CIMA Exam CIMAPRA19-F01-1 Topic 4 Question 79 Discussion

Actual exam question for CIMA's CIMAPRA19-F01-1 exam

Question #: 79
Topic #: 4

[All CIMAPRA19-F01-1 Questions]

WX is considering an investment in ST.

At 31 December 20X2 ST had the following balances in its statement of financial position:

Which of the following would cause ST to become an associate investment of WX?

AWX purchases 15,000 of ST's $1 equity shares and 20,000 of ST's $1 preference shares.

BWX purchases 25,000 of ST's $1 equity shares.

CWX purchases 75,000 of ST's $1 equity shares.

DWX purchases 50,000 of ST's $1 preference shares.

Show Suggested Answer

Suggested Answer: C

by Lindsey at Dec 25, 2023, 09:51 PM

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Malcom

1 months ago

I think I'll go with option C. It's the only one that really fits the definition of an associate investment. Although, I do wonder if the preference shares in option A might give WX some special rights...

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Carin

1 months ago

Option C looks good, but I'm just hoping my calculator doesn't run out of batteries during the exam!

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Xenia

1 months ago

I vote for option C. It's the only one that specifically mentions the 'significant influence' requirement for an associate investment.

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Elin

1 months ago

This is a tricky one. I'm leaning towards option C, but I wonder if the preference shares in option A could also make ST an associate investment.

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Dortha

5 days ago

Yeah, option D with only preference shares might not be enough to make ST an associate investment.

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Elfrieda

8 days ago

I agree, option C with a higher purchase of equity shares seems more likely to make ST an associate investment.

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Carolynn

17 days ago

I think option B might be too low of a purchase to make ST an associate investment.

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Rupert

18 days ago

Option A seems like a good choice, the mix of equity and preference shares could make ST an associate investment.

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Kelvin

1 months ago

Hmm, I'm not sure. Wouldn't option B, purchasing 25,000 equity shares, also give WX a significant influence over ST?

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Nelida

18 days ago

A) So, option B is the correct choice in this scenario.

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Inocencia

19 days ago

B) That's correct. Purchasing 25,000 equity shares would give WX significant influence over ST and therefore make it an associate investment.

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Gerry

20 days ago

A) No, to become an associate investment, WX needs to have significant influence over ST, which is generally considered to be ownership of 20-50% of the voting shares.

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Sabra

2 months ago

I think the correct answer is C. Purchasing 75,000 of ST's equity shares would give WX a significant influence over ST, making it an associate investment.

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