.00 million
B $28.50 million
C $35.50 million
D $47.50 million
2. On 1 July 2014, Walter acquired 70% of the equity share capital of White. Extracts of
their statements of profit or loss for the year ended 30 September 2014 are:
Walter White
‘000 ‘000
Revenue 35,000 26,000
COS -23,000 -14,000
Sales from Walter to White throughout the year ended 30 September 2014 had
consistently been $500,000 per month. Walter made a mark-up on cost of 30% on these
sales. White had $260,000 of these goods in inventory as at 30 September 2014.
What would be the cost of sales in Walter’s consolidated statement of profit or loss for the
A $27.00 million
B $28.56 million
C $35.56 million
D $27.06 million
59
3. PT acquired 60% of SB’s ordinary shares on 1 January 2011 for $2,346,000 when
SUB’s retained earnings were $341,000.
subsidiary. PRT calculated that proportionate goodwill in its subsidiary was impaired by
10% at 31 December 2013. The equity of SUB as at 31 December 2013:
$000
Share premium 24
What adjustment should be made to the NCI share of profit for the goodwill impairment?
A. $0
B. $995 DR
C. $155,000 CR
D. $155,000 DR
60
Mind Map 12 - Regulatory

Environment
No illustrations, just OTQs

61
1. There are different approaches to corporate governance: rules-based and principles-

based.
For each of the characteristics below, select whether it is a rules-based or a principle-
based approach.
A. Comply with the code or explain why
B. Applied in the US
C. Instils the code into law
D. Applied in the UK
2. Which three of the following are topics included in the International Accounting
Standards Board’s (IASB) The Conceptual Framework for Financial Reporting?
A. The objective of financial statements
B. Concepts of capital maintenance
C. Regulatory bodies governing financial statements
D. Measurement of the elements of financial statements
E. The standard setting process.
3. What is the purpose of the International Organization of Securities Commission

(IOSCO)
A. Regulates the world’s securities and futures markets.
B. Promotes rigorous application of the international financial reporting standards
C. Reviews issues not covered by IFRS
D. Issues accounting standards
62
4. List the following in the correct order for the International Financial Reporting Standard
setting process.
A. Consultation with advisory committee in order to set agenda and planning process
B. Issue exposure draft for public consultation
C. Issue Discussion paper for public consultation
D. Issue IFRS
A. A, B, C, D
B. A, C, B, D
C. A, D, B, C
D. B, D, A, C
5. Which of the following are NOT responsibilities of the IFRS Advisory Council?
A. Give advice to IASB on agenda decisions and priorities in its work
B. Annually review the strategy of the IASB
C. Inform the IASB of the views of the members of the council on proposed new
standards
D. Appoint the member of the IASB
63
Mind Map 13 - Conceptual

Framework

64
1. Which of the following is NOT a purpose of the IASB’s Conceptual Framework?
A. To assist the IASB in the preparation and review of IFRS

B. To assist auditors in forming an opinion on whether financial statements comply with
IFRS
C. To assist in determining the treatment of items not covered by an existing IFRS
D. To be authoritative where a specific IFRS conflicts with the Conceptual Framework
2. The IASB’s Framework for the preparation and presentation of financial statements lists
four qualitative characteristics of financial statements, one of which is reliability.
Which ONE of the following lists three characteristics of reliability?
A. Neutrality, prudence and comparability.

B. Prudence, faithful representation and relevance.
C. Comparability, relevance and completeness.
D. Neutrality, faithful representation and prudence.
3. Which ONE of the following is NOT listed as an element of financial statements by the
IASB Framework?
A Asset
B Equity
C Profit
D Expenses
65
4. The following are possible methods of measuring assets and liabilities other than
historical cost:
(i) Current cost

(ii) Realisable value
(iii) Present value
(iv) Replacement cost
According to the IASB’s Conceptual Framework for Financial Reporting (2010)

(Framework) which of the measurement bases above can be used by an entity for
measuring assets and liabilities shown in its statement of financial position?
A (i) and (ii)

B (i), (ii) and (iii)
C (ii) and (iii)
D (i), (ii) (iii) and (iv)
5. Which of the following criticisms does NOT apply to historical cost accounts during a
period of rising prices?
A. They contain mixed values; some items are at current values, some at out of date
values
B. They are difficult to verify as transactions could have happened many years ago
C. They understate assets and overstate profit
D. They overstate gearing in the statement of financial position
66
Mind Map 14 - External Audit
67
Illustration 1
Statal Co. has just been audited and the auditor has found that management have
incorrectly calculated depreciation for the current year. The error is material to the financial
statements and the directors have refused to correct the error.
What action should the auditor take in issuing the audit opinion?
Illustration 2
Newrit Co. is currently being audited and the auditor has discovered that the payroll
function is outsourced to Payroller Co. The auditor has contacted Payroller Co. but they
are unable to provide them with the payroll records of Newrit Co. due to a recent computer
failure. Payroll is material to the financial statements.
What action should the auditor take in issuing the audit opinion?
68
1. What is the responsibility of the external auditor?

A. To report on whether the financial statements are prepared in a true and fair manner
B. To prepare the financial statements
C. Implement internal controls
D. Appoint the internal auditor
2. Select which of the following are the rights of an auditor.

A. Access to all records
B. Speak at the AGM
C. Call an EGM
D. Restate the financial statements
3. Put the following steps in order in relation to the Audit Process.

A. Audit planning
B. Detailed testing
C. Report at AGM
D. Review and Opinion
E. Risk Assessment
F. Appointment and Agree Terms
A. F, E, A, B, D & C
B. F, E, B, A, D & C
C. F, E, A, D, B & C
D. F, E, A, B, C & D
69
4. Which of the following is NOT an element of the Auditors Report.

A. Fee
B. Title & Addressee
C. Opinion
D. Signature
5. The Auditor should only use an ‘Emphasis of Matter’ paragraph to highlight potential
important issues or uncertainties rather than for general communications to share holders.
Is this statement:
A. True
B. False
6. The auditors have discovered that the inventory has been materially understated in the
financial statements.
What type of audit report should be issued in this situation?
A. A modified report, based on insufficient appropriate evidence, with a qualified
opinion
B. A modified report, based on material misstatements, with a qualified opinion
C. A modified report, based on material misstatements, with an adverse opinion
D. An unmodified report, with an unmodified opinion
70
Mind Map 15 - Ethics

71
1. Accountants must ensure that they act responsibly when carrying out the services they
provide to the public. Which of the following may influence an accountant not to act in the
public interest and must therefore be guarded against?
A. Becoming too familiar with a client and developing a close friendship.

B. Being offered a larger fee than the work really warrants.
C. Wanting to keep the client happy.
D. All of the above.
2. Archie is an accountant who works in a small local manufacturing business. During the
recent recession the company has had cash flow problems and the CEO has asked Archie
to overstate profit by bringing in sales from next year. He assures Archie that it is a ‘one-off
to ensure our survival and the jobs of him and his colleagues’.
For Archie to do this would be a breach of which of the following principles?
A. Objectivity
B. Confidentiality
C. Integrity
D. Advocacy
3. You have discovered an ethical threat. Which of the following should you do first?
A. Discuss with the director of the company
B. Discuss with your line manager
C. Discuss with the auditor
D. Discuss with your professional body
4. In what situation is it appropriate to break confidentiality?

A. To obtain promotion
B. Under duress
C. Legal requirement
72
Mind Map 16 - Corporate

Governance

73

1. Corporate Governance is best described as:
A. A system of policies by which the organisation is directed and controlled.

B. Guidance for the treatment of stakeholders by an organisation.
C. A system of penalties for unethical behaviour.
D. Guidance on how the organisation should interact with government.
2. Which of the following statements relating to the US Sarbanes-Oxley Act 2002 is

correct?
A. It is a principles based code requiring compliance or an explanation of reasons for non-

compliance.
B. It came about as a response to the Second World War.
C. It requires the Auditor to be represented on the board of directors.
D. It requires an annual statement on Internal Controls.
3. Which of the following is not required under the UK Corporate Governance Code?
A. Regular re-election of directors.

B. Separate people holding the post of CEO and Chairman.
C. All members of the board should be non-executives.
D. Directors should have regular performance evaluations.
4. Evan has been asked to join the board of AST Ltd. as a Non-Executive director. Which
of the following would mean that he could not accept the role as he is not sufficiently
independent.
A. He was employed as a senior manager in AST Ltd from which he retired 8 years ago.
B. He is a director in HRT Ltd. who supply a major component to AST Ltd.
C. He went to school with the Chairman although they did not keep in contact.
D. He owns a very small number of AST Ltd’s shares.
5. Which of the following is not a function of the Audit Committee?
A. Monitoring and review of the financial statements of the organisation.

