F1 - Financial Operations

CIMA 2010 Chartered Management Accounting Qualification – Specimen Examination Paper F1
Published November 2009
Pillar F
F1 – Financial Operations
Specimen Examination Paper
Instructions to candidates
You are allowed three hours to answer this question paper.
You are allowed 20 minutes reading time before the examination begins
during which you should read the question paper and, if you wish, highlight
and/or make notes on the question paper. However, you will not be allowed,
under any circumstances, to open the answer book and start writing or use
your calculator during this reading time.
You are strongly advised to carefully read ALL the question requirements
before attempting the question concerned (that is all parts and/or sub-
questions). The requirements for questions 2, 3 and 4 are contained in a
dotted box.
ALL answers must be written in the answer book. Answers or notes written
on the question paper will not be submitted for marking.
Answer the ONE compulsory question in Section A. This has ten sub-
questions on pages 3 to 6.
Answer the SIX compulsory sub-questions in Section B on pages 7 to 10.
Answer the TWO compulsory questions in Section C on pages 11 to 14.
The country ‘Tax Regime’ for the paper is provided on page 2. Maths Tables
are provided on pages 15 and 16
The list of verbs as published in the syllabus is given for reference on the
inside back cover of this question paper.
Write your candidate number, the paper number and examination subject title
in the spaces provided on the front of the answer book. Also write your
contact ID and name in the space provided in the right hand margin and seal
to close.
Tick the appropriate boxes on the front of the answer book to indicate the
questions you have answered.
 The Chartered Institute of Management Accountants 2009

Note: Information on relevant tax rules will be published on the CIMA website at least 6 weeks
prior to the date of the examination and be reproduced within the examination paper.
COUNTRY X - TAX REGIME FOR USE THROUGHOUT THE EXAMINATION PAPER
Relevant Tax Rules for Years Ended 30 April 2007 to 2010
Corporate Profits
Unless otherwise specified, only the following rules for taxation of corporate profits will
be relevant, other taxes can be ignored:
(a) Accounting rules on recognition and measurement are followed for tax purposes.
(b) All expenses other than depreciation, amortisation, entertaining, taxes paid to other
public bodies and donations to political parties are tax deductible
(c) Tax depreciation is deductible as follows: 50% of additions to Property, Plant and
Equipment in the accounting period in which they are recorded; 25% per year of the
written-down value (i.e. cost minus previous allowances) in subsequent accounting
periods except that in which the asset is disposed of. No tax depreciation is allowed
on land.
(d) The corporate tax on profits is at a rate of 25%.
(e) Tax losses can be carried forward to offset against future taxable profits from the
same business.
Value Added Tax

Country X has a VAT system which allows entities to reclaim input tax paid.
In country X the VAT rates are:
Zero rated 0%
Standard rated 15%
Specimen Exam Paper 2 Financial Operations

SECTION A – 20 MARKS
[Note: The indicative time for answering this section is 36 minutes]
ANSWER ALL TEN SUB-QUESTION IN THIS SECTION
Instructions for answering Section A:
The answers to the ten sub-questions in Section A should ALL be written in your
answer book.
Your answers should be clearly numbered with the sub-question number and ruled
off, so that the markers know which sub-question you are answering. For multiple
choice questions, you need only write the sub-question number and the letter
of the answer option you have chosen. You do not need to start a new page for
each sub-question.
Question One
1.1 Which of the following statements is correct?
A Tax evasion is legally arranging affairs so as to minimise the tax liability.

Tax avoidance is the illegal manipulation of the tax system to avoid paying taxes due.
B Tax evasion is legally arranging affairs so as to evade paying tax.

Tax avoidance is tax planning, legally arranging affairs so as to minimise the tax
liability.
C Tax evasion is using loop holes in legislation to evade paying tax.

Tax avoidance is the illegal manipulation of the tax system to avoid paying taxes due.
D Tax evasion is the illegal manipulation of the tax system to avoid paying taxes due.
Tax avoidance is tax planning, legally arranging affairs so as to minimise the tax
liability.
(2 marks)
TURN OVER
Financial Operations 3 Specimen Exam Paper

