specimanexampaper-actb407f(1004)

8/7/2019 specimanexampaper-actb407f(1004)

1/11

B407F (2010- Specimen) 1

ACTB407F

Specimen Examination Paper

December 20XX Examination

ADVANCED FINANCIAL REPORTING AND ANALYSIS I

(December 20XX)

xx December 20XX Time Allowed: 3 hours xx:xx-xx:xx

THIS PAPER MUST BE RETURNED

Admissible/Inadmissible materials in this examination:

Material/Stationery

provided to

candidates

(standard items)

Material to be

returned to the

invigilator at the end

of the examination

1. Calculators are allowed. (Please refer to the OUHKApproved List.)

2. Dictionaries are NOT allowed.Violation of the above may lead to disqualification from

the examination.

1. 1 ExaminationPaper

2. 1 Answer Book1. Examination

Paper

2. Answer Book

Instructions:

1. Answer this examination paper in English.2. Read the rubric(s) in the examination paper carefully and write your answers in the

answer book as specified. Answers recorded elsewhere will not be marked. Begin

each question on a new page and write the question number at the top of each page you

have worked on.

3. Write any rough work in the answer book or this examination paper and cross it through

afterwards. Rough work will not be marked.

4. Write clearly. It may not be possible to award marks where the writing is very difficult

to read.


2/11


5. After the invigilator has announced that the examination has started, write your

examination number, student number and course code on the cover of the answer book

or other sheet as distributed by the invigilator. Failure to do so will mean that your

work cannot be identified.

6. At the end of the examination, hand over the answer book and examination paper to the

invigilator.

7. Do NOT open this examination paper until you are told to do so, otherwise you

may be disqualified.


3/11


Important

This specimen examination paper serves solely as an illustration of the

types of questions which may be contained in the examination.

Students should not construe the questions in this exercise as the

actual examination questions or section of the actual examination

paper. In addition, this exercise does not purport to represent the

complete scope or coverage of the course and the distribution of the

topics to be examined.


4/11


This examination is divided into TWO (2) sections. You must answer ALL two

sections. The total marks for this paper are 100. You have THREE HOURS to

complete this examination. Write all the answers in the answer book provided unless

otherwise specified.

Section A: Answer TWO (2) COMPULSORY questions. Total marks for Section A

are 50marks.Section B: Answer any TWO (2) of the three questions. Each question is worth

25 marks and total marks for Section B are 50 marks.

Section A (50 marks)

This section is COMPULSORY. Answer ALL questions in this section.

Question 1 (35 marks)

You are the accounting manager of P Ltd, a listed company in Hong Kong. To achieve

growth, P Ltd purchased 1,200,000 shares in S Ltd and 720,000 shares in A Ltd on 1

January 2009.

The summarized income statements of P Ltd, S Ltd, and A Ltd for the year ended 31

December 2009 are set out below:

P Ltd

$000

S Ltd

$000

A Ltd

$000

Sales 2,800 1,800 1,200

Cost of sales (1,200) ( 800) (500)

Gross profit 1,600 1,000 700

Expenses (200) (100) (100)Profit before tax 1,400 900 600

Profits tax (236) (420) (250)

Profit after tax 1,164 480 350


5/11


Statements of Financial Position as at 31 December 2009

P Ltd

$ 000

S Ltd

$000

A Ltd

$000

Property, plant and equipment 2,000 2,500 3,200

Loan to A Ltd 400

Investment at cost in S Ltd 2,100

In A Ltd 1,100

Current assets 2,000 1,200 1,300

7,600 3,700 4,500

Share capital 5,000 2,000 2,400

Retained earnings 1,500 1,000 1,2506,500 3,000 3,650

Loan from P Ltd 400

Other current liabilities 1,100 700 450

7,600 3,700 4,500

The following information is available:

(i) On 1 January 2009, the assets and liabilities of S Ltd and A Ltd were carried attheir fair values, except for an item of equipment owned by S Ltd, which has a

fair value of $300,000 in excess of its carrying amount on 1 January 2009. The

equipment has a remaining useful life of 5 years. Depreciation is charged to

cost of sales.

(ii) S Ltd sold goods to P Ltd during the year ended 31 December 2009 amountingto $100,000 which represents cost plus a mark-up of 25%. P Ltd held $50,000

in value of these inventories at year end.

(iii) An impairment review at 31 December 2009 reveals that goodwill has beenimpaired by $30,000.

(iv) No dividends were paid by the three companies.


6/11


Required:

(1)Prepare the consolidated income statement for the year ended 31 December 2009and the consolidated statement of financial position as at that date in accordance

with the requirements of currently effective financial reporting standards in Hong

Kong. (19 marks)

Show consolidation journal entries. ( 9 marks)

(2)One of the directors, who is in charge of marketing department, raised thefollowing questions relating to the financial statements you prepared in (1) above:

The sales and costs of sales of P Ltd and S Ltd simply do not add up to the

corresponding figures shown in the consolidated financial statements. Why?

Prepare a memorandum in response to the query raised by the marketing director.