B. Monitoring the work of Internal Audit.
C. Monitoring the performance of the board of directors.
D. Liaison with the external auditor.
74
Mind Map 17 - Presentation

of Financial Statements
Statement of Financial Position Pro-Forma
75
YZ Group Statement of Financial Position as at 31 December 20X5
Assets
Non-Current Assets
Property Plant & Equipment X
Investments X
Intangibles X
Current Assets
Inventories X
Trade Receivables X
Cash & Cash Equivalents X
Total Assets X
Equity & Liabilities
Share Capital & Reserves
Ordinary Shares X
Share Premium Account X
Retained Earnings X
Other Components of Equity X
Total Equity X
Non-Current Liabilities X
Long Term borrowings X
Deferred Tax X
Current Liabilities X
Trade Payables X
Short Term Borrowings X
Current Tax Payable X
Short Term Provisions X X
Total Equity & Liabilities X
Statement of Changes in Equity Pro-Forma

76
Share Share Revaluation Retained Total

Capital Premium Reserve Earnings Equity
$ $ $ $ $
Balance B/F X X X X X
Change in
Accounting
(X) (X)
Policy/prior year
error
Restated
X X X X X
Balance
Dividends (X) (X)
Shares Issued X X X
Profit for the

X X
Period
Revaluation
X X
gain/loss
Transfer to
Retained (X) X -
Earnings
Balance C/F X X X X X
77
Statement of Comprehensive Income Pro-Forma

$
Revenue X
Cost of Sales (X)
Gross Profit X
Distribution Costs (X)
Admin Expenses (X)
Profit from Operations X
Finance Cost (X)
Investment Income X
Profit Before Tax X
Income Tax Expense (X)
Profit For the Year X
Other Comprehensive Income
Gain/Loss on Revaluation X
Gain/Loss on Financial Instruments Through Comprehensive Income X
Total Comprehensive Income for the Year X
78
Mind Map 18 - Non Current

Assets
79
Illustration 1
Mahesh Bhupathi started a painting business on 1 April 2010. In the year to 31 March
2011, he incurred costs which are summarised below.
Item $
Office 200,000
Legal fees relating to 8,000

purchase of office
Cost of materials and labour 250

to paint office
Paint brushes for business 10,000

use
Delivery costs of brushes 50
Staff wages 45,000
What amounts should be capitalised as Land and buildings, and Paint Brushes?
Illustration 2
Charlotte has been running a creche since 1 July 2010. She has purchased the following
items relating to this business:
1. A new microwave for the creche kitchen at a cost of $200 (purchased 5 May 2011)
2. New tables for the creche at a cost of $600 (purchased 1 July 2011)
She depreciates the oven at 8% straight line and the tables at 20% reducing balance. a full
year’s depreciation is charged in the year of purchase and none in the year of disposal.
What is the total depreciation charge for the year ended 30 September 2013?
80
Illustration 3
The following relates to the purchase of plant by Windsor Automotive:
Cost $20,000
Purchase Date 1 September 2010
Depreciation method Straight line pro rata
Residual value 2,000
Useful economic life 5
Review, 1 Sep 2011
New residual value 0
New Useful economic life 8
What is the total depreciation charge for the years ended 30 November 2010 and
2011?
Illustration 4
Grigor Dimitrov purchased a new tennis racquet for $1,000 on 1 January 2010. At that
time, he believed that its useful economic life would be 10 years, with no residual value.
On 1 January 2012, Grigor changes his estimations. He believes that the racquet will be
used for a further 10 years after which time it will have a second-hand value of $100.
What is the depreciation charge for the year ended 31 December 2012?
81
Illustration 5
Mr Gall runs a construction company. On 1 January 2010, he purchased a fork-lift vehicle

for $8,000. He depreciates it at 5% per anum straight line on a monthly basis. A few years
later, he decides to replace it with one which is of superior quality. He sells the forklift truck
on 30 June 2012 for $7,500.
How much is charged to Mr Gall’s income statement for the year ended 31
December 2012?
82
1. Identify from the list below, revenue expenditure and capital expenditure.
A. Desktop Computer
B. Printer Paper
C. Ink
D. Laptop
E. Computer Desk
F. Server with Monitors
2. Both Land and Land Improvements will generally be depreciated.

True or False
3. A company purchases equipment for £30,000 on July 1, 2014. It estimates that the
equipment will have a residual value of £2,000 and its useful life will be 7 years. Assuming
that the company's accounting year ends on December 31 of each year, what will be the
Depreciation Expense for the years 2014 and 2015 assuming straight-line depreciation?
2014 ______
2015 ______
4. On January 1, 2010 an asset was acquired for £30,000. Its useful life was expected to
be 10 years and the residual value is expected to be NIL. After 4 years, the company
reviewed the asset and found that it would be useful for only 3 more years. The company
uses the straight-line method of depreciation. What will the Depreciation Expense in each
of the years 2012 and 2014?
83
5. Calculate the profit or loss on disposal and indicate the journal entries required.
Sales Proceeds 35,500

Asset Cost 100,000
Depreciation to date 60,000
A. Profit on disposal 4,500 ; Dr Income Statement 4,500 Cr Disposal Account 4,500

B. Loss on disposal 4,500 ; Dr Income Statement 4,500 Cr Disposal Account 4,500
C. Profit on disposal 64,500 ; Dr Income Statement 4,500 Cr Disposal Account 4,500
D. Loss on disposal 64,500 ; Dr Income Statement 4,500 Cr Disposal Account 4,500
84
Mind Map 19 - Non Current

Assets II
85
Illustration 1
John Boy has had a non current asset for several years which he bought for $300,000.
The depreciation on the asset to date has been $50,000. He decides to revalue the asset
and finds that it is now worth $350,000.
Show the journal entries to record the transaction.
Illustration 2
Jamie owns a shoe factory. The premises were bought on 1 May 20X3 for $600,000 and
depreciated at 3% per annum straight line.
Jamie now wishes to revalue the factory premises to $900,000 on 1 May 20X8 to reflect
market value.
What is the balance on the revaluation reserve after this transaction?
Illustration 3
Antro Co. buys an asset on 01 Jan 20X4 for $500,000 with a useful economic life of 20
years. On 01 Jan 20X6 the asset is revalued to $600,000.
On 01 Jan 20X7 the asset is revalued again to $400,000.
Show the accounting treatment for the two revaluations and the depreciation charge
for the year ended 31 Dec 20X8.
Illustration 4
Charlie owns a shop in Smallville. He bought it 30 years ago for $150,000, depreciating it
over 50 years. At the start of 20X8 he decides to revalue the unit to $900,000. The shop
has a remaining useful life of 20 years.
What will the depreciation charge be in 20X8?
86

1. The following information relates to OTQ1, OTQ2 and OTQ3.
ABC Company purchased a building on 1/1/07 at a cost of 1,250,000. The building is

depreciated at 2% per annum. At 31/12/10, the building was revalued at 1,500,000
reflecting its value on the market at that time. The company revalued the building 31/12/14
and found that the market value was 1,000,000.
What are the journal entries required in 2010 after the first revaluation?
A. Dr Asset 350,000 Cr Revaluation Reserve 350,000 Cr P&L 0

B. Cr Asset 350,000 Dr Revaluation Reserve 350,000 Cr P&L 0
C. Dr Asset 350,000 Cr Revaluation Reserve 0 Cr P&L 350,000
D. Cr Asset 350,000 Dr Revaluation Reserve 0 Dr P&L 350,000
2. What are the journal entries required in 2014 after the second revaluation?
A. Cr Asset 410,000 Dr Revaluation Reserve 350,000 Dr P&L 60,000

B. Dr Asset 410,000 Cr Revaluation Reserve 410,000 Cr P&L 0
C. Dr Asset 350,000 Cr Revaluation Reserve 350,000 Cr P&L 60,000
D. Dr Asset 410,000 Cr Revaluation Reserve 350,000 Cr P&L 60,000
3. What is the depreciation charge for 2015?
2015 ______
4. In the notes to the financial statements, what is missing from the disclosure items below
in terms of revaluation of a non current asset.
• Date
• Assumption
• Qualified Revaluer
• Revaluation Gain/Loss
87
Mind Map 20 - Investment

Property (IAS 40)
88
Illustration 1
Which of the following are Investment Property?
• Building used as accommodation for staff.

