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FR – Financial Reporting

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Showing 4–6 of 10 questions

Question 4

Wolf plc acquired 80,000 $1 ordinary shares in Fox plc on 1 April 20X5 at a cost of $77,000. Fox plc's retained earnings at that date were $50,000 and its issued ordinary share capital was $100,000.

What is the amount of the gain on a bargain purchase arising on the acquisition?

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  • ○

    $35,000
  • ○

    $43,000
  • ○

    $63,000

  • ○

    $73,000
Question 5

Richard Ltd and McMagoo Inc. trades in shares and securities and are close rivals for many years. Richard Ltd accuses McMagoo Inc. of providing false information related to a particular PH plc’s share; though Richard Ltd knows it is not true. McMagoo Inc. sues Richard Ltd. for defamation. Richard’s and McMagoo Inc’s lawyers agree that it is likely that McMagoo Inc. will win the case and receive damages of an amount of $1.5m. There is no possibility of the case being resolved before the financial statements are finished.

How the above litigation will be represented in the financial statements of both Richard Ltd and McMagoo Inc.?

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  • ○

    Richard Ltd should provide for $1.5m. McMagoo Inc. has a contingent asset and should disclose in the financial statements.
  • ○

    Richard Ltd should provide for $1.5m. McMagoo Inc. should ignore as this is too remote.
  • ○

    Richard Ltd should ignore as this is too remote. McMagoo Inc. has a contingent asset and should disclose in the financial statements.
  • ○

    Richard Ltd should have a contingent asset and should disclose in the financial statements. McMagoo Inc. should provide for $1.5m.
Question 6

On 1 April 2012, Hunting plc acquired 70% of the ordinary shares of ICM Ltd. The following figures relate to the year ended 31 December 2012.

Hunting plc ICM Ltd

$ $

Revenue                             769,000                                                                                    600,000

Cost of sales               568,500                                                                                    420,000

Gross profit               200,500                                                                                    180,000

On 15 November 2012 ICM Ltd sold goods which cost it $5,000 to Hunting plc for $7,000. These goods were still held by Hunting plc at 31 December 2012.

What is the amount for gross profit in the consolidated income statement of Hunting plc for the year ended 31 December 2012?

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  • ○

    $335,500

  • ○

    $333,500

  • ○

    $983,500

  • ○

    $985,500