cima cimapra19 f01 1 practice test

Which THREE of the following statements about government grants are INCORRECT?

• A. A grant is recognised as revenue
• B. Grants must not be deducted from the related expenses in financial statements
• C. Capital grants relate to cash inflow and outflow
• D. A compensatory grant should be recognised in statements when it is received, not when the expenses it applies to occurred
• E. A grant is recognised only when there is reasonable assurance that the entity will comply with any conditions attached to the grant

Which of the following does the phrase 'events after the reporting period' refer to?

• A. Material events which occur between the statement of financial position date and the date on which the financial statements are approved
• B. Material events which occur after the release of the statement of financial position
• C. Material events which occur before the statement of financial position date
• D. Material events which occur between the income statement date and the statement of financial position date

Which of the following is the most appropriate definition of the term 'factoring'?

• A. Where a business sells its accounts receivable to a third party at a discount
• B. Where a business borrows a loan with short-term conditions from a third party
• C. Where a business sells equity to third parties to gain short-term finance
• D. Where a business is provided with a highly flexible regular source of short-term finance by a bank

Company Y is using some of the money from a share issue to purchase a new office building. The
company is also using some of the money to purchase inventories. Which method of financing is
this?

• A. Conservative financing
• B. Matching financing
• C. Aggressive financing

Which of the following are techniques that can be used by a company to ensure they receive timely
payment of receivables? Select ALL that apply:

• A. Offering cash or early payment discount
• B. Charging interest on late payments
• C. Assessing credit risk of customers before they are given credit
• D. Offering extended credit to return customers
• E. Offering free items

Mr AM is the owner of Waxco Ltd. Mr AM was born in India, but currently resides in the US

• A. The USA
• B. Germany
• C. India
• D. Pakistan
• E. Cambodia

Entity RH has an recognised a taxable profit of $1.Smillion for 20X1'. In Entity RH's resident country.
Country M, depreciation charges and entertaining expenses are disallowed expenses. Below is some
information on Entitry RH's outgoings for the period:
Depreciation charged on PPE: $450,000
Political donations: $155,000
Staff parties: $3,200
Cost of updating assets: $10,000
Other expenses: $83,500
In Country M, there is a standard corporation tax of 12% charged on all corporation profits. What is
Entity RH's total tax liability for this period?

• A. $234,384
• B. $125,616
• C. $254,184
• D. $252,984

Entity T operates within several countries, but its country of residence is Country F. In 20X5, Entity T
made $8.4 million in Country M. Country M has a flat rate corporation tax of 5.9%.
Country F and Country M operate a double taxation treaty which uses a foreign tax credit system. In
Country F, there is a tax of 10% tax on all foreign income.
Taking into account the credit, what is the total tax liability that Entity T owes on its Country M
income, in Country F?

• A. $344,400
• B. $495,600
• C. $840,000
• D. $450,000

Which of the following methods could be used by a tax authority to reduce tax evasion and
avoidance?

• A. Increase tax rates to compensate for losses due to evasion.
• B. Reduce penalties for avoidance.
• C. Reduce requirements to have tax returns audited.
• D. Simplify the tax structure, minimizing allowances and exemptions.

Which of the following is NOT a principle in the CIMA Code of Ethics for Professional Accountants?

• A. Integrity
• B. Professional competence and due care
• C. Timeliness
• D. Objectivity