gce model questions vol1 2020 financial_accounting | Objective

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Question 1 View Details
The cash book for June opened with a balance of \(\text{₦}12{,}500\). During the month the following cash receipts were recorded: cash sales \(\text{₦}18{,}400\), loan received \(\text{₦}5{,}000\) and interest received \(\text{₦}200\). Cash payments recorded were: rent \(\text{₦}4{,}800\), salaries \(\text{₦}6{,}500\), purchase of inventory \(\text{₦}9{,}200\) and electricity \(\text{₦}350\). It was later discovered that a cheque of \(\text{₦}1{,}200\) was mistakenly entered as a receipt instead of a payment, and a bank service fee of \(\text{₦}150\) had not been recorded. What is the closing cash balance at the end of June?
A. ₦11,500
Correct B. ₦12,700
C. ₦13,150
D. ₦12,550

Correct Answer: B

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Question 2 View Details
A Purchases Ledger Control Account shows an opening credit balance of \(\text{₦}30{,}000\). During the month the following entries were posted: purchases on credit \(\text{₦}45{,}000\), returns outwards \(\text{₦}3{,}500\), payments to creditors \(\text{₦}28{,}000\) and discount received \(\text{₦}500\). At month‑end it is discovered that a supplier invoice of \(\text{₦}2{,}200\) was omitted and a payment of \(\text{₦}1{,}200\) was posted twice. Determine the correct closing balance of the Purchases Ledger Control Account (state whether it is a debit or credit balance and its amount).
A. Credit balance of ₦45,300
Correct B. Credit balance of ₦46,400
C. Credit balance of ₦47,600
D. Debit balance of ₦46,400

Correct Answer: B

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Question 3 View Details
On 1 July a business receives a cash advance of \(\text{₦}10{,}000\) for services that will be performed evenly over the next two months. According to the accrual concept, how should the amount be recorded in the accounts on 31 July? Provide the journal entry that reflects the portion of revenue earned by that date.
A. Recognise ₦10,000 as revenue and retain ₦0 as unearned revenue (Debit Unearned Revenue ₦0, Credit Service Revenue ₦10,000).
B. Recognise ₦5,000 as revenue and retain ₦5,000 as unearned revenue (Debit Service Revenue ₦5,000, Credit Unearned Revenue ₦5,000).
Correct C. Recognise ₦5,000 as revenue and retain ₦5,000 as unearned revenue (Debit Unearned Revenue ₦5,000, Credit Service Revenue ₦5,000).
D. Recognise ₦2,500 as revenue and retain ₦7,500 as unearned revenue (Debit Unearned Revenue ₦7,500, Credit Service Revenue ₦2,500).

Correct Answer: C

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Question 4 View Details
A trial balance shows total debits of \(\text{₦}85{,}300\) and total credits of \(\text{₦}84{,}800\), leaving a debit difference of \(\text{₦}500\) recorded in the Suspense Account (debit side). On review it is found that the Purchase Returns account was mistakenly debited instead of credited for \(\text{₦}600\), and a Sales Ledger entry of \(\text{₦}700\) (debit to Debtors) was omitted. After correcting these errors, what will be the corrected balances of the Purchase Returns and Sales Ledger accounts, and what will be the final balance of the Suspense Account?
Correct A. Purchase Returns corrected to a credit of ₦600; Sales Ledger (Debtors) corrected to a debit of ₦700; Suspense Account balance is zero.
B. Purchase Returns corrected to a debit of ₦600; Sales Ledger (Debtors) corrected to a credit of ₦700; Suspense Account balance is zero.
C. Purchase Returns corrected to a credit of ₦600; Sales Ledger (Debtors) corrected to a debit of ₦700; Suspense Account balance is ₦500 debit.
D. Purchase Returns corrected to a credit of ₦600; Sales Ledger (Debtors) corrected to a debit of ₦700; Suspense Account balance is zero credit.

