[Feb-2024] CIMA F1 Exam: Basic Questions With Answers
New 2024 Realistic Free CIMA F1 Exam Dump Questions and Answer
NEW QUESTION # 120
BC manufactures product X and on 1 February 20X4 started a project to develop a new material for use in its production. The development project is due to be completed by 31 December 20X4 with the new material being used in production from 1 January 20X5. The development project costs have been reliably estimated at
$200,000 and it is anticipated that the new material will increase the margin achieved on product X by 20%.
You are a CIMA accountant within BC and are considering how to treat the development costs of $200,000 in the financial statements for the year ended 31 December 20X4.
In accordance with the ethical principle of professional competence and due care, which of the following statements correctly explains how these costs should be accounted for?
- A. Expense to profit or loss because the development has not changed the nature of product X.
- B. Expense to profit or loss because the development project will be completed by the end of the year.
- C. Capitalise and amortise from 1 February 20X4 because this is the date that the project commenced.
- D. Capitalise but do not amortise until 1 January 20X5 because this is the date that the new material will start to be used.
Answer: D
NEW QUESTION # 121
Country X levies corporate income tax at a rate of 25% and charges income tax on all profits irrespective of whether they are distributed by way of dividend. Country Y levies corporate income tax at a rate of 20%.
A, who is resident in Country X, pays a divided to B, who is resident in Country Y. B is required to pay corporate income tax on the dividend received from A, but a deduction can be made for the tax suffered on this dividend restricted to a rate of 20%.
Which method of relief for foreign tax does this describe?
- A. Deduction
- B. Restricted
- C. Exemption
- D. Tax credit
Answer: D
NEW QUESTION # 122
When developing local Generally Accepted Accounting Principles (known as local GAAP) some countries start with International Financial Reporting Standards (IFRSs) which are then amended to reflect local needs and conditions.
This type of approach is classified as:
- A. Using IFRSs as a model for local GAAP.
- B. Adoption of IFRSs as local GAAP.
- C. IFRSs having a persuasive influence in formulating local GAAP.
- D. IFRSs having little or no impact in formulating local GAAP.
Answer: A
NEW QUESTION # 123
The following information relates to AA.
Extract of Trial Balance at 31 December 20X4;
Notes
(i) Inventory at 31 December 20X4 was valued at cost at $30.
(ii) The loan which was received on 1 July 20X4 is repayable in 20X9.
(iii) Corporate income tax represents an over-provision of tax for the year ended 31 December 20X3. AA reported a loss for tax purposes for the year ended 31 December 20X4 and a tax refund is expected amounting to $20.
(iv) Cost of sales, administration and distribution costs need to be adjusted for the following:
Calculate gross profit for the year ended 31 December 20X4.
Give your answer as a whole $.
Answer:
Explanation:
$327
NEW QUESTION # 124
Country Q has the following rules in respect of capital tax on the disposal of assets:
*Capital gains are subject to tax at 25%.
*Capital losses can only be carried forward and offset against future capital gains.
The following data relates to ABC:
How much capital tax will be payable on the capital gain recorded in 20X3?
Give your answer to the nearest $.
Answer:
Explanation:
$62500
NEW QUESTION # 125
The statement of profit or loss for PQ, ST and AB for the year ended 31 December 20X0 are shown below:
1. PQ acquired 80% of its subsidiary, ST, on 1 January 20X0 and 40% of its associate, AB, on 1 September 20X0.
2. Since acquistion PQ has sold goods to ST and AB for $20,000 and $30,000 respectively. At the year end both ST and AB have 50% of these goods remaining in inventory. PQ uses a mark-up of 20% on all of its sales.
3. Since acquisition the goodwill in respect of ST has been impaired by $8,000 and the investment in AB has been impaired by $2,000.
4. PQ uses the fair value method for non-controlling interest at acquisition.
Calculate the profit attributable to the non-controlling interests disclosed in PQ's consolidated statement of profit or loss for the year ended 31 December 20X0.
Give your answer to the nearest whole $.
Answer:
Explanation:
$8000
NEW QUESTION # 126
Statements of financial position as at 31 December 20X8 for JK, LM and PQ are as follows:
[1] JK purchased 80% of LM's $1 equity shares on 1 January 20X8 for $260,000 when the retained earnings of JK were $110,000. At that date the non-controlling interest had a fair value of $63,000.
[2] JK purchased 25% of PQ's $1 equity shares on 1 January 20X8 for $90,000 when the retained earnings of PQ were $96,000.
[3] During the year JK sold goods to LM for $32,000 at a mark up of 33.33% on cost. Half of the goods were still in LM's inventory at 31 December 20X8.
[4] LM transferred $32,000 to JK on 30 December 20X8 in settlement of the inter-group trade. JK did not record the cash in its financial records until 2 January 20X9.
Calculate the value of inventory that would be included in JK's consolidated statement of financial position at 31 December 20X8.
Give your answer to the nearest $.
Answer:
Explanation:
$224000
NEW QUESTION # 127
Refer to the exhibit.
An entity sells 2,000 bags of product X each year. It has been estimated that the cost of holding one bag of product X is £4.
The cost of placing an order is £250.
where:
Co = cost of placing an order
Ch = cost of holding one unit in inventory for one year
D = annual demand
Calculate the Economic Order Quantity (EOQ) for bags of product X.
Give your answer to the nearest whole number of bags.
Answer:
Explanation:
500 bags
NEW QUESTION # 128
The accounting profit before tax of an entity was $243,200 for the year ended 31 July 20X4.
The accounting profit included disallowable income from government grants of $48,000 and disallowable expenditure of $25,600 on entertaining expenses.
