Online Access Free F2 Practice Test

ST has in issue unquoted 7% debentures which were issued at par and are redeemable in 1 year's time.
These debentures cannot be traded. The yield to maturity on these debentures has been calculated at
5%.
Which of the following would explain why the yield to maturity is lower than the coupon?

• A.The debentures will be redeemed at their par value.
• B.ST will benefit from the tax relief on the interest payment.
• C.The debentures will be redeemed at a discount to their par value.
• D.The market value of the debentures must be higher than their par value.

AB acquired its one subsidiary, CD, on 1 January 20X1. At this date the fair value of CD's property, plant and equipment was found to be $40 million higher than its carrying value. The relevant items had a remaining estimated useful life of 10 years from the date of acquisition.
At 31 December 20X4 AB and CD presented property, plant and equipment of $100 million and $50 million respectively in their individual financial statements.
The value of property, plant and equipment presented in AB's consolidated statement of financial position at 31 December 20X4 is:

• A.$190 million
• B.$174 million
• C.$134 million
• D.$150 million

XY has a weighted average cost of capital (WACC) of 12%. The debt:equity ratio is 1:3 and this is considered low for the industry. XY needs to raise finance to purchase new machinery in the coming year.
Which of the following forms of finance is most likely to increase the WACC?

• A.8% preference shares
• B.Finance lease
• C.6% bank loan
• D.Rights issue of equity shares

AB and EF are located in the same country and prepare their financial statements to 31 October in accordance with International Accounting Standards. EF supplies AB with a component that is vital to AB's product range. AB is considering acquiring a controlling interest in EF by 31 December 20X4 in order to guarantee future supply. The Board of EF has indicated that such an approach would be postively considered. AB would use its control to make AB the sole customer of EF.
The Finance Director of AB has been granted access to EF's management accounts and has conducted some initial analysis from the financial press. The results togther with comparisons for AB for the year to
31 October 20X4 are presented below:

AB and EF are forecasting revenues of S1,500,000 and $700,000 respectively for the year ended 31 October 20X5.
Which of the following independent options would explain the difference between the gearing ratios of AB and EF at 31 October 20X4?

• A.EF's average cost of borrowing is significantly lower than that of AB and EF has taken advantage of that.
• B.EF made a bonus issue of shares from retained earnings during the year whereas AB did not.
• C.EF has a policy of revaluing non current assets whereas AB does not.
• D.EF's market value of shares at 31 October 20X4 is lower than that of AB.

Following the impairment review of the investment in BC, what would be the carrying value of this associate in KL's consolidated statement of financial position at 31 December 20X9?

• A.$1,050,000
• B.$1,800,000
• C.$1,960,000
• D.$1,240,000