Correct Answer: A

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Question 5 View Details
The following excerpt from a trial balance (all figures in \(\text{₦}\)) is given for XYZ Ltd.\n\nCash \(12{,}000\)\nDebtors \(18{,}000\)\nInventory \(25{,}000\)\nPrepaid Insurance \(3{,}600\)\nEquipment (cost) \(40{,}000\)\nAccumulated Depreciation - Equipment \(8{,}000\) (credit)\nCreditors \(15{,}000\)\nBank Loan (long term) \(20{,}000\)\nShare Capital \(30{,}000\)\nRetained Earnings (b/f) \(10{,}000\)\nSales Revenue \(80{,}000\)\nCost of Goods Sold \(45{,}000\)\nSalaries Expense \(12{,}000\)\nRent Expense \(6{,}000\)\nInsurance Expense \(2{,}400\)\n\nAdditional information:\n- Equipment has a useful life of 8 years, no residual value; it was purchased at the start of the year.\n- An insurance policy of \(\text{₦}3{,}600\) was paid on 1 July for 12 months.\n- Utilities of \(\text{₦}1{,}200\) have been incurred but not yet recorded.\n\nPrepare the adjusted trial balance for the items above, calculate the gross profit and net profit for the year, and state the current ratio (Current Assets ÷ Current Liabilities) rounded to two decimal places.
A. Gross profit = ₦35,000; Net profit = ₦7,200; Current ratio = 3.51
B. Gross profit = ₦30,000; Net profit = ₦5,100; Current ratio = 3.20
Correct C. Gross profit = ₦35,000; Net profit = ₦6,600; Current ratio = 3.51
D. Gross profit = ₦38,000; Net profit = ₦6,600; Current ratio = 3.80

Correct Answer: C

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Question 6 View Details
The trial balance of XYZ Ltd for the year ended 31 December shows the following figures (all amounts in \(\text{₦}\)): Sales \(500{,}000\); Purchases \(300{,}000\); Opening stock \(50{,}000\); Purchases returns \(20{,}000\); Carriage inwards \(5{,}000\); Operating expenses \(60{,}000\); Administrative expenses \(30{,}000\); Closing stock (unknown). It is known that the net profit before tax for the year is \(80{,}000\). Determine the amount of the closing stock.
A. 0
B. 10,000
Correct C. 5,000
D. 15,000

Correct Answer: C

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Question 7 View Details
The trial balance of ABC Co for the year ended 31 March includes the following items (all amounts in \(\text{₦}\)): Sales \(400{,}000\); Opening stock \(40{,}000\); Purchases \(180{,}000\); Purchases returns \(0\); Carriage inwards \(0\); Operating expenses \(50{,}000\). Depreciation is charged at 10 % of gross profit. Bad debts are estimated at 2 % of credit sales (assume all sales are on credit). The net profit after all expenses is \(122{,}000\). The closing stock is unknown. Determine the value of the closing stock.
A. 25,000
B. 15,000
Correct C. 20,000
D. 30,000

Correct Answer: C

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Question 8 View Details
Three partners A, B and C share the profit of their business in the ratio 3 : 2 : 1. Their capital contributions are A = \(60{,}000\), B = \(40{,}000\) and C = \(20{,}000\) (all amounts in \(\text{₦}\)). Interest on capital is charged at 5 % per annum. Salaries are paid to A and B at \(15{,}000\) and \(10{,}000\) respectively; C receives no salary. The partnership has goodwill of \(30{,}000\) which is amortised equally over 5 years, giving an annual amortisation charge of \(6{,}000\) that is shared equally among the partners. The profit before any of these deductions for the year is \(121{,}000\). Calculate the total amount transferred to each partner's capital account at year‑end.
A. A 63,000; B 42,000; C 16,000
B. A 47,000; B 32,000; C 17,000
Correct C. A 62,000; B 42,000; C 17,000
D. A 60,000; B 40,000; C 15,000

