QUESTION: 113

JKL measure gearing as debt:equity, based on book values. At 31 December 20X5 the ratio is 2:3 and JKL would like this to be 2:5.
Which of the following transactions individually would achieve this?

Bonus issue from the share premium account.
Revaluation of investment property to an increased fair value.
Repayment of a 6 year term loan with the issue of 5 year redeemable debentures.
Issue of redeemable preference shares at par.

Answer(s): B

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QUESTION: 114

Which of the following actions should XY's management take in order to reduce its investment in working capital?

Sell its long-term investments and use the proceeds to reduce its bank overdraft.
Extend credit terms with its trade customers.
Scrap its obsolete inventory and replace with new inventory.
Pay trade suppliers more quickly to take advantage of prompt payment discounts.

Answer(s): A

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XY acquired 75% of the equity shares of LM on 31 December 20X3. LM acquired 60% of the equity shares of JK on 31 December 20X4 for $950,000. XY measured the non controlling interest in JK at the date of acquisition using the proportionate share of the fair value of the net assets acquired. The fair value of JK's net assets was $850,000 at 31 December 20X4.
What is the value of goodwill that XY will include in its consolidated statement of financial position at 31 December 30X4 in respect of JK as a result of gaining indirect control?