1.2 A has been trading for a number of years. The tax written down value of A’s property,
plant and equipment was $40,000 at 31 March 2009. A did not purchase any property,
plant and equipment between 1 April 2009 and 31 March 2010.
A’s Income statement for the year ended 31 March 2010 is as follows:
$
Gross profit 270,000
Administrative expenses (120,000)
Depreciation - property, plant and equipment (12,000)
Distribution costs (55,000)
83,000
Finance cost (11,000)
Profit before tax 72,000
Administration expenses include entertaining of $15,000.
What is A’s income tax due for the year ended 31 March 2010?
A 8,750
B 13,750
C 15,500
D 22,250
(2 marks)
1.3 B buys goods from a wholesaler, paying the price of the goods plus VAT. B sells goods
in its shop to customers. The customers pay the price of the goods plus VAT.
From the perspective of B, the VAT would have
A Effective incidence
B Formal incidence
C Ineffective incidence
D Informal incidence
(2 marks)
1.4 CT has taxable profits of $100,000 and pays 50% as dividends.

The total tax due is calculated as:
CT’s corporate income tax ($100,000 x 25%) $25,000
CT’s shareholder’s personal income tax on dividends received
($50,000 x 20%) $10,000
Total tax due $35,000
The tax system in use here would be classified as a:
A Imputation tax system

B Partial imputation tax system
C Classical tax system
D Split rate tax system
(2 marks)

1.5 The International Accounting Standards Board’s Framework for the Presentation and
Preparation of Financial Statements sets out four qualitative characteristics, relevance
and reliability are two, list the other two.
(2 marks)
1.6 The CIMA Code of Ethics for Professional Accountants sets out four principles that a
professional accountant is required to comply with. Two principles are objectivity and
professional competence/due care, list the other two.
(2 marks)
1.7 The purpose of an external audit is to:
A check the accounts are correct and to approve them.

B enable the auditor to express an opinion as to whether the financial statements give a
true and fair view of the entity’s affairs.
C search for any fraud taking place in the entity.
D check that all regulations have been followed in preparing the financial statements and
to authorise the financial statements.
(2 marks)
1.8 Goodwill arising on acquisition is accounted for according to IFRS 3 Business

combinations.
Goodwill arising on acquisition is:
A carried at cost, with an annual impairment review.

B written off against reserves on acquisition.
C amortised over its useful life.
D revalued to fair value at each year end.
(2 marks)
1.9 IT has 300 items of product ABC2 in inventory at 31 March 2010. The items were found
to be damaged by a water leak. The items can be repaired and repackaged for a cost
of $1.50 per item. Once repackaged, the items can be sold at the normal price of $3.50
each.
The original cost of the items was $2.20 each. The replacement cost at 31 March 2010
is $2.75 each.
What value should IT put on the inventory of ABC2 in its statement of financial position at 31
March 2010?
A $600
B $660
C $810
D $825
(2 marks)

1.10 (i) CD is Z’s main customer.

(ii) FE is a supplier of Z.
(iii) ST is Z’s chairman of the board and a major shareholder of Z.
(iv) K is Z’s banker and has provided an overdraft facility and a $1,000,000 loan.
(v) JT is the owner of a building entity that has just been awarded a large building
contract by Z. JT is also the son of ST.
Which 2 of the above can be regarded as a related party of Z?
A (i) and (iii)

B (ii) and (iv)
C (iii) and (v)
D (iv) and (v)
(2 marks)
(Total for Question One = 20 marks)
Reminder
All answers to Section A must be written in your answer book.
Answers or notes to Section A written on the question paper will
not be submitted for marking.
End of Section A
Section B starts on the opposite page

SECTION B – 30 MARKS
[Note: The indicative time for answering this section is 90 minutes]
ANSWER ALL SIX SUB-QUESTIONS IN THIS SECTION – 5 MARKS EACH
Question Two
(a) ATOZ operates in several countries as follows:
 ATOZ was incorporated in country BCD many years ago. It has curtailed operations
in BCD but still has its registered office in country BCD and carries out a small
proportion (less than 10%) of its trade there.
 ATOZ buys most of its products and raw materials from country FGH.
 ATOZ generates most of its revenue in country NOP and all its senior management
live there and hold all the management board meetings there.
Required:
(i) Explain why determining corporate residence is important for corporate

income tax.
(2 marks)
(ii) Explain which country ATOZ will be deemed to be resident in for tax
purposes.
(3 marks)
(Total for sub-question (a) = 5 marks)
(b) WX operates a retail business in country X and is registered for VAT purposes.
During the last VAT period WX had the following transactions:
Purchases of materials and services, all at standard VAT rate, $130,000 excluding
VAT.
Purchase of new machinery, $345,000, inclusive of VAT.
Sales of goods in the period, all inclusive of VAT where applicable, were:
Sales of goods subject to VAT at standard rate $230,000