• Land purchased as an investment. No planning consent yet.
• New office building purchased for capital appreciation.
Illustration 2
A company has purchased a building for investment purposes on 1st Jan 20X0. The
building cost a total of $1.5m with the land element being estimated at $500,000.
The building has a useful life of 30 years. At the 31st December 20X0 the fair value of the
building (including the land) was $2m.
Show the treatment of the property for the two methods possible under IAS 40.
89
Aston Co. owns a property which cost $400,000 7 years ago at which time it had a useful
economic life of 20 years. The property is rented out to Villa Co. under an operating lease
and has been treated using the cost model. Aston Co. has now decided to revalue the
property to it’s current fair value of $500,000.
Which of the following is correct?
A. A revaluation reserve of $240,000 will be created.

B. A charge of $240,000 will be taken to Profit or Loss.
C. A gain of $240,000 will be taken to Profit or Loss.
D. The carrying value of the property will be increased by $100,000.
90
Mind Map 21 - Intangible

Assets (IAS 38)
91
Illustration 1
Which of the following should be classified as development?
1. Lion Ltd has spent $200,000 investigating whether a particular substance, drefite, found
in the Arctic Circle is resistant to heat.
2. Hoey Ltd has incurred $250,000 expenses in the course of making new material for ski-
equipment which will be more durable.
3. Ryan Ltd has found that a chemical compound, mallerite, is harmful to the human body.
4. Lion Ltd has incurred a further $300,000 using drefite in creating prototypes of a new
heat-resistant body-suit for humans.
Illustration 2
Coddy Ltd is developing a new product, the fold-up bicycle. Forecasts are as follows:
Expense Costs
20X5 20X6 20X7 20X8
$ $ $ $
Revenue from other activities 500 700 800 800
Revenue from Fold-up Bicycle 500 700 900
Development costs -600
Show how the development costs should be treated if:
1. the costs do not qualify for capitalisation

2. the costs do qualify for capitalisation.
92
Illustration 3
A company has 3 projects in development:
Project A is in development and testing of the product has proved successful. Production
has begun and some sales have been made to date. The costs have been measured
accurately and the project looks likely to be profitable. All costs incurred so far meet the
criteria to be capitalised under IAS 38.
Project B is also in development and testing of the product has proved successful. The
costs have been measured accurately and the company expects to begin production and
sales next year. All costs incurred so far meet the criteria to be capitalised under IAS 38.
Project C was begun in the current period and to date there has been a feasibility study
carried out which was inconclusive.
Other Information:
A B C
Total Costs to the start of the year 600 500
Costs incurred in the period 200 100 150
Total Anticipated Revenues 20,000 30,000 Unknown
Revenue in Period 5,000 0 0
Show how the above will be treated in the current period accounts discussing each project
individually.
93
1. Which one of the following could be classified as deferred development expenditure in

M’s statement of financial position as at 31 March 2010 according to IAS 38 Intangible
assets?
A. $120,000 spent on developing a prototype and testing a new type of propulsion system
for trains. The project needs further work on it as the propulsion system is currently not
viable.
B. A payment of $50,000 to a local university’s engineering faculty to research new
environmentally friendly building techniques.
C. $35,000 spent on consumer testing a new type of electric bicycle. The project is near
completion and the product will probably be launched in the next twelve months. As this
project is the first of its kind for M it is expected to make a loss.
D. $65,000 spent on developing a special type of new packaging for a new energy efficient
light bulb. The packaging is expected to be used by M for many years and is expected
to reduce M’s distribution costs by $35,000 a year.
2. Which ONE of the following events would result in an asset being recognised in KJH’s
statement of financial position at 31 January 2012?
A. KJH spent $50,000 on an advertising campaign in January 2012. KJH expects the
advertising to generate additional sales of $100,000 over the period February to April
2012.
B. KJH is taking legal action against a contractor for faulty work. Advice from its legal team
is that it is likely that KJH will receive $250,000 in settlement of its claim within the next
12 months.
C. KJH purchased the copyright and film rights to the next book to be written by a famous
author for $75,000 on 1 March 2011.
D. KJH has developed a new brand name internally. The directors value the brand name at
$150,000.
94
3. Dempsey’s year end is 30 September 2014. Dempsey commenced the development

stage of a project to produce a new pharmaceutical drug on 1 January 2014. Expenditure
of $40,000 per month was incurred until the project was completed on 30 June 2014 when
the drug went into immediate production. The directors became confident of the project’s
success on 1 March 2014. The drug has an estimated life span of five years; time
apportionment is used by Dempsey where applicable.
What amount will Dempsey charge to profit or loss for development costs, including any
amortisation, for the year ended 30 September 2014?
A $12,000
B $98,667
C $48,000
D $88,000
4. Which ONE of the following CANNOT be recognised as an intangible non-current asset

in GHK’s statement of financial position at 30 September 2011?
A. GHK spent $12,000 on a consultation to determine demand for a new type of product.
B. GHK purchased another entity, BN on 1 October 2010. Goodwill arising on the
acquisition was $15,000.
C. GHK purchased a brand name from a competitor on 1 November 2010, for $65,000.
D. GHK spent $21,000 during the year on the development of a new product. The product
is being launched on the market on 1 December 2011 and is expected to be profitable.
95
Mind Map 22 - Government

Grants (IAS 20)
96
Illustration 1
A company purchases an item of plant on which it receives a government grant of 30% of
the purchase price. The plant cost $2m and has no residual value.
The plant is to be depreciated on a straight line basis over it’s 10 year life.
Show the possible accounting treatments for the government grant in the first year.
97
1. Which of the following statements about IAS 20 Accounting for Government Grants and
Disclosure of Government Assistance are true?
I. A government grant related to the purchase of an asset must be deducted from the
carrying amount of the asset in the statement of financial position
II. A government grant related to the purchase of an asset should be recognised in profit
or loss over the life of the asset
III. Free marketing advice provided by a government department is excluded from the
definition of government grants
IV. Any required repayment of a government grant received in an earlier reporting period
is treated as prior period adjustment
A (i) and (ii)

B (ii) and (iii)
C (ii) and (iv)
D (iii) and (iv)
98
Mind Map 23 - Borrowing

Costs (IAS 23)
99
Illustration 1
A company is building a qualifying asset worth $2.5m and has issued a bond of the same
value to do so with an effective interest rate of 6%.
The asset will take 9 months to build and for the first 3 months the company invests the
proceeds of the bond and earns interest at 3%.
What borrowing costs should be capitalised?
Illustration 2
A company has a £1m 6% loan and a £2m 8% loan. It builds a building costing £600,000
and it takes 8 months.
What borrowing costs should be capitalised?
Illustration 3
Company buys land on 1/12, a planning application is prepared during December and
January. Permission is obtained at the end of January. Payment for the land is made on
1/2. On this date a loan is taken out to pay for the land and building construction
Adverse weather conditions meant a delay in the commencement of work until 15/3.
When should interest be capitalised from?
Illustration 4
Davos is building an office block and issued a $10 million unsecured loan with a coupon
(nominal) interest rate of 6% on 1 April 20X9. The loan is redeemable at a premium which
means the loan has an effective finance cost of 7·5% per annum.
The loan was specifically issued to finance the building of the new block which meets the
definition of a qualifying asset in IAS 23. Construction of the block commenced on 1 May
20X9 and it was completed and ready for use on 28 February 2010, but did not open for
trading until 1 April 20X0.
During the year trading at Davos’ was below expectations so they suspended the
construction of the new block for a two-month period during July and August 20X9. The
proceeds of the loan were temporarily invested for the month of May 20X9 and earned
interest of $40,000.
Calculate the borrowing costs that can be capitalised under IAS 23
100

1. Indicate which of the following is NOT a qualifying asset.
A. You are distilling whisky, and it must be allowed 10 years to mature.

