NATIONAL OPEN UNIVERSITY OF NIGERIA
PLOT 91, CADASTRAL ZONE, NNAMDI AZIKIWE EXPRESSWAY, JABI, ABUJA
FACULTY OF MANAGEMENT SCIENCES
NOVEMBER 2018 EXAMINATIONS
COURSE CODE: ACC 311 CREDIT UNIT: 3
COURSE TITLE: FINANCIAL ACCOUNTING
TIME ALLOWED: 21/2 Hours
INSTRUCTIONS: 1. Attempt question Number one (1) and any other three (3).
- Question number 1 is compulsory and carries 25 marks, while the other questions carry 15 marks each
- Present all your points in coherent and orderly manner
Question one
1a. In the absence of agreement to the contrary, the Partnership Act 1890 provides certain provisions for the dissolution of partnership. Briefly state any four of those provisions.
- Obinna, Andrew and Okoro entered a partnership business sharing profit and losses in the ratio 4:3:3. The trial balance extracted from the financial transactions of the partnership as at 30th September 2017 is as follows:
Dr Cr
Capital Accounts
Obinna 22,500
Andrew 15,000
Okoro 7,500
Current Accounts
Obinna 875
Andrew 625
Okoro 375
Bad debt 750
Account Receivables 28,000
Account payable 43,750
Provision for doubtful debts 1,250
Bank 8,125
Land and building at cost 75,000
Office expenses 3,000
General expenses 2,000
Motor vehicle at cost 25,000
Sales 187,500
Purchases 106,250
Rent and rate 2,250
Wages and salaries 2,750
Selling expenses 15,000
Insurance 2,500
Inventory at beginning 20,000
Accumulated depreciation:
Land & building 15,000
Motor van 10,000
Drawing:
Obinna 5,000
Andrew 3,750
Okoro 3,750
Bills payable 20,000
Bills receivable 1,250
Equipment 18,750
Additional Information 323,750323,750
- Closing inventory was N37,500
- Expenses owing: selling expenses N350, wages and salaries N325 and insurance N
- Expenses paid in advance: Rent and rates N
- Non-current assets are written off as follows:
Land and building 5% per on cost annum, motor vehicle 20% on cost per annum.
- Provision for bad debts is to be made equal to 5% of outstanding receivables as at 30th September 2017.
- The partnership agreement covers the following information:
- Andrew is to be allowed a salary of N7,500 per annum.
- Interest on capital to be 10%.
- Interest on drawing 5%.
You are required to prepare:
- Statement of profit or loss for the year ended 30th September 2017.
- Partnership appropriation accounts.
- Partners current accounts.
- Statement of financial position as at that date.
25 marks
Question two
2a. List any four features of a dependent branch.
- Deluxe Plc sent goods to its branch at cost plus mark up of 33⅓%. The company has its head office in Lagos and one of its branches in Kano, Nigeria. The following are details of the Kano branch transaction for the year ended 31st December 2017.
N
Opening inventory at branch selling price 60,000
Goods sent to branch at selling price 600,000
Goods returned to head office by branch at selling price 45,000
Goods returned to head office by branch customer 15,000
Credit sales 435,000
Cash sales 145,500
Authorized allowance off selling price 4,500
Goods returned to branch by branch customer at selling price 22,500
Cheques/cash received from branch customer 285,000
Cash discount allowed to branch customer 16,500
Branch bad debt 11,250
Branch sundry expenses paid by head office 22,500
Cash stolen at branch 15,000
Goods stolen at branch at selling price 6,000
Closing inventory at branch selling price 90,000
Goods invoiced to the branch at N12,000 on 20th December was not received by the branch until January 4th and had not been included in the figures.
Required: Using cost plus mark up method, Prepare the following accounts:
- Branch inventory account
- Good sent to branch account
- Branch inventory adjustment account
- Branch receivables accounts
- Branch statement of profit or loss 15 marks
Question three
3a. List and explain any four methods of issuing new share.
- Frances Ltd was registered with a share capital consisting of 1,000,000 ordinary shares of N1 each and 250,000 6% preference share of N1 each. It offered 600,000 ordinary shares for public subscription as follows:
On application 20k
On allotment 30k
On first call & final call 25k
All shares were applied for and allotted. However, a shareholder who had been allotted 40,000 shares failed to pay the first call. The second and last call have not been made.
You are required to calculate the following:
- Authorized share capital
- Issued share capital
- Unissued share capital
- Called up share capital
- Uncalled up share capital
- Calls in arrears
- Paid up share capital
15 marks
Question four
4a. Describe the two methods of preparing a statement of cash flow.
- State any three advantages of cash flow statement.
- From the cash book of TundePlc shown below for the year ended 31st December 2016, prepare a statement of cash flow for the year ended 31stDecember 2016 using direct method.
TundePlc
Cash book for the year ended 31st December 2016
| Bal b/d | 100,000 | |||
| Receipt: | Payment: | |||
| Customers (goods) | 980,500 | Suppliers (goods) | 480,000 | |
| Interests | 140,000 | Salaries | 240,000 | |
| Dividends | 82,000 | Rent | 50,000 | |
| Commission | 25,000 | Taxation | 62,000 | |
| Equity share | 120,000 | 10% debenture | 45,000 | |
| Investments | 238,000 | Interest | 20,000 | |
| Equipment | 345,000 | Plant | 490,000 | |
| 10% loan | 100,000 | Dividend | 120,000 | |
| 8% debenture | 50,000 | 6% redeemable Pref share | 80,000 | |
| Debtor | 42,000 | Properties | 210,000 | |
| Other operating expenses | 78,000 | |||
| _________ | Bal b/d | ___347,500 | ||
| N2,222,500 | N2,222,500 |
15 marks
Question five
- State any four classifications of financial ratio.
- The following are the final account of Suzzy Fashion Venture Ltd for the year ended 2017.
Statement of Profit and loss for the year ended 31st December, 2017.
₦
Sales 233,000
Cost of goods sold (170,000)
Gross profit 63,000
Distribution cost (15,000)
Administrative expenses (16,800)
Other overhead expenses (6,200)
Net profit 25,000
Statement of financial position as at 31st December, 2017
| N | N | N | N | ||
| Equity of N1 per share | 80,000 | Non-current assets | 111,000 | ||
| Retained profit | 16,900 | Currents assets | |||
| 96,900 | Inventory | 18,100 | |||
| Noncurrent liabilities: | Account Receivables | 6,000 | |||
| Loan | 25,000 | Cash | 6,800 | ||
| Current liabilities: | Prepayment | 2,000 | 32,900 | ||
| Trade payables | 14,000 | ||||
| Accruals | 8,000 | 22,000 | _______ | ||
| 143,900 | 143,900 |
Additional Information:
- Credit sales amount to 75% of total sales while credit purchases amount to N120,000.
- Opening balances of the following items are as follows:
Account receivable N8,500, Account payable N19,200, Inventory N22,400
iii Market price per share is N5.20
iv Dividend per share of 25k was paid.
Compute the following:
- Account Receivable turnover
- Inventory turnover
- Quick ratio
- Cash ratio
- Debt equity ratio
- Dividend yield ratio
- Price earnings ratio
15 marks
Question six
- Accounting can be seen as an important part of the total information system within a business. Enumerate five purposes of accounting information.
- Mention five users of accounting information together with their information needs.
- State five limitations of financial statements. 15 marks