Sales of goods subject to VAT at zero rate $115,000
TURN OVER

Assume you are WX’s trainee management accountant and you have been asked to
prepare the VAT return and calculate the net VAT due to/from the tax authorities at the
end of the period.
Assume WX has no other transactions subject to VAT and that all VAT paid can be
recovered.
Required:
(i) Explain the difference between a single stage sales tax and VAT.
(2 marks)
(ii) Calculate the net VAT due to/from WX at the end of the period.
(3 marks)
(Total for sub-question (b) = 5 marks)
(c) Country K uses prescriptive accounting standards. Country K’s standard on intangible
assets has a list of intangible assets covered by the standard and an extensive list of
items that are not allowed to be recognised as assets. RS has incurred expenditure on
a new product that does not appear to be specifically listed as “not allowed” by the
standard. RS’s management want to classify the expenditure as an intangible non-
current asset in RS’s statement of financial position. They argue that the type of
expenditure incurred is not listed in the accounting standard as being “not allowed”
therefore it is allowed to be capitalised.
RS’s auditors have pointed out that the expenditure is not listed as being “allowed” and
therefore should not be capitalised.
Required:
Explain the possible advantages of having accounting standards based on principles
rather than being prescriptive. Use the scenario above to illustrate your answer.
(Total for sub-question (c) = 5 marks)
(d) BD is a well established double glazing business, manufacturing building extensions,

doors and windows in its own manufacturing facility and installing them at customer
properties.
BD’s financial statements for the year ended 31 March 2009 showed the manufacturing
facility and installation division as separate reportable segments.
On 1 March 2010, BD’s management decided to sell its manufacturing facility and
concentrate on the more profitable selling and installation side of the business.

At BD’s accounting year end, 31 March 2010, BD had not found a buyer for its
manufacturing facility and was continuing to run it as a going concern. The facility was
available for immediate sale; the management were committed to the sale and were
actively seeking a buyer. They were quite sure that the facility would be sold before 31
March 2011.
The manufacturing facility’s fair value at 31st March 2010 was $2.8 million, comprising
total assets with a fair value of $3.6 million and liabilities with a fair value of $0.8 million.
BD’s management accountant calculated that the manufacturing facility had incurred a
loss for the year of $0.5 million before tax and the estimated cost of selling the
manufacturing facility was $0.2 million.
Required:
Explain, with reasons, how BD should treat the manufacturing facility in its financial
statements for the year ended 31 March 2010.
(Total for sub-question (d) = 5 marks)
(e) L leases office space and a range of office furniture and equipment to businesses. On 1
April 2009 C acquired a lease for a fully furnished office space (office space plus office
furniture and equipment) and a separate lease for a computer system from L.
The office space was a lease of part of a large building and the building had an
expected life of 50 years. The lease was for 5 years with rental payable monthly. The
first year was rent free. The $1,000 per month rental commenced on 1 April 2010.
The computer system lease was for 3 years, the expected useful life of the system was
3 years. The $15,000 per year lease rental was due annually in arrears commencing
with 31 March 2010. The interest rate implicit in the lease is 12.5% and the cost of the
leased asset at 1 April 2009 was $35,720. C depreciates all equipment on the straight
line basis.
Under the terms of the computer system lease agreement C is responsible for insuring,
servicing and repairing the computers. However, L is responsible for insurance,
maintenance and repair of the office.
C allocates the finance charge for finance leases using the actuarial method.
Required:
Explain the accounting treatment, required by international financial reporting

standards, in the financial statements of C in respect of the two leases for the year
ended 31 March 2010.
(Total for sub-question (e) = 5 marks)
TURN OVER

(f) PS issued 1,000,000 $1 cumulative, redeemable preferred shares on 1 April 2009. The
shares were issued at a premium of 25% and pay a dividend of 4% per year.
The issue costs incurred were $60,000. The shares are redeemable for cash of $1.50
on 31 March 2019. The effective interest rate is 5.18%. Ignore all tax implications.
The management accountant of PS has extracted the following amounts from the
preferred shares ledger account, for the year ended 31 March 2010:
Account - Non-current liability – Preferred shares

