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GH issued a 6% debenture for $1,000,000 on 1 January 20X4. A broker fee of $50,000 was payable in respect of this issue. The effective interest rate associated with this debt instrument is 7.2%.

The carrying value of the debenture at 31 December 20X4 is:

Options:

$958,400

$1,065,600

$1,012,000

$961,400

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Question 2

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?

Options:

DR Deferred tax liability (SOFP) £36,000

CR Deferred tax liability (SOFP) £36,000

DR Corporation tax (income statement) £36,000

CR Corporation tax (income statement) £36,000

DR Deferred tax liability (SOFP) £144,000

CR Deferred tax liability (SOFP) £144,000

DR Corporation tax (income statement) £144,000

Question 3

LM are just about to pay a dividend of 20 cents a share. Historically, dividends have grown at a rate of 5% each year.

The current share price is $3.05.

The cost of equity using the dividend valuation model is:

Options:

12.4%

11.9%

7.4%

6.9%

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F2 Exam Dumps : F2 Advanced Financial Reporting

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