Free CIMA CIMAPRA19-F02-1-ENG Exam Questions

LM has made the following share purchases during the year:

* Purchased 55% of the equity share capital of OP.

* Purchased 45% of the equity share capital of QR.LM have the power to appoint the majority of board members on the QR board.

* Purchased 30% of the equity share capital of ST. LM is represented by one director on the main board of ST which has five members in total. The other 70% of ST's equity share capital is owned by a single company, UV.

The Managing Director has told you that OP has performed well, but both QR and ST have not performed as expected. He is therefore pleased thatOP will be included as a subsidiaryand that QR and ST will only be included as investments in the group financial statements.

In accordance with the ethical principle of professional competence and due care how should the investments in OP, QR and ST be treated in the group financial statements?

The tax benefit on a company's asset is 180,000 and the useful life on that asset is five years. The company creates a deferred tax provision to spread this benefit over the asset's useful life.

What entry is needed to reduce this deferred tax provision in the company's year two accounts?

The dividend yield of ST hasfallen in theyear to 31 May 20X5, compared to the previous year.

The share price on 31 May 20X4 was $4.50 and on 31 May 20X5 was $4.00. There were no issues of share capital during the year.

Whichof the following should explain the reduction in the dividend yield for the year to 31 May 20X5 compared to the previous year?