W and Y are very similar entities with the same level of profit before interest and tax. However, W has gearing of 95% and Y has gearing of 30%.
Which of the following statements is true?

• A.Investors in Y will expect a higher return than investors in W.
• B.A greater proportion of profit will be available out of which to declare a dividend in W.
• C.Y has a greater commitment to meet interest payments than W.
• D.Investing in W carries a higher level of risk than investing in Y.

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XY owned 60% of the equity share capital of AB at 1 January 20X6. XY acquired a further 20% of AB's equity share capital on 31 December 20X6 for $500,000. The non controlling interest in AB was measured at $720,000 immediately prior to the 20% acquisition.
Calculate the amount that XY debited to non controlling interest when it accounted for the 20% acquisition in its consolidated financial statements at 31 December 20X6.
Give your answer to the nearest $000.
$ ? 000

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On 1 January 20X8 XY, a listed entity, had 10,000,000 ordinary shares in issue each with a par value of 50 cents. On 1 July 20X8 XY raised $6,000,000 by issuing ordinary shares at a price of £1.50 each which was the full market price.
Place the correct figure into the box below to show the number that XY will use as its weighted average number of ordinary shares in the calculation of earnings per share for the year to 31 December 20X8.

Correct Answer:

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HJ is currently in dispute with an employee, who is claiming $400,000 in a legal case against them.
HJ's legal advisors have stated that it is probable that they will lose the case and will have to pay the amount claimed.
Also, HJ are claiming $250,000 from a supplier of defective goods and the legal advisors have stated that it is probable that HJ will be successful in this claim.
What is the correct accounting treatment for these two items in HJ's financial statements?

• A.Disclose the $400,000 potential outflow and recognise the $250,000 potential inflow.
• B.Provide for the $400,000 potential outflow and recognise the $250,000 potential inflow.
• C.Provide for the $400,000 potential outflow and disclose the $250,000 potential inflow.
• D.Disclose the $400,000 potential outflow and disclose the $250,000 potential inflow.

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On 1 January 20X7 GH purchased plant and equipment at a cost of $400,000. The temporary differences in respect of this plant and equipment at 31 December 20X7 and 20X8 have been calculated as follows:
Assume that there are no other temporary differences in the periods and that the corporate income tax rate is 25%. GH is expected to have significant taxable profits in the future.
Which of the following is the correct impact in GH's statement of financial position at 31 December 20X8 in respect of deferred tax?

• A.Decrease in the deferred tax asset.
• B.Increase in the deferred tax liability.
• C.Decrease in the deferred tax liability.
• D.Increase in the deferred tax asset.

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