Cima F2 Exam Question No 54

Question No 54:

What is Convertible debt?
The principles of convertible bonds and convertible preference shares are similar and will be dealt with together. If the convertible bonds/preference shares had been converted:

• The interest/dividend would be saved therefore earnings would be higher
• The number of shares would increase.

Note: Interest on bonds is tax deductible however preference dividends do not attract tax relief. Therefore, the interest adjustment should only be reflected net of tax in the case of bonds.
Note: If there is an option to convert the debt into a variable number of ordinary shares depending on when conversion takes place, the maximum possible number of additional shares is used in the calculation.

Cima F2 Exam Question No 53

Question No 53:

What is Assets?
Assets are defined in the Framework as resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

Cima F2 Exam Question No 52

Question No 52:

The basic EPS calculation is

 EPS = Earnings / Number of shares

This is expressed as dollars or cents per share (cents if the amount is less that $1).

• Earnings: Net profit attributable to ordinary equity shareholders of the parent entity, i.e. group profit after tax less profit attributable to non-controlling interests and irredeemable preference share dividends.
• Number of shares: Weighted average number of ordinary shares on a time weighted basis.

Cima F2 Exam Question No 51

Question No 51:

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

A. $450,000
B. $1,450,000
C. $950,000
D. $570,000

Answer: A