Correct Answer: C

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Question 9 View Details
The cash book of XYZ Ltd shows a balance of \(150{,}000\) as at 31 March. The bank statement for the same date shows a balance of \(145{,}000\). The following items are identified:\n- Deposits in transit of \(8{,}000\).\n- Outstanding checks totalling \(5{,}500\).\n- A bank error where a cheque of \(2{,}000\) was incorrectly debited to the company's account.\n- Interest earned on the bank balance of \(300\), not yet recorded in the cash book.\n- Bank service charges of \(800\), recorded by the bank but not yet entered in the cash book.\nPrepare a bank reconciliation statement and state the corrected cash book balance.
A. 149,200
Correct B. 149,500
C. 151,500
D. 150,300

Correct Answer: B

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Question 10 View Details
The Purchases Ledger Control Account of ABC Ltd for the month shows an opening credit balance of \(20{,}000\). During the month the following entries were posted:\n- Purchases recorded: \(45{,}000\).\n- Purchase returns recorded: \(5{,}000\).\n- Payments made to suppliers: \(30{,}000\).\nAt month‑end the total of the individual suppliers' balances in the Purchases Ledger (the subsidiary ledger) is \(12{,}000\) (credit). Assuming the control account should agree with the subsidiary ledger, determine the amount of purchases that were omitted from the control account.
A. 8,000
B. 23,000
Correct C. 18,000
D. 13,000

Correct Answer: C

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Question 11 View Details
During the year, a sole trader's incomplete records show the following information: - Sales: \(£180,000\) - Gross profit margin: \(28\%\) of sales - Opening stock of raw materials: \(£25,000\) - Opening creditors: \(£10,000\) - Closing creditors: \(£15,000\) - Cash payments to suppliers during the year: \(£120,000\) - Net profit after all expenses: \(£14,000\) - Depreciation charged: \(£4,000\) Using this information, determine the value of the closing stock of raw materials at year‑end.
A. £15,400
Correct B. £20,400
C. £25,400
D. £22,800

Correct Answer: B

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Question 12 View Details
Three partners A, B and C share profits in the ratio 3 : 2 : 1. Their partnership has the following assets before a new partner D is admitted: - Cash: \(£20,000\) - Building (cost): \(£80,000\) - The building is revalued upward by \(£12,000\). The partnership's profit for the year before any goodwill or revaluation is \(£45,000\). The partners agree that goodwill of \(£30,000\) will be paid by D and allocated to A, B and C in their old profit‑sharing ratio. The revaluation surplus of the building is also allocated to A, B and C in the same ratio. D will acquire a one‑fifth (\(\frac{1}{5}\)) interest in the partnership's net assets (including the revalued building). Determine the amount that should be credited to D's capital account on admission.
Correct A. £52,400
B. £22,400
C. £50,000
D. £61,400

Correct Answer: A

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Question 13 View Details
A manufacturing firm produces two products, X and Y. The following data are given for the year: - Opening stock of raw materials: \(£8,000\) - Purchases of raw materials: \(£25,000\) - Closing stock of raw materials: \(£6,000\) - Direct labour cost: \(£15,000\) - Manufacturing overhead is applied at 150 % of direct labour. - Units produced: 1,200 of X and 800 of Y. - Machine‑hour requirement: 2 hours per unit of X and 3 hours per unit of Y. - Total machine hours used: 4,800. - Selling price per unit: \(£40\) for X and \(£55\) for Y. - Fixed selling and distribution expenses: \(£12,000\), allocated to each product in proportion to its sales value. Calculate the profit earned on product Y for the year.
A. £6,511
B. £6,101
Correct C. £6,011
D. £5,511

Correct Answer: C

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Question 14 View Details
The following trial balance was prepared (all amounts in £, debit unless indicated): Cash 12,000  Accounts Receivable 8,500  Inventory 5,200  Equipment 15,000  Accumulated Depreciation - Equipment 4,000 (cr)  Accounts Payable 6,300 (cr)  Capital 30,000 (cr)  Drawings 2,500  Sales 22,000 (cr)  Purchases 9,500  Rent Expense 1,200  Salary Expense 3,400 The trial balance totals debit £58,200 and credit £58,200, appearing balanced. Later it is discovered that a purchase of £1,200 was mistakenly recorded as a credit to Purchases instead of a debit, and a sales entry of £800 was omitted entirely. After correcting these errors, what amount should be shown in the suspense account to restore balance?
A. £1,600 (debit)
B. £2,000 (credit)
Correct C. £1,600 (credit)
D. £1,200 (credit)

