Free F1 Financial Reporting Exam CIMAPRA19-F01-1 Exam Practice Test

Which THREE of the following are costs that a business might incur as a result of holding insufficient inventory of raw materials?

• Lost production
• Purchasing inventory at a higher price
• Additional storage costs
• Increased risk of obsolescence
• Loss of sales

GH's tax liability at 30 June 20X3 in respect of the tax charge on the profits for the year ended 30 June 20X3 is $876,000.There was an over provision of $105,000 that related to the tax charge on the profits for the year ending 30 June 20X2.What amount should be shown in GH's statement of profit or loss for the year ending 30 June 20X3?Give your answer to the nearest $.

Which of the following is NOT an appropriate description of the meaning of the term incidence of tax?

• It refers to the distribution of the tax burden.
• It only relates to the person or entity that actually pays the tax authorities.
• It can be formal or actual.
• It relates to the person or entity that ultimately bears the cost of the tax.

Which of the following statements about trade payables management is false?

• Trade payables are an important source of finance.
• When goods are in short supply customers who pay immediately are likely to be given priority over customers who take credit.
• Trade payables should be paid as quickly as possible.
• Goods or services may be more costly if extended credit is required.

Why are excise duties an attractive method of raising tax for governments?Select TWO that apply.

• Low cost of collection compared to other forms of taxation.
• High yields from the tax.
• Encourages consumption of products such as alcohol.
• Popular form of tax for the tax payer as it can be reclaimed.
• Ensures that the tax levied on all taxpayers is the same irrespective of their spending habits.

Company R use a defined benefit plan pension scheme. Employee UW has been working for Company R for 25 years. The defined benefit plan is 1.5% of the employee's annual salary during their time at the company, for every year of employment.Employee UW started on a 18,000 per annum salary. After 10 years of employment. Employee UW received a promotion and began earning 22,000. After another 3 years of employment. Employee UW got promoted to a wage of 35,000, and is still on this salary now. How much pension has Employee UW accumulated since working at Company R?

• 9,900
• 18,000
• 6,750
• 9,375

The external auditors have completed their audit and have discovered a material but not pervasive error in the financial statements of JK.The directors of JK have refused to change the financial statements.What type of modified audit report should be issued?

• Disclaimer of opinion
• Emphasis of matter opinion
• Adverse opinion
• Qualified opinion

UV's financial statements for the year ended 31 March 20X8 were approved for publication on 30 June 20X8.In accordance with IAS 10 Events After the Reporting Period, which of the following material events would have been classified as a non-adjusting event in these financial statements?

• On 1 June 20X8 UV's auditors discovered that an error in valuation had caused the closing inventory to be overvalued by $150,000.
• On 10 April 20X8 UV received a communication stating that one of its customers had ceased trading and gone into liquidation. The balance outstanding at 31 March 20X8 was unlikely to be paid.
• On 1 June 20X8 UV was awarded damages of $70,000 in respect of a legal claim that it had made against the local government authority in October 20X7.
• On 28 April 20X8 a fire destroyed half of UV's main production facility. Output was severely reduced for six months.

Country X levies corporate income tax at a rate of 25% and charges income tax on all profits irrespective of whether they are distributed by way of dividend. Country Y levies corporate income tax at a rate of 20%.A, who is resident in Country X, pays a divided to B, who is resident in Country Y. B is required to pay corporate income tax on the dividend received from A, but a deduction can be made for the tax suffered on this dividend restricted to a rate of 20%.Which method of relief for foreign tax does this describe?

• Exemption
• Deduction
• Tax credit
• Restricted

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

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