ACC311 : FINANCIAL ACCOUNTING (2019_1)

NATIONAL OPEN UNIVERSITY OF NIGERIA


PLOT 91, CADASTRAL ZONE, NNAMDI AZIKIWE EXPRESS WAY, JABI – ABUJA

FACULTY OF MANAGEMENT SCIENCES

DEPARTMENT OF FINANCIAL STUDIES

                    2019_1 EXAMINATION

COURSE CODE: ACC311                                                               CREDIT UNITS: 3

COURSE TITLE: FINANCIAL ACCOUNTING

TIME ALLOWED: 2½ HRS

INSTRUCTIONS:

  1. Attempt Question One (1) and any other three (3) questions
  2. Question 1 carries 25 marks, while the other questions carry 15 marks each.
  3. Present all points in coherent and orderly manner

 

QUESTION 1

The following is the trial balance of ROWEN Plc. as at 31st August, 2018.

Dr                 Cr

N’’000           N’000

Ordinary shares of 50k each                                                                                       400,000

Share premium                                                                                                            520,000

Revaluation surplus                                                                                                     180,000

Retain earnings                                                                                                           700,000

Sales                                                                                                                         5,780,000

Purchases                                                                                        2,900,000

Inventory at 1st September 2017                                                        900,000

Returns inwards                                                                                 440,000

Returns outwards                                                                                                       760,000

Salaries and wages                                                                             520,000

Directors remunerations                                                                     410,000

Insurance and rates                                                                             320,000

Land                                                                                                    600,000

Building at cost                                                                                1,000,000

Accumulated depreciation on building                                                                      530,000

Plant and equipment at cost                                                             1,800,000

Accumulated depreciation on plant & equipment                                                     420,000

Motor vehicle at cost                                                                        1,200,000

Accumulated depreciation on motor vehicles                                                           320,000

Furniture and fitting at cost                                                              1,500,000

Accumulated depreciation on furniture & fitting                                                      300,000

Trade receivables                                                                                500,000

Trade payable                                                                                                            800,000

Long term investment                                                                         800,000

Short term investment                                                                         500,000

Cash in hand                                                                                        700,000

Long term loan                                                                                                          600,000

Investment income                                                                                                    710,000

Commission received                                                                                                620,000

Other income                                                                                                             920,000

Short term loan                                                                                                          440,000

Loan interest                                                                                       120,000

Sundry expenses                                                                                 250,000

Bank overdraft                                                                                                          460,000

14,460,000    14,460,000

Additional information

  1. Inventory at 31st August 2018, valued at cost was N900 million. Its net realizable value is estimated at N640 million as a result of obsolescence;
  2. At 31st August, insurance and rates outstanding amounted to N120 million;
  3. At 31st August, prepaid wages amounted to N320 million;
  4. Provision for corporation tax of N480 million is to be made on the profit for the year;
  5. The company depreciates non-current assets as follows:

Building 10% on cost

Plant and equipment 20% on cost

Motor vehicles 25% on reducing balance

Furniture and fittings 15% on reducing balance

 

You are required to prepare the following statements for internal use:

  1. Statement of profit or loss account and other comprehensive income for the year ended 31st August, 2018. (14 marks)
  2. Statement of financial position as at 31st August, 2018. (11 marks)

(Total: 25 marks)

 

 

 

 

 

 

 

QUESTION 2

On 31st December 2018, the statement of financial position of Grace, Peace, and Mercy in partnership sharing profits and losses equally are as follows:

Statement of Financial Position as at 31st December, 2018

N                      N

ASSET: Non-current assets

Freehold buildings & land                                                             4,000,000

Plant & Machinery                                                                         1,200,000

Motor vehicles                                                                                   900,000

6,100,000

Current assets

Inventory                                                                  900,000

Receivable                                                                800,000

Bank                                                                         300,000          2,000,000

8,100,000

Capital accounts:

Grace                                                                                             1,900,000

Peace                                                                                             1,800,000

Mercy                                                                                             1,500,000

Current accounts:

Grace                                                                        255,000

Peace                                                                        180,000

Mercy                                                                       175,000          610,000

Current liabilities:

Payables                                                                   990,000

Bank overdraft                                                      1,300,000       2,290,000

8,100,000        8,100,000

On 31st December 2018, the partnership was dissolved and the asset sold publicly as follows:

Freehold Land and Building    8,000,000

Plant & machinery                    800,000

Motor vehicles                          400,000

Inventory                                   700,000

Receivables realized N650,000. Payables were settled in full and the bank overdraft was repaid. Grace personally took over a vehicle at the valuation of N150,000 while Peace took the other vehicle at the valuation of N80,000. Dissolution expenses amounting to N130,000 were paid.

