NATIONAL OPEN UNIVERSITY OF NIGERIA
14/16 AHMADU BELLO WAY, VICTORIA ISLAND, LAGOS
SCHOOL OF MANAGEMENT SCIENCES
MARCH/APRIL 2014 EXAMINATION
Course code: ACC316 Credit unit: 3
Course title: ANALYSIS OF FINANCIAL STATEMENT
Time allowed: 2 hrs
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
1. Exotic Furniture Nig. Ltd recorded the following transactions in the first week of January 2009:
(a) Rented an office space in Port Harcourt for ₦1 million per annum and paid ₦5 million, being rent
for five years demanded by the landlord. (b) Bought office equipment for ₦240,000 on credit from
Modern Business machines Ltd. The expected useful life of the equipment is four years. (c) Received
cheque of ₦1.3 million from Rivers State Polytechnic, Bori, being final payment for sales made to
the Institution in 2007. (d) Sold furniture items on credit to a local government in Rivers State for
₦4 million. The local government did not pay until the following year. You are required to prepare
extracts of the income statement and balance sheet of the company for the year ended 31 December,
2009, on the assumption that financial statements are prepared under (a) the accrual basis and
(b) the cash basis accounting. Comment as appropriate. (25 marks)
2. What is working capital? How is simulation approach linked to working capital? (15 marks)
3. Define Linear Programming and explain short-term decision as it affects small business (15 marks)
4. Explain liquidity ratios of a business organization. Mention different liquidity ratios stating their
specific uses. (15 marks)
5. Discuss financial statement as a tool for management decision. Identify with brief explanations the
main components of financial statement in an organization. (15 marks)
6. A business outfit uses 10,000 units in 60 days. The ordering costs are N200 per order and the storage
cost for one unit for 60 days is N1. Calculate the Economic Order Quantity. (10 marks)
(b) Why is inventory management important? (5 marks)
You can get the exam summary answers for this course from 08039407882
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