B. You are a wholesaler. All goods purchased leave your firm as sales, unchanged
from their state of arrival.
C. You are building a town’s power-generation facility, which will take 4 years to
complete
D. You are building a manufacturing plant, which will take 2 years to complete
2. You have a qualifying asset, a chemical plant. 80% of your company’s borrowings are in
relation to this qualifying asset. The remainder of the borrowings are not used for
qualifying assets. Total borrowings are $30,000 and the effective rate is 6%. The plant was
finished 2 months before the year end.
How much can be capitalised?
A. 1,500
B. 400
C. 2,000
D. 3,600
3. Capitalisation is suspended if active development of an asset is suspended for an

extended period of time.
True
False
101
Mind Map 24 - Operating

Segments (IFRS 8)
102
Illustration 1
Norman, a public limited company, has three business segments which are currently
reported in its financial statements. Norman is an international hotel group which reports to
management on the basis of region. It does not currently report segmental information
under IFRS8 ‘Operating Segments’. The results of the regional segments for the year
ended 31 May 2008 are as follows:
Revenue Segmental Segmental Segmental

Region
External Internal Profit/Loss Assets Liabilities
$m $m $m $m $m
European 200 3 -10 300 200
South East Asia 300 2 60 800 300
Other 500 5 105 2,000 1,400
There were no significant inter company balances in the segment assets and liabilities.
The hotels are located in capital cities in the various regions, and the company sets
individual performance indicators for each hotel based on its city location.
Required:
Discuss how the principles in IFRS 8 ‘Operating Segments’ for the determination of
a company’s reportable operating segments would be applied to Norman plc using
the information given above.
103
Illustration 2
JK is an entity that operates in the wholesale and retail clothing market sectors across
several countries. It prepares its financial statements in accordance with IFRSs. The
directors are considering listing JK on a local stock exchange within the next 12 months.
One of the directors has raised concerns about the costs associated with being a listed
entity, in particular the additional expense of producing operating segment information.
(a) Explain how the requirements of IFRS 8 Operating segments assist entities in
minimising the costs of producing the operating segment disclosures required
by the standard as well as the benefits that could be gained by investors from
reviewing the operating segment disclosures of JK when making decisions on
investment.
(b) Discuss the potential limitations faced by investors of using operating segment
information when making investment decisions.
104

1. Decking is a multidivisional company that has both internal sales and external sales to
customers. Decking should report segment financial information for each segment meeting
which of the following criteria?
A. Segment profit or loss is 10% or more of consolidated profit or loss.

B. Segment profit or loss is 10% or more of combined profit or loss of all company
segments.
C. Segment revenue is 10% or more of combined revenue of all company segments.
D. Segment revenue is 10% or more of consolidated profit or loss.
2. The following information pertains to Willow Company for the year ended 31 December
20X4.
Sales to customers 2,000,000

Intersegment sales 600,000
All of Willows segments are engaged solely in manufacturing operations. Willow has a
reportable segment if that segment’s revenue exceeds:
A. 264,000
B. 260,000
C. 204,000
D. 200,000
3. Reported segments should report _____% or more of the entity’s total external revenue.
What is the missing percentage?
A. 25%
B. 50%
C. 75%
D. 15%
105
Mind Map 25 - Assets Held

For Sale and Discontinued
Operations (IFRS 5)
106
Illustration 1
Archie Co. committed itself at the beginning of the financial year to selling a property that
is being under-utilised following the economic downturn. As a result of the economic
downturn, the property was not sold by the end of the year. The asset was actively
marketed but there were no reasonable offers to purchase the asset. Archie is hoping that
the economic downturn will change in the future and therefore has not reduced the price of
the asset.
Can Archie Co. classify the property as available for sale under IFRS 5?
Illustration 2
A company has a machine that cost $300,000 to buy two years ago. At the time of
purchase the machine had a useful economic life of 30 years and they apply the cost
model under IAS 16 (Cost less depreciation).
The company has decided to sell the machine and it’s fair value at this time is $220,000
with additional costs to sell being estimated at $5,000.
Although the machine has not been sold at the year end as the decision was taken that
day the company is confident that it will be sold quickly and is committed to selling it
having begun to market the machine to potential purchasers.
How should the machine be treated at the year end in the financial statements and
at what value will it be included?
107
Illustration 3
A company has two divisions each of which form a major line of business, Division A and
Division B.
Mid way through the current period Division A was shut down with losses of $50,000 on
the sale of the fixed assets of the business and redundancy costs of $100,000.
Division B was restructured incurring losses of $85,000.
Results in the period included the following information:
Div A Div B
$‘000 $‘000
Revenue 1,000 2,000
Cost of Sales 750 1,250
Distribution 250 300
Administration 100 50
Finance costs for the business were $40,000 in the period and the tax charge was
$32,000.
Prepare a note to the accounts showing the analysis of the discontinued operation
and draft the income statement for the company for the period.
108
1. BN has an asset that was classified as held for sale at 31 March 2012. The asset had a
carrying value of $900 and a fair value of $800. The cost of disposal was estimated to be
$50. The useful economic life of the asset was 10 years.
According to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which
ONE of the following values should be used for the asset in BN’s statement of financial
position as at 31 March 2012?
A. $750
A. $750
B. $810
C. $720
2. PQ has ceased operations overseas in the current accounting period. This resulted in
the closure of a number of small retail outlets.
Which one of the following costs would be excluded from the loss on discontinued
operations?
A Loss on the disposal of the retail outlets

B Redundancy costs for overseas staff
C Cost of restructuring head office as a result of closing the overseas operations
D Trading losses of the overseas retail outlets up to the date of closure
109
Mind Map 26 - Impairment of

Assets (IAS 36)
110
Illustration 1
The carrying value of an item of plant in the financial statements is $400,000. The
recoverable amount of the plant has been determined as $275,000.
Is the plant impaired and if so by how much?
Illustration 2
A company has an asset for which the following information is relevant:
$‘000
Carrying amount 400
Fair Value 350
Cost to sell 25
Cash flows expected in each of the next 5 years 90
Discount rate 10%
Annuity rate for 10% over 5 years 3.791
Carry out the impairment review for the asset.
Illustration 3
Marko owned a piece of property, plant and equipment (PPE) which cost $12 million and
was purchased on 1 May 20X8. It is being depreciated over 10 years on the straight-line
basis with zero residual value. On 30 April 20X9, it was revalued to $13 million and on 30
April 20X0, the PPE was revalued to $8 million.
The whole of the revaluation loss had been posted to the statement of comprehensive
income and depreciation has been charged for the year.
Show the correct treatment.
111
Illustration 4
A cash generating unit has the assets outlined below. It’s recoverable amount has been
assessed as $1,000. Show the treatment for any impairment.
Assets Carrying Value
Goodwill 100
PPE 800
Intangible 400
1300
Illustration 5
A cash generating unit has the assets outlined below. It’s recoverable amount has been
assessed as $1,650.
The PPE has been damaged and now has a fair value of 700. The recoverable amount of
the receivables has been assessed at their current carrying amount.
Show the treatment for any impairment.
Assets Carrying Value
Goodwill 100
PPE 800
Intangibles 700
Receivables 200
Inventory 400
2200
112
1. Which of the following is NOT an indicator of impairment?
A. Advances in the technological environment in which an asset is employed have an

adverse impact on its future use
B. An increase in interest rates which increases the discount rate an entity uses
C. The carrying amount of an entity’s net assets is higher than the entity’s number of
shares in issue multiplied by its share price
D. The estimated net realisable value of inventory has been reduced due to fire damage
although this value is greater than its carrying amount
2. Riley acquired a non-current asset on 1 October 2009 at a cost of $100,000 which had
a useful economic life of ten years and a nil residual value. The asset had been correctly
depreciated up to 30 September 2014. At that date the asset was damaged and an
impairment review was performed. On 30 September 2014, the fair value of the asset less
costs to sell was $30,000 and the expected future cash flows were $8,500 per annum for
the next five years. The current cost of capital is 10% and a five year annuity of $1 per
annum at 10% would have a present value of $3·79
What amount would be charged to profit or loss for the impairment of this asset for the
A $17,785
B $20,000
C $30,000
D $32,215
3. The net assets of Fyngle, a cash generating unit (CGU), are:
Property, plant and equipment $200,000

Allocated goodwill $50,000
Product patent $20,000
Net current assets (at net realisable value) $30,000
As a result of adverse publicity, Fyngle has a recoverable amount of only $200,000.