(7 marks)


Discuss:

(i) the need for interim financial reporting; (6 marks)(ii) the purpose of interim financial reporting; and (5 marks)

(iii) the frequency of financial reporting as required for listed companies in Hong

Kong (4 marks)

[End of Section A]


7/11


Section B (50 marks) Answer any TWO questions in this section. Each question

carries 25 marks


The following are summarized accounts of XYZ Ltd:

Consolidated Income Statement for the year ended 31 December 2009

$000

Operating profit before tax 2,670

Share of associates profit 890

Profit before tax 3,560

Income tax expense (1,420)Profit for the year 2,140

Attributable to:

Owners of the parent 1,744

Non-controlling interest 396

2,140

Consolidated Statements of Financial Position as at 31 December

2009 2008

$000 $000 $000 $000

ASSETS

Non-current assets

Property, plant and equipment (net) 4,500 3,300

Goodwill 165 195

Investment in associates 2,340 1,557

Current assets

Inventory 1,690 738

Trade receivable 3,037 2,880

Investments 534 338

Cash at bank 540 5,801 670 4,626

Total assets 12,806 9,678


8/11


EQUITY AND LIABILITIES

Equitable to owners of the parent

Ordinary shares of $1 each 2,950 1,575

Share premium 800 390

Retained earnings 3,400 2,076

7,150 4,041

Non-controlling interests 450 215

7,600 4,256

Non-current liabilities

10% debentures 2,250 3,600

Current liabilities

Bank overdraft 603 -Tax payable 960 802

Trade payable 1,393 2,956 1,020 1,822

Total equity and liabilities 12,806 9,678

The following information relates to 2009:

(i) Dividend paid during the year amounted to $420,000.(ii) Machinery with a written down value of $195,000 was sold during the year for

$138,000.

(iii) The operating profit before tax was arrived at after charging:$000

Depreciation 288

Goodwill impairment 105

Interest expenses 158

(iv) $1,350,000 10% debentures were redeemed at par by issuing 1,000,000 ordinaryshares.

(v) On 1 January 2009, XYZ Ltd acquired 80% of the share capital of S Ltd. The net

assets of S Ltd at the date of acquisition were:


9/11


$000

Non-current assets 675

Inventories 345

Trade receivable 450

Cash 270

Tax payable (735)

1,005

Consideration

30,000 ordinary shares of $1 each 60

Cash 819

879

(vi) The company purchased shares of a listed company for investment purpose.The cost of the investment was $196,000 and the fair value of the investment

was also $196,000 on 31 December 2009.

Required:

Prepare a consolidated statement of cash flows for XYZ Ltd for the year ended 31

December 2009, using indirect method to ascertain the cash flows from operating

activities. (25 marks)

Show your workings


H Ltd acquired 80% of the share capital of a foreign subsidiary, F Ltd, on 1 January

2009. The functional currency of F Ltd is FC. The summarized income statement and

balance sheet of F Ltd are as below:

Income statement for the year ended 2009

FC000

Profit before tax 350

Tax (168)

Profit for the year 182


10/11


Statements of Financial Position as at 31 December 2009

FC000 FC000

Property, plant and equipment 992

Less: depreciation (32)

960

Current assets

Inventories 400

Receivables 208 608

1,568

Equity and liabilities

Ordinary share (FC1 per share) 500

Retained profit 462

962Loan-term loans 320

Current liabilities 286

1,568

The following information is available:

(i) There was no loan repayments or movements in non-current assets during the

year.

(ii) The exchange rates are:1 January 2009 HK$1 = FC4.0

31 December 2009 HK$1 = FC3.2

Average for the year HK$1 = FC3.5

(iii) The functional currency of H Ltd is HK$, which is also the presentationcurrency for the consolidated financial statements of H Ltd.

Required:

(1) What are the primary factors that an entity should consider in determining its

functional currency? (4 marks)

(2) Subsequent to initial recognition, what exchange rates should be used to

translate foreign currency monetary items, non-monetary items measured in

terms of historical cost in a foreign currency, and non-monetary items measured

at fair value in a foreign currency into the functional currency of an entity in its

statement of financial position? (7 marks)


11/11


(3) Translate the financial statements of F Ltd into HK$ (8 marks)(4) Analyze the reasonableness of the exchange difference; (6 marks)


(a) HKAS 31Interest in Joint Ventures uses joint control as the characteristics ofjoint venture. Discuss what is meant by joint control. (5 marks)

(b) Discuss if joint control exists in the following situation:

A, B and C own shares that entitled them to 20%, 31% and 49%, respectively ofthe voting rights in entity X.

The article of association and an agreement between all three parties require that

decisions of the board of directors in connection with the key financial and

operating policies of the company require a 75% majority. The article and the

agreement provide for A to appoint one director, but B and C to each appoint two

directors. (10 marks)

(c) Explain the difference between the two accounting methods as recommended by

HKAS 31, proportionate and equity method. (10 marks)

[End of Section B]

[END OF EXAMINATION PAPER]

specimanexampaper-actb407f(1004)

Documents

Transcript of specimanexampaper-actb407f(1004)