Net amount received on issue $1,190,000
Finance cost @5.18% $61,642
Less dividend paid ($40,000)
Balance at 31 March 2010 $1,211,642
Required:
(i) Explain the IAS 32 Financial instruments – presentation and IAS 39 Financial
instruments – recognition and measurement requirements for the presentation
and measurement of an issue of preferred shares.
(3 marks)
(ii) Using the information provided above, explain the amounts that PS should
include for the preferred shares in its statement of comprehensive income and
statement of financial position for the year ended 31 March 2010.
(2 marks)
(Total for question 2 = 30 marks)
(Total for sub-question (f) = 5 marks)
End of Section B

SECTION C – 50 MARKS
[Note: The indicative time for this section is 90 minutes]
ANSWER BOTH QUESTIONS IN THIS SECTION – 25 MARKS EACH
Question Three
XY’s trial balance at 31 March 2010 is shown below:

Notes $000 $000
Administrative expenses 303
Available for sale investments (ii) 564
Cash and cash equivalents 21
Cash received on disposal of land 48
Cost of goods sold 908
Distribution costs 176
Equity dividend paid (ix) 50
Income tax (iii) 12
Inventory at 31 March 2010 76
Land at cost – 31 March 2009 (v) 782
Long term borrowings (viii) 280
Ordinary Shares $1 each, fully paid at 31 March 2010 (vii) 500
Property, plant and equipment – at cost 31 March 2009 (vi) 630
Provision for deferred tax at 31 March 2009 (iv) 19
Provision for property, plant and equipment depreciation at 31
March 2009 (vi) 378
Retained earnings at 31 March 2009 321
Revaluation reserve at 31 March 2009 160
Revenue 1,770
Share premium at 31 March 2010 200
Trade payables 56
Trade receivables 210
3,732 3,732
Additional information provided:

(i) XY trades in country X.
(ii) Available for sale investments are carried in the financial statements at market value.
The market value of the available for sale investments at 31 March 2010 was
$608,000. There were no purchases or sales of available for sale investments during
the year.
(iii) The income tax balance in the trial balance is a result of the underprovision of tax for
the year ended 31 March 2009.
(iv) The taxation due for the year ended 31 March 2010 is estimated at $96,000. The tax
depreciation cumulative allowances at 31 March 2009 for property, plant and
equipment were $453,000.
(v) Land sold during the year had a book value of $39,000. The fair value of the remaining
land at 31 March 2010 was $729,000.
(vi) Property, plant and equipment is depreciated at 20% per annum straight line.
Depreciation of property, plant and equipment is considered to be part of cost of sales.
XY’s policy is to charge a full year’s depreciation in the year of acquisition and no
depreciation in the year of disposal.

(vii) XY issued 100,000 equity shares on 31 October 2009 at a premium of 50%. The cash
received was correctly entered into the financial records and is included in the trial
balance.
(viii) Long term borrowings consist of a loan taken out on 1 April 2009 at 5% interest per
year. No loan interest has been paid at 31 March 2010.
(ix) XY paid a final dividend of $50,000 for the year ended 31 March 2009.
Required:
(a) Calculate the deferred tax amounts relating to property, plant and equipment, that
are required to be included in XY’s statement of comprehensive income for the
year ended 31 March 2010 and its statement of financial position at that date.
Ignore all other deferred tax implications.
(5 marks)
(b) Prepare XY’s statement of comprehensive income and statement of changes in

equity for the year to 31 March 2010 and a statement of financial position at that
date, in a form suitable for presentation to the shareholders and in accordance with
the requirements of International Financial Reporting Standards.
(20 marks)
Notes to the financial statements are not required, but all workings must be clearly
shown. Do not prepare a statement of accounting policies.
(Total for Question Three = 25 marks)

Question Four
The draft summarised Statements of Financial Position at 31 March 2010 for three
entities, P, S and A are given below:
P S A
$000 $000 $000 $000 $000 $000
Non-current Assets
Property, plant and equipment 40,000 48,000 34,940
Investments:
40,000 Ordinary shares in S at cost 60,000
Loan to S 10,000
8,000 Ordinary shares in A at cost 13,000 . .
123,000 48,000 34,940
Current Assets
Inventory 8,000 12,000 8,693
Current a/c with S 8,000 0 0
Trade receivables 17,000 11,000 10,106
Cash and cash equivalents 1,000 3,000 3,033
34,000 26,000 21,832
Total Assets 157,000 74,000 56,772
Equity and Liabilities