What would be the value of Fyngle’s property, plant and equipment after the allocation of
the impairment loss?
A $154,545
B $170,000
C $160,000
D $133,333
113
Mind Map 27 - Inventories

(IAS 2)
114
Illustration 1
ABC Co. has the following items in inventory:
i) Goods purchased for resale at a cost of $40,000. The recent downturn in the economy
has meant that these goods will now sell for $42,000 with costs to sell of $2,500.
ii)Materials purchased at a cost of $30,000 per tonne which will be sold at a profit. The
manufacturer of the materials has just announced that from now on they will sell these
materials to you at a lower price of $28,000 per tonne.
iii)Plant constructed for a specific customer at a cost of $50,000 and an agreed price to the
customer of $60,000. New health and safety requirements mean that the plant will need
to be modified at a cost to ABC Co. of $4,000 before it can be delivered to the customer.
At what value should each of the above be included in the inventory of ABC Co.
115
Objective Test Question

On 30 September 2014, Razor’s closing inventory was counted and valued at its cost of
$1 million. Some items of inventory which had cost $210,000 had been damaged in a flood
(on 15 September 2014) and are not expected to achieve their normal selling price which
is calculated to achieve a gross profit margin of 30%. The sale of these goods will be
handled by an agent who sells them at 80% of the normal selling price and charges Razor
a commission of 25%.
At what value will the closing inventory of Razor be reported in its statement of financial
position as at 30 September 2014?
A $1 million
B $790,000
C $180,000
D $970,000
116
Mind Map 28 - Current Tax

(IAS 12)
117
Illustration 1
Sebastian Philpott commenced trade on 1 January 2011 and estimates that the tax
payable for the year ended 31 December 2011 is $200,000.
In August 2012, the accountant of Sebastian Philpott receives and pays tax of $210,000
for the year ended 31 December 2011. At 31 December 2012 he estimates that the
company owes $220,000 for corporation tax in relation to the Y/E 31 December 2012.
Calculate the tax charge and income tax payable accounts for the years ended 31
December 2011 and 2012, and detail the amounts shown in the statement of
financial position and income statement in both years.
Illustration 2
Kettle Ltd estimated last year’s tax charge to be $250,000. However, their tax advisor
settled with the tax authorities at $220,000.
This year, Kettle Ltd estimate their tax bill to be $270,000, but they are confused as to how
this should be reflected in the financial statements.
Calculate tax liability and tax charge to be shown in the statement of financial
position and income statement for the current year.
118
1. Which of the following statement about the income tax expense reported for accounting
purposes is NOT correct.
A. It is shown as an expense in the income statement

B. It is the amount that must be paid to the government in respect of the current
income tax year.
C. It is not necessarily the same as the income tax payable.
D. None of the above
2. On 31 December 20X4, PS had a debit balance b/f on its corporate income tax account
of 42,000, representing an under provision of the tax charge for the year ended 31
December 20X3.
PS’s taxable profit for the year ended 31 December 20X4 was 325,000 and the applicable
income tax rate for the year to 31 December 20X4 was 19%.
Calculate the income tax expense that PS will charge in its statement of profit or loss for
the year ended 31 December 20X4. (To the nearest whole number)
31 December 20X4 _______
3. On 31 December 20X4, SP had a credit balance b/f on its corporate income tax account
of 35,000, representing an over provision of the tax charge for the year ended 31
December 20X3.
SP’s taxable profit for the year ended 31 December 20X4 was 832,000 and the applicable
income tax rate for the year to 31 December 20X4 was 24%.
Calculate the income tax expense that SP will charge in its statement of profit or loss for
the year ended 31 December 20X4. (To the nearest whole number)
31 December 20X4 _______
119
Mind Map 29 - IAS 8

Accounting Policies,
Estimates & Errors
120
Illustration 1
I. A change in the IFRS relating to leases means that an entity that used to recognise a
lease on an item of plant as an operating lease must now recognise it as a finance
lease.
II. Depreciation has previously been charged by the entity at 25% straight line but has
decided to change this to 30% reducing balance.
III. The entity had previously charged certain overheads within administration expenses
but now has decided to show them within cost of sales.
IV. The method used by the entity to measure the value of it’s inventory has been
changed.
For each of the above is it a change in accounting policy or a change in accounting

estimate?
121
Illustration 2
A company discovers that items of inventory with a value of £1m were included in the
Statement of Financial Position as at 31 December 20X0 even though they were in fact
sold prior to the year end.
The figures reported in the year to December 20X0 and the figures for the current year
were:
20X1 20X0
$‘000 $‘000
Sales 10,000 9,000
Cost of Sales 5,000 3,000
Gross Profit 5,000 6,000
Tax 300 250
Net Profit 4700 5750
Retained Earnings B/F 1st Jan 20X0 $12m
Show the retained earnings for each year and the revised 20X1 Income Statement with
comparatives (ignore any tax effects).
122
Which of the following would be a change in accounting policy in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors?
A. Adjusting the financial statements of a subsidiary prior to consolidation as its accounting

policies differ from those of its parent
B. A change in reporting depreciation charges as cost of sales rather than as
administrative expenses
C. Depreciation charged on reducing balance method rather than straight line
D. Reducing the value of inventory from cost to net realisable value due to a valid adjusting
event after the reporting
Which of the following is a change of accounting policy under IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors?
A. Classifying commission earned as revenue in the statement of profit or loss, having

previously classified it as other operating income
B. Switching to purchasing plant using finance leases from a previous policy of
purchasing plant for cash
C. Changing the value of a subsidiary’s inventory in line with the group policy for
inventory valuation when preparing the consolidated financial statements
D. Revising the remaining useful life of a depreciable asset
According to IAS 8 Accounting policies, changes in accounting estimates and errors, which
ONE of the following is a change in accounting policy requiring a retrospective adjustment
in financial statements for the year ended 31 December 2010?
A. The depreciation of the production facility has been reclassified from administration
expenses to cost of sales in the current and future years.
B. The depreciation method of vehicles was changed from straight line depreciation to
reducing balance.
C. The provision for warranty claims was changed from 10% of sales revenue to 5%.
D. Based on information that became available in the current period a provision was made
for an injury compensation claim relating to an incident in a previous year.
123
Mind Map 30 - Interim

Reporting

124
Mind Map 31 - Pensions

(IAS 19)
125
Illustration 1
A company maintains a defined benefit pension scheme for it’s employees. The following
information is relevant:
The pension assets brought forward in 20X0 $1,000 with a closing balance of $2,000.
The Discount Rate is 11%.
Calculate the expected return on Pension Assets.
Illustration 2
The liabilities of the scheme were $1,400 at the start of the period and $2,600 at the end.
The discount rate is 12%.
Calculate the Interest Cost for the period.
Illustration 3 - Try this yourself!

The following details refer to Company A’s pension scheme.
B/F C/F
Pension Assets 1,000 2,000
Pension Liabilities 1,400 2,600
The discount rate is 11%
Calculate the return on assets and the interest cost.
126
Illustration 4
The pension assets brought forward in 20X0 $1,800 with a closing balance of $2,700.
The company contributes $90 per year into the scheme.
Benefits paid out in the period were $100.
The liabilities of the scheme were $1,600 at the start of the period and $2,100 at the end.
The discount rate is 12%.
The terms of the scheme have changed meaning that past service costs have arisen of
$35 and the current service costs for the period are $70.
Required:
Show the treatment for the pension scheme in the financial statements of the
company.
127
1. Which of the following represent a defined benefit scheme?
A. The employer undertakes to finance a pension income of a certain amount

B. The cost of providing pensions is not certain and varies from year to year
C. The employer has no further obligation after this amount is paid
2. Which of the following represent a defined contribution scheme?
A. The employer has an ongoing obligation to make sufficient contributions to the plan
to fund the pensions
B. The annual cost to the employer is reasonably predictable
C. The employer’s contribution is usually a fixed percentage of the employee’s salary.
3.Trampo Co makes contributions to a defined contribution pension fund for employees at

a rate of 5% of gross salary. The contributions made are $10,000 per month for
convenience with the balance being contributed in the first month of the following
accounting year. The wages and salaries for 20X4 are $4.7m.
Calculate the pension expense to be charged to the statement of profit or loss for 20X4.
A. $100,000
B. $235,000
C. $4.7m
D. $200,000
4. Trampo Co makes contributions to a defined contribution pension fund for employees at

a rate of 5% of gross salary. The contributions made are 10,000 per month for
convenience with the balance being contributed in the first month of the following
accounting year. The wages and salaries for 20X4 are 4.7m.
Calculate the pension accrual/prepayment at the end of the year.
A. $100,000
B. $235,000
C. $115,000
D. $200,000
128
Mind Map 32 - Foreign

Exchange (IAS 21)
129
Illustration 1
Zian is located in a foreign country and imports its raw materials at a price which is
normally denominated in dollars. The product is sold locally at selling prices denominated
in dinars, and determined by local competition. All selling and operating expenses are
incurred locally and paid in dinars. Distribution of profits is determined by the parent
company, Ribby. Zian has financed part of its operations through a $4 million loan from
Hall which was raised on 1 June 2007. This is included in the financial assets of Hall and
the non-current liabilities of Zian. Zian’s management have a considerable degree of
authority and autonomy in carrying out the operations of Zian and other than the loan from
Hall, are not dependent upon group companies for finance.
Required
Discuss and apply the principles set out in IAS 21 ‘The effects of changes in foreign
exchange rates’ in order to determine the functional currency of Zian.
(8 marks)
Illustration 2
Bulldog Ltd has a year end of 31 January.
On 13th October Bulldog Ltd buys goods from Eagle Inc. a US supplier for $250,000.
On 24th November Bulldog settles the transaction in full.
Exchange rates
13th October £1 : $1.45
24th November £1 : $1.55
Show the accounting entries for these transactions.
130
Illustration 3
Jeff Ltd. purchases an item of plant from a foreign supplier for cash of €100,000. Jeff is a
US company and the exchange rate at the time was $ = €1.50.
What value in $ will the asset be recorded at?
Illustration 4
Jeff Ltd. purchases an item of plant on 1st June from a foreign supplier on one month’s
credit for €100,000. Jeff is a US company.
Exchange rates
1st June $ = €1.50
21st June $ = €1.40
How will this transaction be dealt with in the accounts for the year to 21st June?
131
1. Which of the following statements describes Functional Currency?
A. It is the main currency used by a business or unit of a business.

