Cima F2 Exam Question No 58

Question No 58

How would KL account for its investment in MN in its consolidated financial statements for the year to 31 December 20X9?

A. Joint venture
B. Joint arrangement
C. Financial asset
D. Subsidiary

Answer: A

Cima F2 Exam Question No 57

Question No 57:

Options and warrants to subscribe for shares, these 'free' shares are equal to:
No. of options * ((FV - EP))/FV)
FV = fair value of the share price
EP = exercise price of the shares

Cima F2 Exam Question No 56

Question No 56:

The total number of shares issued on the exercise of the option or warrant is split into two?

• The number of shares that would have been issued if the cash received had been used to buy shares at fair value (using the average price of the shares during the period);
• The remainder, which are treated like a bonus issue (i.e. as having been issued for no consideration).

The number of shares issued for no consideration is added to the weighted average number of shares when calculating the DEPS.

Cima F2 Exam Question No 55

Question No 55:

Options and warrants to subscribe for shares  
An option or warrant gives the holder the right to buy shares at some time in the future at a predetermined price.The cash received by the entity when the option is exercised will be less than the market price of the shares, as the option will only be exercised if the exercise price is lower than the market price. The increase in resources does not match the increase there would be in resources if the issue of shares were at market value. The options will therefore have a dilutive effect on EPS.