Correct Answer: C

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Question 15 View Details
The trial balance of a business (all amounts in £, debit unless indicated) before adjustments is: Cash 6,000  Bank 10,000  Accounts Receivable 9,000  Inventory 7,000  Equipment 25,000  Accumulated Depreciation - Equipment 6,000 (cr)  Accounts Payable 5,000 (cr)  Accrued Expenses 3,000 (cr)  Capital 50,000 (cr)  Drawings 4,000  Sales 40,000 (cr)  Purchases 18,000  Rent Expense 3,000  Salary Expense 5,000  Depreciation Expense —  The trial balance totals debit £80,000 and credit £80,000. The following adjustments are required: 1. Depreciation on equipment is 8 % of its cost. 2. One month of rent (annual rent £3,000) has been prepaid. 3. Closing inventory is £6,200 (opening inventory £7,000). 4. Additional accrued expenses of £1,500 have been incurred. After posting all adjustments, the adjusted trial balance shows a profit of £6,950. Determine the depreciation expense that should be recorded.
A. £1,600
B. £2,500
Correct C. £2,000
D. £1,520

Correct Answer: C

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Question 16 View Details
During the month the following journal entries were recorded in the cash book: 1. Debit Cash \(\pounds12{,}000\); Credit Sales Revenue \(\pounds12{,}000\). 2. Debit Rent Expense \(\pounds2{,}500\); Credit Cash \(\pounds2{,}500\). 3. Debit Inventory \(\pounds5{,}000\); Credit Accounts Payable \(\pounds5{,}000\). 4. Debit Cash \(\pounds3{,}000\); (the credit side was omitted by mistake). After posting, the trial balance shows total debits \(\pounds22{,}500\) and total credits \(\pounds19{,}500\). (a) Determine the amount that should have been recorded on the missing credit side. (b) Suggest the most appropriate account for that credit entry.
A. £3,000 credit to Rent Expense
Correct B. £3,000 credit to Sales Revenue
C. £2,500 credit to Sales Revenue
D. £3,000 credit to Accounts Payable

Correct Answer: B

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Question 17 View Details
The following journal entries were posted during a month: 1. Purchase of goods on credit \(\pounds15{,}000\). (Debit Purchases \(\pounds15{,}000\); Credit Accounts Payable \(\pounds15{,}000\)) 2. Credit sales \(\pounds20{,}000\). (Debit Accounts Receivable \(\pounds20{,}000\); Credit Sales \(\pounds20{,}000\)) 3. Cash received from customers \(\pounds12{,}000\). (Debit Cash \(\pounds12{,}000\); Credit Accounts Receivable \(\pounds12{,}000\)) 4. Cash paid to suppliers \(\pounds8{,}000\). (Debit Accounts Payable \(\pounds8{,}000\); Credit Cash \(\pounds8{,}000\)) After posting these entries the trial balance prepared by a student shows total debits \(\pounds27{,}000\) and total credits \(\pounds25{,}000\). Assuming the above four entries are correct, determine the amount and the likely accounts of the entry that was omitted, which would bring the trial balance into balance.
A. £2,000 credit to Service Revenue (debit Accounts Receivable £2,000)
B. £2,500 credit to Sales Revenue (debit Accounts Receivable £2,500)
Correct C. £2,000 credit to Sales Revenue (debit Accounts Receivable £2,000)
D. £2,000 credit to Sales Revenue (debit Cash £2,000)

Correct Answer: C

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Question 18 View Details
A company purchased office equipment for \(\pounds5{,}000\) cash. Record the journal entry using the double‑entry system.
A. Debit Office Equipment \(\pounds5{,}000\); Credit Accounts Payable \(\pounds5{,}000\)
B. Debit Office Equipment \(\pounds4{,}500\); Credit Cash \(\pounds4{,}500\)
Correct C. Debit Office Equipment \(\pounds5{,}000\); Credit Cash \(\pounds5{,}000\)
D. Debit Cash \(\pounds5{,}000\); Credit Office Equipment \(\pounds5{,}000\)