B. It is the currency that the financial statements are presented in.
2. How does the entity account for the sale at 12 March 20X4?
A. Dr Receivables 769,231 Credit Sales 769,231
B. Dr Receivables 325,000 Credit Sales 325,000
C. Dr Receivables 833,000 Credit Sales 833,333
D. Dr Receivables 300,000 Credit Sales 300,000
3. What is the gain or loss on exchange when the payment is made in April 20X4?
A. Gain = 64,102
B. Loss = 64,102
C. Gain = 25,000
D. Loss = 25,000
132
Mind Map 33 - Subsequent

Events (IAS 10)
133
Illustration 1
Which of the following are adjusting events for Fishcakes Ltd? The year end is 30 June
20X1 and the accounts are approved on 20 August 20X1.
1. Sales of year-end inventory on 4 July 2011 at less than cost

2. Issue of new ordinary shares on 10 July 2011.
3. A fire in the warehouse occurred on 16 July 2011. All stock was destroyed.
4. A major credit customer was declared bankrupt on 20 July 2011.
5. All of the share capital of a rival, Haggis Ltd was acquired on 22 July 2011.
6. On 4 August, $700,000 was received in respect of an insurance claim dated 13
February 2011.
Which of the following are adjusting events for Fishcakes Ltd?
134

1. Which Which TWO of the following events which occur after the reporting date of a
company but before the financial statements are authorised for issue are classified as
ADJUSTING events in accordance with IAS 10 Events after the Reporting Period?
(i) A change in tax rate announced after the reporting date, but affecting the current tax
liability
(ii) The discovery of a fraud which had occurred during the year
(iii) The determination of the sale proceeds of an item of plant sold before the year end
(iv) The destruction of a factory by fire
A (i) and (ii)

B (i) and (iii)
C (ii) and (iii)
D (iii) and (iv)
2. IAS 10 Events after the reporting period distinguishes between adjusting and non-
adjusting events.
Which ONE of the following is an adjusting event in XS’s financial statements?
A. A dispute with workers caused all production to cease six weeks after the year end.
B. A month after the year end XS’s directors decided to cease production of one of its
three product lines and to close the production facility.
C. One month after the year end a court determined a case against XS and awarded
damages of $50,000 to one of XS’s customers. XS had expected to lose the case and
had set up a provision of $30,000 at the year end.
D. Three weeks after the year end a fire destroyed XS’s main warehouse facility and most
of its inventory.
3. Which ONE of the following would be classified by WDC as a non-adjusting event

according to IAS 10 Events After The Reporting Period? WDC’s year end is 30 September
2011.
A. WDC was notified on 5 November 2011 that one of its customers was insolvent and
was unlikely to repay any of its debts. The balance outstanding at 30 September 2011
was $42,000.
B. On 30 September WDC had an outstanding court action against it. WDC had made a
provision in its financial statements for the year ended 30 September 2011 for damages
awarded against it of $22,000. On 29 October 2011 the court awarded damages of
$18,000.
C. On 5 October 2011 a serious fire occurred in WDC’s main production centre and
severely damaged the production facility.
D. The year end inventory balance included $50,000 of goods from a discontinued product
line. On 1 November 2011 these goods were sold for a net total of $20,000.
135
Mind Map 34 - Short Term

Finance I

136
1. Which of the following is NOT a source of short term finance?
A. Trade payables
B. Factoring
C. Overdraft
D. Share Issue
2. Which of the following is an advantage of a bank overdraft?
A. Flexible source of finance

B. Repayable on demand
C. May require security
D. Variable finance costs
3. What is factoring?
A. Outsourcing of the credit control department to a third party.

B. Invoices are used as security to borrow funds
4. Which of the following is a method of dealing with credit risk on exports.
A. Negotiable instruments
B. Short dated government bonds
C. Documentary credits
D. Bills of exchange
137
Mind Map 35 - Short Term

Finance II
138
Illustration 1
A US Treasury Bill with a face value of $10,000 is issued at a 6% discount yield for 60
days.
Calculate the discount value on the Bill assuming 360* days in the year.
*This is the number used on the US calculations.
Illustration 2
A US Treasury Bill with a face value of $10,000 is issued at a 4% discount yield for 45
days.
Calculate the issue price of the Bill assuming 360* days in the year.
*This is the number used on the US calculations.
Illustration 3
A Government has issued debt which is redeemable in 5 years time.
Interest is payable at 8%.
The current market value of the debt is $102.
Calculate the Yield to Maturity on the bond.
Illustration 4
A Government has issued debt which is redeemable in 5 years time.
Interest is payable at 10%.
The current market value of the debt is $104.
Calculate the Yield to Maturity on the bond.
139
1. A Treasury Bill with a face value of 20,000 is issued at a 9% discount yield for 90 days.
Calculate the discount value on the Bill assuming 360 days in the year.
2. A Treasury Bill with a face value of 20,000 is issued at a 9% discount yield for 90 days.
Calculate the issue price of the Bill.
3. Hazel Co is considering investing in government bonds. The current price of a $100

bond with 5 years maturity is 98. The bonds have a coupon rate of 6% and repay face
value of $100 at the end of the 15 years.
Calculate the yield to maturity using discount rates of 5% and 15%.
A. 5.1%
B. 6.84%
C. 4.5%
D. 4.9%
4. Which of the following describes a commercial paper (CP)
A. An unsecured, short-term debt instrument issued by a corporation, typically for the

financing of accounts receivable, inventories and meeting short-term liabilities
B. Is issued by a corporation in order to raise financing for a variety of reasons such as

to ongoing operations or to expand business
140
Mind Map 36 - Working

Capital
141
Illustration 1
Balance Sheet
$‘000
ASSETS
Non Current Assets 1000
Inventory 300
Receivables 200
Cash 300
1800
LIABILITIES
Ordinary Shares 800
Reserves 200
Long term Liabilities 700
Payables 100
Overdraft -
1800
Income Statement
$‘000
Revenue 1000
COS 800
Gross Profit 200
Other Costs 100
Net Profit 100
Other Information:
All sales are made on credit.
Required:
Calculate the Cash Operating Cycle for Inter Ltd.

142
Part III
Show the journal entries and calculate the Revised Balance sheet if the operating cycle
changes to:
Item Days
Inventory Period 90
Collection Period 30
Less:
Payables Period 60
60
143
1. Which of the following are components of working capital within the financial
statements:
1. Non Current Assets.