Equity shares of $1 each 100,000 40,000 20,000
Retained earnings 21,000 13,000 7,800
121,000 53,000 27,800
Non-current liabilities
Borrowings 26,000 10,000 10,000
Current liabilities
Trade payables 10,000 5,000 18,972
Current a/c with P 0 6,000 0
10,000 11,000 18,972
Total Equity and Liabilities 157,000 74,000 56,772
Additional information:
(i) P’s acquired all of S’s equity shares on 1 April 2009 for $60,000,000 when
S’s retained earnings were $6,400,000. P also advanced S a ten year loan of
$10,000,000 on 1 April 2009.
(ii) The fair value of S’s property, plant and equipment on 1 April 2009 exceeded
its book value by $1,000,000. The excess of fair value over book value was
attributed to buildings owned by S. At the date of acquisition these buildings
had a remaining useful life of 20 years. P’s accounting policy is to depreciate
buildings using the straight line basis.
(iii) At 31 March 2010 $250,000 loan interest was due and had not been paid.
Both P and S had accrued this amount at the year end.
(iv) P purchased 8,000,000 of A’s equity shares on 1 April 2009 for $13,000,000
when A’s retained earnings were $21,000,000. P exercises significant
influence over all aspects of A’s strategic and operational decisions.
(v) S posted a cheque to P for $2,000,000 on 30 March 2010 which did not
arrive until 7 April 2010.
(vi) No dividends are proposed by any of the entities.

(vii) P occasionally trades with S. In March 2010 P sold S goods for $4,000,000.
P uses a mark up of one third on cost. On 31 March 2010 all the goods were
included in S’s closing inventory and the invoice for the goods was still
outstanding.
(viii) P’s directors do not want to consolidate A. They argue that they do not
control A, therefore it does not need to be consolidated. They insist that A
should appear in the consolidated statement of financial position at cost of
$13,000,000.
Required:
(a) Draft a response that explains to P’s directors the correct treatment of A in
the consolidated financial statements. Include comments on any ethical
issues involved.
(5 marks)
(b) Prepare a Consolidated Statement of Financial Position for the P Group of entities
as at 31 March 2010, in accordance with the requirements of International
Financial Reporting Standards.
(20 marks)
Notes to the financial statements are not required but all workings must be shown.
(Total for Question Four = 25 marks)
End of Question Paper

MATHS TABLES AND FORMULAE

Present value table
Present value of $1, that is (1 + r)-n where r = interest rate; n = number of periods until
payment or receipt.
Periods Interest rates (r)

(n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909
2 0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826
3 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751
4 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683
5 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621
6 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.564
7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.513
8 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467
9 0.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424
10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386
11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350
12 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319
13 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290
14 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263
15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239
16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218
17 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198
18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.180
19 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164
20 0.820 0.673 0.554 0.456 0.377 0.312 0.258 0.215 0.178 0.149

(n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
1 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833
2 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694
3 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579
4 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482
5 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402
6 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335
7 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279
8 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233
9 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194
10 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162
11 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135
12 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112
13 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093
14 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078
15 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.079 0.065
16 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054
17 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045
18 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038
19 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031
20 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026

Cumulative present value of $1 per annum, Receivable or Payable at the end of each year for
1 (1 r )  n
n years r

(n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909
2 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736
3 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487
4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170
5 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791
6 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355
7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868
8 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335
9 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759
10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145
11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495
12 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7.161 6.814
13 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103
14 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367
15 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.061 7.606
16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824
17 15.562 14.292 13.166 12.166 11.274 10.477 9.763 9.122 8.544 8.022
18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201
19 17.226 15.679 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365
20 18.046 16.351 14.878 13.590 12.462 11.470 10.594 9.818 9.129 8.514

(n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
1 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833
2 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528
3 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106
4 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589
5 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991
6 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326
7 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605
8 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.837
9 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.031
10 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192
11 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327
12 6.492 6.194 5.918 5.660 5.421 5.197 4.988 7.793 4.611 4.439
13 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533
14 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611
15 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675
16 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730
17 7.549 7.120 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4.775
18 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812
19 7.839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843
20 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870
Formulae
Annuity
Present value of an annuity of $1 per annum, receivable or payable for n years, commencing
in one year, discounted at r% per annum:
1 1 
PV = 1  n 
r  [1  r ] 
Perpetuity
Present value of $1 per annum, payable or receivable in perpetuity, commencing in one year,
1
discounted at r% per annum: PV 
r

