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NEW QUESTION: 1
LM and JK operate in the same country and prepare their financial statements to 30 June 20X6 in accordance with International Accounting Standards. On 27 June 20X6 both entities raised $1 million cash by issuing debt instruments with identical terms and conditions. Prior to this issue both entities were financed entirely by equity.
At 30 June 20X6 the gearing ratios, calculated as Debt/Equity x 100%, were as follows:
LM: 30%
JK: 65%
Which of the following independent options would explain the difference between LM and JK's year-end gearing?
A. LM held no investments in other entities; JK revalued its available for sale investments upwards in the year.
B. LM made a bonus issue from retained earnings in the year; JK issued no shares in the year.
C. LM revalued its land and buildings upwards in the year; JK has performed no revaluations.
D. LM had 100,000 $1 shares at the year end; JK had 200,000 50c shares in issue at the year end.
Answer: C