Correct Answer: C

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Question 19 View Details
An asset was purchased for \(\pounds50{,}000\). It has a residual value of \(\pounds5{,}000\) and a useful life of 5 years. For the first two years the straight‑line method was used. From the third year onward the company switched to the reducing‑balance method at a rate of 40% per annum on the remaining book value. Calculate the depreciation expense for the fourth year.
A. 9600
B. 8000
Correct C. 7680
D. 7200

Correct Answer: C

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Question 20 View Details
A retailer's incomplete records for the year show the following information: - Sales: \(\pounds120{,}000\) - Opening stock: \(\pounds20{,}000\) - Closing stock: \(\pounds25{,}000\) - Gross profit rate: 30% of sales - Recorded expenses: Salaries \(\pounds15{,}000\), Rent \(\pounds5{,}000\), Utilities \(\pounds3{,}000\), and an unknown expense \(X\) - Net profit reported: \(\pounds10{,}000\) Using the gross‑profit method, determine the amount of the unknown expense \(X\).
A. 2000
B. 5000
Correct C. 3000
D. 4000

Correct Answer: C

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Question 21 View Details
The Sales Ledger Control Account opened with a debit balance of \(12{,}000\). During the year the following transactions were recorded: credit sales of \(85{,}000\), cash receipts of \(60{,}000\), sales returns of \(3{,}000\), and discounts allowed of \(2{,}000\). At year‑end the total of the individual customer balances in the subsidiary ledger is \(30{,}500\). What is the amount by which the Sales Ledger Control Account balance differs from the total of the subsidiary ledger balances?
A. 1,000
B. 2,500
Correct C. 1,500
D. 3,500

Correct Answer: C

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Question 22 View Details
A partnership of A and B shares profit in the ratio 3:2. Their capitals are \(40{,}000\) and \(30{,}000\) respectively. At the beginning of the year goodwill is revalued upward by \(12{,}000\) and is to be shared in the profit‑sharing ratio. The net profit before any adjustments is \(45{,}000\). During the year A receives a salary of \(6{,}000\) and B receives \(4{,}000\). Interest on capital is charged at 5% per annum on each partner's capital. At year‑end A retires and his share of goodwill is to be paid in cash. How much cash should be paid to A on retirement?
A. 68,300
B. 71,300
Correct C. 73,300
D. 75,300

Correct Answer: C

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Question 23 View Details
A machine was purchased for \(120{,}000\) with a residual value of \(12{,}000\) and a useful life of 8 years. The company depreciates the asset using the straight‑line method for the first three years and then switches to the reducing‑balance method at a rate of 25% per annum on the remaining book value. What is the book value of the machine at the end of year 5?
A. 42,500.00
B. 46,875.00
Correct C. 44,718.75
D. 45,000.00

Correct Answer: C

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Question 24 View Details
During posting, a purchase invoice of \(4{,}560\) was mistakenly recorded as \(5{,}460\) in the Purchases Ledger. In addition, a sales return of \(1{,}230\) was omitted entirely. The trial balance after these errors shows a debit‑side excess of \(1{,}230\). What amount should be transferred to the Suspense Account to correct the trial balance?
A. 1,250
B. 1,200
Correct C. 1,230
D. 1,330

Correct Answer: C

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Question 25 View Details
A company bought equipment for cash \(18{,}000\) and received a 5% early‑payment discount, but the discount was omitted when the transaction was entered in the Purchases Journal. Later, goods were sold on credit for \(12{,}000\) with terms 2/10, net of discount, yet the discount was mistakenly recorded as revenue in the Sales Journal. Identify the two books of original entry that contain these errors and state the exact amount that must be adjusted in each book.
A. Purchases Journal: 900; Sales Journal: 120
Correct B. Purchases Journal: 900; Sales Journal: 240
C. Purchases Journal: 1800; Sales Journal: 240
D. Purchases Journal: 450; Sales Journal: 240

Correct Answer: B

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