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:
- Attempt Question One (1) and any other three (3) questions
- Question 1 carries 25 marks, while the other questions carry 15 marks each.
- 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
- 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;
- At 31st August, insurance and rates outstanding amounted to N120 million;
- At 31st August, prepaid wages amounted to N320 million;
- Provision for corporation tax of N480 million is to be made on the profit for the year;
- 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:
- Statement of profit or loss account and other comprehensive income for the year ended 31st August, 2018. (14 marks)
- 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:
- Commission, Advertising, Discounts Allowed – Proportionate to sales
- Discount received – Proportionate of purchases
- Cleaning, electricity, internal telephone, insurance – Total floor rate
All other expenses should be apportioned equally between the departments
Required:
- a) Prepare the Departmental Statement of Profit or Loss account and other Comprehensive income for the year ended 31st December, 2017 (12 Marks)
- 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
- You are required to prepare the necessary accounts in the books of the head office using Memorandum method (9 Marks)
- 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:
- Calculate from the statement of financial position and operating results:
- Two (2) ratios of interest to payables (4 Marks)
- Two (2) ratios of interest to management (4 Marks)
iii. Two (2) ratios of interest to shareholders (4 Marks)
- Comment briefly upon the changes between 2016 and 2017 (3 Marks)
(Total 15 Marks)
QUESTION 6
- a) Discuss the two methods of preparing cash flow statements (3 marks)
- b) With respect to classification of cash flow statement, explain the following giving three
(3) examples each:
- Operating activities (4 Marks)
- Investing activities (4 Marks)
- Financing activities (4 Marks)
(Total 15 Marks)