LIST OF VERBS USED IN THE QUESTION REQUIREMENTS

A list of the learning objectives and verbs that appear in the syllabus and in the question requirements for
each question in this paper.
It is important that you answer the question according to the definition of the verb.
LEARNING OBJECTIVE VERBS USED DEFINITION
Level 1 - KNOWLEDGE
What you are expected to know. List Make a list of
State Express, fully or clearly, the details/facts of
Define Give the exact meaning of
Level 2 - COMPREHENSION
What you are expected to understand. Describe Communicate the key features
Distinguish Highlight the differences between
Explain Make clear or intelligible/State the meaning or
purpose of
Identify Recognise, establish or select after
consideration
Illustrate Use an example to describe or explain
something
Level 3 - APPLICATION
How you are expected to apply your knowledge. Apply Put to practical use
Calculate/compute Ascertain or reckon mathematically
Demonstrate Prove with certainty or to exhibit by
practical means
Prepare Make or get ready for use
Reconcile Make or prove consistent/compatible
Solve Find an answer to
Tabulate Arrange in a table
Level 4 - ANALYSIS
How are you expected to analyse the detail of Analyse Examine in detail the structure of
what you have learned. Categorise Place into a defined class or division
Compare and contrast Show the similarities and/or differences
between
Construct Build up or compile
Discuss Examine in detail by argument
Interpret Translate into intelligible or familiar terms
Prioritise Place in order of priority or sequence for action
Produce Create or bring into existence
Level 5 - EVALUATION
How are you expected to use your learning to Advise Counsel, inform or notify
evaluate, make decisions or recommendations. Evaluate Appraise or assess the value of
Recommend Propose a course of action

Financial Pillar
Operational Level Paper
Specimen Paper
Thursday Morning Session

F1 - Financial Operations

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CIMA 2010 Chartered Management Accounting Qualification – Specimen Examination Paper F1

Published November 2009

Answer the SIX compulsory sub-questions in Section B on pages 7 to 10.

Answer the TWO compulsory questions in Section C on pages 11 to 14.

 The Chartered Institute of Management Accountants 2009

COUNTRY X - TAX REGIME FOR USE THROUGHOUT THE EXAMINATION PAPER

Relevant Tax Rules for Years Ended 30 April 2007 to 2010

Value Added Tax

Specimen Exam Paper 2 Financial Operations

Instructions for answering Section A:

1.1 Which of the following statements is correct?

A Tax evasion is legally arranging affairs so as to minimise the tax liability.

B Tax evasion is legally arranging affairs so as to evade paying tax.

C Tax evasion is using loop holes in legislation to evade paying tax.

Financial Operations 3 Specimen Exam Paper

Administration expenses include entertaining of $15,000.

From the perspective of B, the VAT would have

1.4 CT has taxable profits of $100,000 and pays 50% as dividends.

The tax system in use here would be classified as a:

A Imputation tax system

Specimen Exam Paper 4 Financial Operations

1.7 The purpose of an external audit is to:

A check the accounts are correct and to approve them.

1.8 Goodwill arising on acquisition is accounted for according to IFRS 3 Business

Goodwill arising on acquisition is:

A carried at cost, with an annual impairment review.

Financial Operations 5 Specimen Exam Paper

1.10 (i) CD is Z’s main customer.

Which 2 of the above can be regarded as a related party of Z?

A (i) and (iii)

(Total for Question One = 20 marks)

Specimen Exam Paper 6 Financial Operations

(a) ATOZ operates in several countries as follows:

(i) Explain why determining corporate residence is important for corporate

(Total for sub-question (a) = 5 marks)

During the last VAT period WX had the following transactions:

Purchase of new machinery, $345,000, inclusive of VAT.

Sales of goods subject to VAT at standard rate $230,000

Financial Operations 7 Specimen Exam Paper

(Total for sub-question (b) = 5 marks)

(Total for sub-question (c) = 5 marks)

(d) BD is a well established double glazing business, manufacturing building extensions,

Specimen Exam Paper 8 Financial Operations

(Total for sub-question (d) = 5 marks)

Explain the accounting treatment, required by international financial reporting

(Total for sub-question (e) = 5 marks)

Financial Operations 9 Specimen Exam Paper

Account - Non-current liability – Preferred shares

Specimen Exam Paper 10 Financial Operations

XY’s trial balance at 31 March 2010 is shown below:

Additional information provided:

Financial Operations 11 Specimen Exam Paper

(b) Prepare XY’s statement of comprehensive income and statement of changes in

(Total for Question Three = 25 marks)

Specimen Exam Paper 12 Financial Operations

Equity and Liabilities

(vi) No dividends are proposed by any of the entities.

Financial Operations 13 Specimen Exam Paper

(Total for Question Four = 25 marks)