ACC311 – Financial Accounting 2020_2

 

NATIONAL OPEN UNIVERSITY OF NIGERIA

Plot 91, Cadastral Zone, Nnamdi Azikiwe Express Way, Jabi-Abuja Faculty of Management Sciences, Department of Financial Studies 2020_2 Examination1234

 

COURSE CODE: ACC 311                                                         CREDIT UNIT: 3

COURSE TITLE: Financial Accounting                             TIME ALLOWED: 2 ^1/2 HOURS

 

Instructions:

1. Attempt question number one (1) and any other three (3).
2. Question number 1 is compulsory and carries 25 marks while the others carry 15 marks
3. Present all your points in coherent and orderly manner

 

 

Question One

 

You are to study the following financial statements for Abuja Enterprises and Lagos Enterprises stores and then answer the questions which follow.

 

 

Financial Statements
	Abuja Enterprises		Lagos Enterprises
	N	N	N	N
Income Statements
Sales		555,000		750,000
Less Cost of goods sold
Opening inventory	100,000		80,000
Add Purchases	200,000		320,000
	300,000		400,000
Less Closing inventory	(60,000)	(240,000)	(70,000)	(330,000)
Gross profit		315,000		420,000
Less Depreciation	5,000		15,000
Wages, salaries and commission	165,000		220,000
Other expenses	45,000	(215,000)	35,000	(270,000)
Net profit		100,000		150,000
Statement of financial position
Non-current assets

 

Equipment at cost	50,000		100,000
Less Depreciation to date	(40,000)	10,000	(30,000)	70,000
Current assets
Inventory	60,000		70,000
Accounts receivables	125,000		100,000
Bank	25,000	210,000	12,500	182,500
Total assets		220,000		252,500
Current liabilities
Accounts payable		(104,000)		(100,500)
Net assets		116,000		152,000
Financed by: Capitals
Balance at start of year		76,000		72,000
Add Net profit		100,000		150,000
		176,000		222,000
Less Drawings		(60,000)		(70,000)
Total capital		116,000		152,000

 

Required:

• Calculate the following ratios for each business:
  • gross profit as percentage of sales;
  • expenses as percentage of sales;
  • inventory turnover;
  • rate of return of net profit on capital employed;
  • acid test ratio;
  • accounts receivables/sales ratio
  • accounts payables/purchases ratio
  • current ratio

(16 marks)

 

• State SIX purposes of Accounting information (9 marks) (Total 25 marks)

Question Two

1. State FIVE advantages of the statement of cashflows
2. Mention FOUR limitations of the Statement of Cashflows
3. List TWO items each under the following activities: Operating activities, investing activities and financing (Total marks 15)

 

Question Three

Success Ltd has a nominal value of the Ordinary Shares Capital of N1 per share. It issued 400,000 of this ordinary share on 1^st January 2018 payable as follows: Application 25k, Allotment 40k, 1^st Call 35k and Final Call 20k.

When application register were closed 500,000 applications were received. The shares were allotted and excess applications fees were refunded. Allotment fees and calls fees were received when due.

You are required to prepare the following accounts:

1. Bank Account
2. Application Account

• Allotment account

1. 1^st Call account
2. Final Call account

(b) Using the above account, prepare the abridged Statement of Financial Position after the above transactions were completed.

(Total marks 15)

 

Question Four

 

(a) Wazobia is the proprietor of a shop selling paintings and ornaments. For the purposes of his financial statements he wishes the business to be divided into two departments:

Department A – Paintings Department B – Ornaments

The following balances have been extracted from his nominal ledger at 31 August 2019:

	Dr	Cr
	N	N
Sales Department A		75,000
Sales Department B		50,000
Inventory Department A, 1 September 2018	1,250
Inventory Department B, 1 September 2018	1,000
Purchases Department A	51,000
Purchases Department B	38,020
Wages of sales assistants Department A
Wages of sales assistants Department B
Picture framing costs
General office salaries
Fire insurance – building
Lighting and heating
Repairs to premises
Internal telephone
Cleaning
Accountancy charges
General office expenses
Inventory at 31 August 2019 was valued at:
Department A N1,410
Department B N912
The proportion of the total floor area occupied by each department was:
Department A: two-fifths Department B: three-fifths

 

• Prepare Wazobia’s departmental income statement for the year ending 31 August 2019, apportioning the costs, where necessary, to show the net profit or loss of each department. The apportionment should be made by using the methods as shown:

Area – Fire insurance, Lighting and heating, Repairs, Telephone, Cleaning; Turnover – General office salaries, Accountancy, General office expenses.                                           (11 marks)

• Explain the following terms:

 

• Independent departmental account (2 marks)

 

• Dependent departmental account (2 marks) (Total 15 marks)

 

Question Five

• Explain the following terminologies under branch accounts:

1. Local branch

 

1. Foreign branch

 

• Dependent branch

 

1. Independent branch

 

1. Unrealised profit

 

1. Foreign branch

2 marks each                        (12 Marks)

 

 

 

• State Three (3) features of an independent branch (3 Marks)

(Total 15 Marks )

 

 

 

Question Six

The following trial balance is extracted from the books of Nigeria Ltd as at 31^st December, 2018.

 

	Dr N	Cr N
Inventory 1/1/2018	30,000
Sales		285,750
Purchases	196,020
Carriage Inwards	1,320

 

Carriage outwards	480
Debtors and Creditors	63,000	69,000
Ordinary share capital		300,000
7% Preference share capital		90,000
6% Debentures		72,000
Goodwill	60,150
Preliminary expenses	9,630
Land and Building	135,000
Equipment	105,000
Motor vehicle	165,000
Bank	85,680
Cash in hand	72,000
Provision for depreciation: Equipment		9,150
Motor vehicle		12,900
General reserve		39,600
Share premium		15,000
Interim ordinary dividend	12,150
Profit and loss		84,600
Motor expenses	2,340
General expenses	1,440
Debenture interest	2,220
Rates	4,560
Salaries & Wages	13,110
Directors remuneration	12,750
Auditors remuneration	6,150
	978,000	978,000

 

Additional Information:

1. Inventory at 31/12/2018 was N90,000.
2. Accrued debenture interest and salary are N2100 and N750

• Transfer N12,300 to general reserve

1. Authorized share capital is N150,000 in Preference shares and N900,000 in ordinary
2. Provision for depreciation: Motor vehicle – N13,500

Equipment – N6,900

1. Write off goodwill N1,500; Preliminary expenses N9,630

• Corporation Tax – N7,500
• Provide for preference dividend N6,300 and final ordinary dividend of 5%.

Required:

Prepare the final accounts of Nigeria Ltd for the year ended 31^st December, 2018.

(15 marks)

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