 

You are required to prepare:

  • the realization account, (6 marks)
  • bank account, and (5 marks)
  • capital accounts to record the dissolution. (4 marks)

                                                      (Total 15 marks)

 

QUESTION 3

The following balances were extracted from the books of Aisha Nig. Ltd for the year ended 31st December 2018.                                                                         N                      N

Sales: Department A                                                                                     8,000,000

Department B                                                                                      6,000,000

Opening inventory: Department A                                      350,000

Department B                                      120,000

Purchases: Department A                                                 5,500,000

Department B                                                  4,000,000

 

Commission                                                                            100,000

General office salaries                                                            250,000

Insurance                                                                                   80,000

Rates                                                                                          50,000

Repairs                                                                                       55,000

Lighting                                                                                   130,000

Cleaning                                                                                      5,000

Internal telephone                                                                     20,000

Discount received                                                                     15,000

Discount allowed                                                                     14,000

Sundry expenses                                                                      12,000

Stationery                                                                                 30,000

Advertising                                                                              46,000

Electricity                                                                              120,000

Closing inventory: Department A                                         120,000

Department B                                           80,000

The total floor area occupied by each department was:

Department A: 2/5                  Department B: 3/5

The following basis of apportionment should be used for the departments:

  1. Commission, Advertising, Discounts Allowed – Proportionate to sales
  2. Discount received – Proportionate of purchases
  3. Cleaning, electricity, internal telephone, insurance – Total floor rate

All other expenses should be apportioned equally between the departments

Required:

  1. a) Prepare the Departmental Statement of Profit or Loss account and other Comprehensive income for the year ended 31st December, 2017 (12 Marks)
  2. b) Discuss three (3) advantages of departmental accounts (3 Marks)

(Total 15 Marks)

 

 

QUESTION 4

Prestige Limited operates a branch at Asaba. All purchases are made by the head office in Warri and goods are invoiced at selling price, being cost plus 50%. The following information was given for the year ended 30th September 2017.

N

Cash sales                                                                    1,971,000

Credit sales                                                                 6,300,000

Goods sent to branch at invoiced price                    11,250,000

Returns to head office at invoiced price                       112,500

Inventory at close at invoiced price                            2,812,500

Goods stolen at invoiced price                                         9,000

Cash stolen at invoiced price                                          27,000

Allowance off selling price                                             18,000

  1. You are required to prepare the necessary accounts in the books of the head office using Memorandum method (9 Marks)
  2. Explain three (3) types of branches (6 Marks)

(Total 15 Marks)

 

 

QUESTION 5

The summarized Statement of Financial Position and operating results of BSC Limited for the two years ended 30th September, 2017 were as follows:

 

Statement of Financial Position as at 30th September

2017                2016

N’000              N’000

Non-Current Asset (net)                                                         32,444             13,882

 

Current Assets

Inventory                                                                                  124,588         104,392

Receivables                                                                               109,718         100,104

Bank                                                                                            14,468           29,130

248,774         233,626

Current Liabilities

Payables                                                                                      94,110           85,770

Taxation                                                                                        8,308             6,438

Dividends                                                                                     5,000             4,500

107,418           96,708

Net current assets                                                                      141,356         136,918

 

10% Debentures 20×7-9

Net assets                                                                                   50,000            50,000

 

Financed by

Ordinary shares of N1 each                                                       25,000            25,000

Revenue reserves                                                                       71,748            59,574

Deferred taxation                                                                       27,052            16,226

123,800          100,800

Operating results for the year ended 30th September

2017               2016

N’000             N’000

Sales                                                                                     1,345,888           1,118,142

Profit before interest and taxation                                            46,824                41,764

Interest payable                                                                           5,000                  5,000

Taxation                                                                                  201,012                17,494

Dividend                                                                                     7,500                  7,000

 

The shares of the company were quoted at N1.20 at 30th September, 2017.

You are required:

  1. Calculate from the statement of financial position and operating results:
  2. Two (2) ratios of interest to payables (4 Marks)
  3. Two (2) ratios of interest to management (4 Marks)

iii. Two (2) ratios of interest to shareholders                                      (4 Marks)

  1. Comment briefly upon the changes between 2016 and 2017 (3 Marks)

(Total 15 Marks)

 

QUESTION 6

  1. a) Discuss the two methods of preparing cash flow statements (3 marks)
  2. b) With respect to classification of cash flow statement, explain the following giving three

(3) examples each:

  1. Operating activities                                                                        (4 Marks)
  2. Investing activities                                                                         (4 Marks)
  • Financing activities (4 Marks)

 (Total 15 Marks)

Contact me to get your Exam Summary for this course.

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