NATIONAL OPEN UNIVERSITY OF NIGERIA
14/16 AHMADU BELLO WAY, VICTORIA ISLAND, LAGOS
SCHOOL OF MANAGEMENT SCIENCES
MARCH/APRIL 2014 EXAMINATION
COURSE CODE: ACC 312 CREDIT UNIT: 2
COURSE TITLE: INTERMEDIATE FINANCIAL ACCOUNTING II
TIME ALLOWED: 2 HRS 30 MINS
Instructions: 1. Attempt question Number one (1) and any other two (2).
2. Question number 1 is compulsory and carries 30 marks, while the other
questions carry equal marks each
3. Present all your points in coherent and orderly manner
Simplest Estate Development Nigeria Plc, was registered in year 2005. It purchased freehold land at Ajah for the purpose of creating a highly developed holiday centre and retirement estate. The area of land purchased consists of 4,000 plots from which a block of 20 plots was designed as sports and entertainment arena whilst the remaining land was offered for sale at N 15,000 per plot, for development of luxury bungalows. As at 30th April, 2008, the position of the company was as follows:
Authorised share capital 50,000
Issued and fully paid:
Ordinary shares @ N 1.00 per share 27,000
9% redeemable preference shares 4,500
Unappropriated profit brought forward 9,600
7% debentures 18,000
Debentures redemption fund 6,900
Fixed Assets: 45,330
Entertainment arena including land & filling at cost (750)
Debenture redemption fund investment, at cost
(market value N7,500,000) 6,900
Current Assets N’000 N’000
Freehold land (2,000 plots unsold) at cost 12,000
Arena stocks 750
Arena debtors 130
Less: Current liabilities:
Trade creditors 180
Proposed ordinary dividend 2,700
Net current assets 14,520
The following transaction took place in the year ended 30th April, 2008:
a. On 1st July 2007, to be effective 1st May 2007, the company sold the entertainment arena to complete leisure limited for N3 million together with arena stocks and debtors at the balance sheet figure. Cash settlement was made on 20th July, 2007.
b. The preference shares were redeemed on 30th June, 2007, within the terms of the original issue, at a premium of 105, to be in lieu of any accrued dividend. The premium on redemption is to be written-off to capital reserve.
c. On 1st July 2007, the proposed ordinary dividend was paid.
d. On 31st October 2007, the 7% debentures were redeemed at 104 together with 6 months accrued interest. The premium on redemption is to be written-off to capital reserve. The debenture redemption fund had been created out of profit.
e. On 1st November 2007, the company made a bonus share issue to the ordinary shareholders of one for every three ordinary shares held on that date. The capital reserve arising from the realization of fixed assets was issued for this purpose.
f. During the course of the year, 400 plots were sold at N15,000 a plot.
g. Also, within the year, the creditors as at May 2007, were paid off at a discount of 5% and administrative expenses of N450,000 incurred, of which N210,000 was unpaid at 30th April, 2008.
h. Income from investments (market value on 31st October, 2007 was N7,800,000) amounted to N270,000
You are required to prepare for Simplest Estate Development Nigeria Plc the following for year ended 30th April, 2008.
i. Profit and loss appropriation account.
ii. Balance sheet as at 30th April, 2008.
iii. Bank account. 25 Marks
1b. Mention 5 (five) sources of Generally Accepted Accounting Practice (GAAP) in Nigeria. 5 Marks
a. List and explain 5 (five) accounting concepts used in the preparation of financial statements. 10 Marks
b. State 5 (five) factors that determine the acceptability of an accounting practice?
a. State 5 (five) the powers of the Nigerian Accounting Standards Board (NASB) as prescribed under section 7 of the NASB Act, 2003. 10 Marks
b. Define the following terms used in the Statement of Accounting Standard 19 as follows:
– Deferred tax liabilities
– Input tax credit
– Capital gains
– Accounting profit/loss
– Deferred tax assets 10 Marks
a. Define a Capital Structure of a company. 5 Marks
b. State and explain 5 (five) types of capital. 15 Marks
a. Define the term ‘debenture’ and explain the types of debentures available. 10 Marks
b. Give 5 (five) functions of the Nigerian Accounting Standard Board (NASB) according to section 6 of the NASB Act, 2003. 10 Marks