The entity also paid a $40,000 dividend to shareholders. The tax rates for the country were as follows:
Calculate the tax the entity is due to pay for the year ending 31 July 20X4.
- A. $44,160
- B. $39,174
- C. $57,546
- D. $47,840
Answer: D
NEW QUESTION # 129
Statements of financial position for FG, IJ and KL at 31 December 20X5 include the following balances:
FG acquired 90% of IJ's equity shares for $358,000 on 1 July 20X5 when IJ's retained earnings were $98,000.
FG acquired 100% of KL's equity shares for $360,000 on 1 January 20X5 when KL's retained earnings were
$155,000.
FG used the proportion of net assets method to value non-controlling interests at acquisition.
KL sold a piece of land to FG for $130,000 on 1 September 20X5. At the date of transfer the land had a carrying value of $50,000.
The management of FG expect KL to make profits in the future and no impairment ot its goodwill was proposed at 31 December 20X5.
Calculate the amount of retained earnings that will be included in FG's consolidated statement of financial position as at 31 December 20X5.
Give your answer to the nearest whole $.
Answer:
Explanation:
$709200
NEW QUESTION # 130
The International Accounting Standards Board's "The Conceptual Framework for Financial Reporting" (known as The Conceptual Framework) states that "faithful representation" is a fundamental qualitative characteristic.
In accordance with the Conceptual Framework which of the following is NOT part of faithful representation?
- A. Neutral
- B. Free from error
- C. Complete
- D. Comparable
Answer: D
NEW QUESTION # 131 
Answer:
Explanation:
NEW QUESTION # 132
The statement of profit or loss for PQ, ST and AB for the year ended 31 December 20X0 are shown below:
1. PQ acquired 80% of its subsidiary, ST, on 1 January 20X0 and 40% of its associate, AB, on 1 September
20X0.
2. Since acquistion PQ has sold goods to ST and AB for $20,000 and $30,000 respectively. At the year end both ST and AB have 50% of these goods remaining in inventory. PQ uses a mark-up of 20% on all of its sales.
3. Since acquisition the goodwill in respect of ST has been impaired by $8,000 and the investment in AB has been impaired by $2,000.
4. PQ uses the fair value method for non-controlling interest at acquisition.
Calculate the amount that will be shown as the share of profit of associate in PQ's consolidated statement of profit or loss for the year ended 31 December 20X0.
- A. $2,000
- B. $4,000
- C. $10,000
- D. $3,200
Answer: A
NEW QUESTION # 133
Which THREE of the following statements are true?
- A. Balancing allowances reduce the taxable profit.
- B. Balancing allowances increase the taxable profit.
- C. Tax depreciation increases the taxable profit.
- D. Balancing charges increase the taxable profit.
- E. Balancing charges reduce the taxable profit.
- F. Tax depreciation replaces accounting depreciation when calculating the taxable profit.
Answer: A,D,F
NEW QUESTION # 134
The development of an international financial reporting standard generally goes through a number of stages.
Which of the following is NOT a stage of development?
- A. Establishing an interpretations committee
- B. Establishing an advisory committee
- C. Producing an exposure draft for public comment
- D. Developing and publishing a discussion paper
Answer: A
NEW QUESTION # 135
Country X levies corporate income tax at a rate of 25% and charges income tax on all profits irrespective of whether they are distributed by way of dividend. Country Y levies corporate income tax at a rate of
20%.
A, who is resident in Country X, pays a divided to B, who is resident in Country Y. B is required to pay corporate income tax on the dividend received from A, but a deduction can be made for the tax suffered on this dividend restricted to a rate of 20%.
Which method of relief for foreign tax does this describe?
- A. Deduction
- B. Restricted
- C. Exemption
- D. Tax credit
Answer: D
NEW QUESTION # 136
Which of the following would NOT be classified as part of non-current assets in a statement of financial position?
- A. The goodwill arising on the acquisition of a subsidiary.
- B. The interest paid on a loan raised to fund the construction of a factory, where that factory is still not ready for its intended use.
- C. Assets held for sale, classified in accordance with IFRS 5 Non-current Assets Held for Sales and Discontinued Operations.
- D. A property held as an investment which is let to tenants.
Answer: C
NEW QUESTION # 137
Statements of financial position for YZ, BC and DE at 31 March 20X2 include the following balances:
YZ purchased 90% of BC's equity shares for $508,000 on 1 January 20X2. On 1 January 20X2 BC's retained earnings were $183,000. YZ uses the proportion of net assets method to value non-controlling interest at acquisition.
YZ purchased 30% of DE's equity shares on 1 April 20X1 for $112,000. DE's retained earnings at 1 April
20X1 were $88,000.
On 1 February 20X2 YZ sold goods to BC for $28,000 at a mark up of 25% on cost. All the goods were still in BC's inventory at 31 March 20X2.
Calculate the amount of the non-controlling interest to be included in YZ's consolidated statement of financial position at 31 March 20X2.
Give your answer to the nearest whole $.
Answer:
Explanation:
$47900
NEW QUESTION # 138
WX is considering an investment in ST.
At 31 December 20X2 ST had the following balances in its statement of financial position:
Which of the following would cause ST to become an associate investment of WX?
- A. WX purchases 15,000 of ST's $1 equity shares and 20,000 of ST's $1 preference shares.
- B. WX purchases 25,000 of ST's $1 equity shares.
- C. WX purchases 50,000 of ST's $1 preference shares.
- D. WX purchases 75,000 of ST's $1 equity shares.
Answer: B
NEW QUESTION # 139
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