2. Inventory.
3. Payables.
4. Intangible Assets.
A. 1 and 2
B. 2 and 3
C. 3 and 4
D. 2 and 4
2. Which of the following are indicators of overtrading.
i) Reliance on long term finance.

ii) Offering lax credit terms.
iii) Build up of inventory.
iv) Rapidly decreasing sales.
v) Deteriorating Current ratio.
A. i) iii) and iv) only

B. ii) iii) and v) only
C. All of the above
D. i) ii) and iii) only
3. The following information has been calculated for A Co:
Trade receivables collection period 52 days

Raw material inventory turnover period 42 days
Work in progress inventory turnover period 30 days
Trade payables payment period 66 days
Finished goods inventory turnover period 45 days
What is the length of the working capital cycle?
A 103 days
B 131 days
C 235 days
D 31 days
144
4. If inventory days go up from 100 to 150 the company will need to invest more cash in
the business.
Is this statement:
A. TRUE
B. FALSE
5. Which of the following statements concerning working capital management are correct?
1 The twin objectives of working capital management are profitability and liquidity
2 A conservative approach to working capital investment will increase profitability
3 Working capital management is a key factor in a company’s long-term success
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3
2 A aggressive approach to working capital investment will increase profitability
3 Working capital management is not a key factor in a company’s long-term success
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3
2 A moderate approach to working capital investment will increase profitability
3 An aggressive approach to working capital investment uses more long term finance than
short term.
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3
145
1 A conservative approach to working capital investment employs uses long term finance
to finance some fluctuating current assets.
2 An aggressive approach to working capital investment will increase profitability
3 Working capital management has no effect on profitability of the company.
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3
146
Mind Map 37 - Managing

Receivables & Payables
147
Illustration 1
Credit sales in the year are currently 1200 and the company offers 3 month credit terms.
The overdraft rate for the company is 10%.
New Policy
2% discount if paid in less than 10 days
2 month terms for everyone else.
20% will take the discount
Should the new policy be implemented?
Illustration 2
Receivables are currently $4,600,000. Sales are $37,400,000
A factor has offered to take over the administration of trade receivables on a non-recourse
basis for an annual fee of 3% of credit sales.
The factor will maintain a trade receivables collection period of 30 days and Gorwa Co will
save $100,000 per year in administration costs and $350,000 per year in bad debts.
A condition of the factoring agreement is that the factor would advance 80% of the face
value of receivables at an annual interest rate of 7%. The current overdraft rate is 5%
148
1. How can a company assess the credit worthiness of their customers?
1. Get trade references from other suppliers or from banks.

2. Use a credit rating agency.
3. Offer initial high levels of credit.
4. Ask for a written promise to pay.
A 1 and 3 only
B 1 and 2 only
C 2 and 3 only
D 1, 2 and 3
2. Which of the following are benefits of a company offering a discount to customers for
early payment of invoices?
1. Better liquidity for the firm.

2. Less interest as less or no overdraft will be required.
3. Risk of more bad debt as customers take longer to pay.
4. Loss of customers who don’t take advantage of the discount.
A. 2 and 3 only
B. 1 and 3 only
C. 1 and 2 only
D. 1, 2 and 3
3. The management of XYZ Co has annual credit sales of $20 million and accounts
receivable of $4 million. Working capital is financed by an overdraft at 12% interest per
year. Assume 365 days in a year.
What is the annual finance cost saving if the management reduces the collection period to
60 days?
A. $85,479
B $394,521
C $78,904
D $68,384
149
4. Which of the following are disadvantages of debt factoring for a company?
1. It can be expensive.
2. It creates a bad impression with customers because the debt is collected by the factor.
3. It can increase the liquidity of the company.
4. It can lose the goodwill of customers.
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3
5. Which of the following statements relate to invoice discounting through a factor?
1. The company retains the risk of bad debt.

2. The factor collects the debt.
3. The factor advances a percentage of the invoice value to the company.
4. Invoice discounting can be used by any company.
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3
150
Mind Map 38 - Inventory

Management
151
Illustration 1
Demand of 1200 units per month.
Cost of making an order of $12.
Cost of one unit $10.
Holding cost per year of 10% of the purchase price of the goods.
Calculate the EOQ & check that it is correct.
Illustration 2
Company orders when the level of stock reaches 50,000
It takes 4 weeks to receive new stock from the time of ordering.
The company uses 7,500 units on average per week.
Calculate the buffer stock.
Illustration 3
The current policy is to order 100,000 units when the inventory level falls to 35,000 units.
Forecast demand to meet production requirements during the next year is 625,000 units.
The cost of placing and processing an order is €250, while the cost of holding a unit in
stores is €0·50 per unit per year. Both costs are expected to be constant during the next
year. Orders are received two weeks after being placed with the supplier. You should
assume a 50-week year and that demand is constant throughout the year.
Calculate EOQ with buffer stock
152
Illustration 4
Demand is 1000 units per month.
Purchase cost per unit £11.
Order cost £30
Holding cost 10% p.a. of stock value.
Required
Calculate the minimum total cost with a discount of 1% given on orders of 1500 and
over
153
1. Which of the following types of cost we are seeking to minimise by using the Economic
Order Quantity?
A. Holding costs and inventory movement costs

B. Ordering costs and holding costs
C. Ordering costs and insurance costs
D. Holding costs and security costs
2. If a company uses the Economic Order Quantity as the level at which to order, how will
they calculate total ordering costs for the year?
A. Cost per order x (Annual Demand / EOQ)

B. Annual Demand x (Cost per order /EOQ)
C. (EOQ / Cost per order) x Holding costs
D. Annual demand x EOQ
3. ABC Co. sells widgets and expects annual demand of 3.4m units. The cost of making
an order is $49.71 and the cost of holding one unit for one year is $0.50.
What is the total ordering costs per year:
A. $5,687.34
B. $6,413.81
C. $6,500.54
D. $6,430.32
4. ABC Co. sells widgets and expects annual demand of 1.2m units. The cost of making
an order is $25.21 and the cost of holding one unit for one year is $0.50.
What is the total holding costs per year:
A. $2,850
B. $3,750
C. $2,450
D. $2,750
154
5. Layla Co. sells 200m wigs in a year with each order taking 15 days to be delivered once
made. They make an order every time their stock levels reach 10m wigs.
What is the buffer stock level for Layla Co.
A. 1,780,822
B. 6,666,666
C. 9,333,333
D. 2,345,632
6. Which of the following are drawbacks of a company using the Economic Order Quantity
method of stock management?
1. Assumes constant ordering costs.

2. Assumes constant demand.
3. Assumes known annual demand.
4. Assumes no buffer stock or lead time.
A 1, 2 and 4 only
B 1 and 3 only
C All of the above
D 1, 2 and 3
7. Stavros Co’s current inventory policy is to order 60,000 units when the inventory level
falls to 55,000 units. Forecast demand to meet production requirements during the next
year is 800,000 units. The cost of placing and processing an order is $90, while the cost
of holding a unit in stores is $1 per unit per year. Both costs are expected to be constant
during the next year. Orders are received three weeks after being placed with the
supplier. You should assume a 50-week year and that demand is constant throughout
the year.
What is the total cost of ordering at the EOQ level?
A. $12,000
B. $6,000
C. $7,000
D. $19,000
155
Mind Map 39 - Cash

Management
156
Illustration 1
A business expects to move 500,000 from it’s interest bearing account into cash over the
course of one year.
The interest rate is 7% and the cost of making a transfer is $250.
How much should the business transfer into cash each time it makes a transfer?
Illustration 2
Using the information in illustration 1 calculate the total cost to the business each year of
their cash management policy.
Illustration 3
Subsonic Speaker Systems (SSS) has annual transactions of $9 million.
The fixed cost of converting securities into cash is $264.50 per conversion.
The annual opportunity cost of funds is 9%.
What is the optimal deposit size?
Illustration 4
If a company must maintain a minimum cash balance of £8,000, and the variance of its
daily cash flows is £4m (ie std deviation £2,000). The cost of buying/ selling securities is
£50 & the daily interest rate is 0.025 %.
Calculate the spread, the upper limit & the return point.
157
1. Which of the following are the reasons for a company to hold cash?
1. Speculation
2. Persuasion
3. Transaction
4. Reaction
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3
2. Revaile Co. has annual transactions of $30 million. The fixed cost of converting
securities into cash is $500 per conversion. The annual opportunity cost of funds is 6%.
What is the optimal deposit size?
A. $21,213
B. $42,426
C. $707,107
D. $42.43
3. Which of the following are problems with the Baumol Model?
1. Assumes constant cash disbursements

2. Assumes that there are no cash receipts, just movements
3. Assumes a risk free interest rate
4. Assumes no safety buffer for cash
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3
158
Mind Map 40 - Cash

Management II
159
Illustration 1
Jenkins Co. is preparing a cash flow forecast for the next four months. They have an
overdraft facility of $10,000 available and the following information is relevant:
1. Sales will be $40,000 in month one and are expected to rise by 5% per month.
2. Wages will be $15,000 in month one and are expected to rise by $500 per month.
3. Other costs will be $10,000 in month one and are expected to rise by $1000 per month.
4. Capital investment of $80,000 for new Plant is scheduled to occur in month 2.
5. An interim payment of 50% of the dividends declared for the year $240,000 will be paid
in month 3.
6. The opening balance on cash is $132,000.
Prepare the cash flow forecast and advise Jenkins on the implications as well as
possible action to take in response.
160
1. Drill has produced the following sales forecast:
£ ‘000
July 850
August 860
September 870
October 880
November 890
December 900
Currently 15% of customers pay in cash, of the credit customers (excl irrecoverable debts),
55% pay in one month, 35% pay in two months and 10% in three months. Irrecoverable
debts are 3%. This payment pattern is expected to continue.
Calculate the forecast sales receipts for October to the nearest 1,000
2. The following items have been extracted from an entity's budget for the next month:
Sales on credit 140,000

Expected increase in inventory in the next month 30,000
Expected decrease in receivables in the next month 15,000
Calculate the budgeted receipt from trade receivables next month?
3. Which of the following is a technique to create a cash budget?
A. A receipts and payments forecast

B. A statement of financial position forecast
C. A statement of profit and loss
D. A statement of changes in equity
161
Mind Map 41 - Cash Flow

Statements
162
Illustration 1
An entity has the following results in their financial statements:
2011 2010
ASSETS $‘000 $‘000
Non Current Assets 1000 1000
Inventory 300 400
Receivables 200 300
Cash 300 200
1800 1900
LIABILITIES
Reserves 200 199
Long term Liabilities 700 801
Payables 100 100
1800 1900
$‘000 $‘000
Revenue 1000 1200
COS 800 1100
Profit on Sale of Non Current Asset 30 0
Other Costs 70 90
PBIT 100 10
Interest Cost 10 7
PBT 90 3
Tax 30 2
PAT 60 1
163
Other Information:
I. Within cost of sales is depreciation of $40,000 and amortisation of an intangible asset

of $30,000.
II. Within other costs is an increase in accrued admin expenses of $5,000.
Perform the reconciliation of Profit Before Tax to Cash Generated From Operations
for 2011.
Illustration 2
An entity has the following information in their financial statements:
2011 2010
PPE 2,000 1,100
Intangible Assets 500 400
Other information:
I. The entity disposed of a piece of plant during the year with a carrying value of $300
for a profit of $50.
II. Intangible assets are made up of qualifying development expenditure on a product
currently being sold, with amortisation in 2011 of $100.
What cash flows will appear in the statement of cash flows for the entity in the year
2011?
164
Illustration 3
Statement of Financial Position 2011 2010
Non Current Assets
PPE (note (i)) 32,600 24,100
Financial Assets (note (ii)) 4,500 7,000
37,100 31,100
Current Assets
Inventory 10,200 7,200
Receivables 3,500 3,700
Bank 1,400
13,700 12,300
Total Assets 50,800 43,400
Equity & Liabilities
Ordinary Shares of $1 (note (iii)) 14,000 8,000
Share Premium (note (iii)) 2,000
Revaluation Reserve (note (iii)) 2,000 3,600
Retained Earnings 13,000 10,100
Non Current Liabilities
Finance Lease Obligations 7,000 6,900
Deferred Tax 1,300 900
Current Liabilities
Tax 1,000 1,200
Bank Overdraft 2,900
Prov’n for warranties (note (iv)) 1,600 4,000
Finance Lease Obligations 4,800 2,100
Trade Payables 3,200 4,600
Total Equity & Liabilities 50,800 43,400
165
Income Statement 2011 2010
$‘000 $‘000
Revenue 58,500 41,000
Cost of Sales -46,500 -30,000
Gross Profit 12,000 11,000
Operating Activities -8,700 -4,500
Investment Income (note (ii)) 1,100 700
Profit Before Tax 3,900 6,800
Income Tax -1,000 -1,800
Profit For the year 2,900 5,000
Note (i) - Property Plant & Equipment
Cost Accumulated Carrying

Depreciation Amount
$‘000 $‘000 $‘000
At 30 September 2010 33,600 -9,500 24,100
New finance lease additions 6,700 6,700
Purchase of new plant 8,300 8,300
Disposal of property -5,000 1,000 -4,000
Depreciation for the year -2,500 -2,500
At 30 September 2011 43,600 -11,000 32,600
The property disposed of was sold for $8.1 million.
Note (ii) - Investments/Investment Income
During the year an investment that had a carrying amount of $3 million was sold for $3.4
million. No investments were purchased during the year.
Investment income consists of:
166
Year to 30 September 2011 2010
$‘000 $‘000
Dividends received 200 250
Profit on sale of investment 400 0
Increases in fair value 500 450
1100 700
Note (iii)
On 1 April 2011 there was a bonus issue of shares that was funded from the share
premium and some of the revaluation reserve. This was followed on 30 April 2011 by an
issue of shares for cash at par.
Note (iv)
The movement in the product warranty provision has been included in cost of sales.
Required:
Prepare a statement of cash flows for Mocha for the year ended 30 September 2011,
in accordance with IAS 7 Statement of cash flows, using the indirect method.
167
1. Which of the following do not appear with cash flows from investing activities within a
statement of cash flows?
A. Interest Received
B. Cash purchase of a new car
C. Profit from disposal of an old car
D. Dividends received
E. Repayment of a loan taken out to purchase some machinery
2. An item of plant costing 1.8m was purchases on 01/01/X4 and is being depreciated over
its UEL of 10 years. Residual value is NIL. On 31/12/X5 the asset was revalued to 1.92m,
there was no change to its UEL. On 31/12/X6 the asset was sold for 2.1m.
The entity prepares financial statements at 31 December each year.
Which two amounts will appear on the statement of profit and loss and the statement of
cash flows regarding the disposal of the plant.
A. 2.1m inflow
B. 2.1m outflow
C. 0.42M Gain on Disposal
D. 0.18M Gain on Disposal
E. 0.372M Gain on Disposal
3. The following is an extract of the Statement of Financial Position for Bubbly Company
for the years 20X4 and 20X3
Current Assets 20X4 20X3

Cash and Cash Equivalents 2,350,000 -
Current Liabilities
Cash and Cash Equivalents - 1,112,000
Which of the following is correct?
A. Net increase in cash of 1,238,000

B. Net increase in cash of 3,462,000
C. Net decrease in cash of 1,238,000
D. Net decrease in cash of 3,462,000
168
4. Which of the following is a disadvantage of Cash Flow Statements?
A. Used to value the business

B. Users can access the quality of profit
C. Harder to manipulate
D. Prepared on a Historic Basis
169

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Mind Map 1 - Tax I

Tax is Payable at 20%.

Calculate the Tax Payable for the year ended 31/01/X1.

Calculate the Balancing Charge/Allowance on the sale

Tax is Payable at 22%.

Calculate the Tax Payable for the year ended 31/01/X4.

Be careful with the year ends.

01/04/02 - 01/04/03 - 20%

Assuming that profit accrues evenly across the period:

Calculate the Tax Payable for the year ended 31/01/X4.

Kalls Co. has the following results:

Year Trading Profit/Loss

Marbles Co. has the following results:

Year Trading Profit/Loss

Year of Cessation -900,000

Objective Test Questions

2. Which of the following best describes Hypothecation?

A. A tax charges on the sale of goods to consumers.

The income tax regime in this country could be described as:

Tax is Payable at 22%.

What is the tax payable for the year?

Mind Map 2 - Tax II

Capital gains are taxed at 30%

Calculate the capital tax payable.

Capital gains are taxed at 20%

Calculate the capital tax payable.

01/01/X1 - 31/12/X2 = 20%

Capital gains are taxed at 25%

Calculate the capital tax payable.

Kalls Co. has the following results:

Year Capital Gains/(Losses)

Objective Test Questions

1. LM recently disposed of a building for £600,000 on 31 December 2009. The original

The indexation factors are as follows:

20X5 to 20X9 30%

The indexation factors were:

A. 2004 Nil 2005 7,040

Calculate the group taxable profit.

The tax system could be said to be

Mind Map 3 - Tax III

Abel manufactures the computer and sells it to a distributor for $200.

The distributor sells it to a retailer for $300.

The retailer sells it to the consumer for $500.

The figures above are exclusive of VAT.

Calculate the VAT payable by each of the parties above.

Calculate the VAT payable in the period.

What is the amount of VAT payable or receivable on 31 December 2011?

Objective Test Questions

1. Which of the following is not an indirect tax?

• Standard rated expenses amounted to £24,800.

• On 15 February 2013 Gwen purchased machinery at a cost of £24,150. This figure is

What is the Vat payable?

Mind Map 4 - Tax IV

No Illustrations Just OTQs

Objective Test Questions

1. Which of the following is a characteristic of transfer pricing?

2. Identify which of the following is a Benefit in Kind

3. Which of the following describes Avoidance of Tax?

Mind Map 5 - International

No Illustrations Just OTQs

Objective Test Questions

1. What determines a company’s country of residence?

A. Where the company’s income is earned