Practice neco financial_accounting 2017 Past Questions

Question 1 View Details

The trial balance of a merchandising firm shows: Opening stock ₦150,000; Purchases ₦320,000; Purchase returns ₦20,000; Freight‑in ₦8,000; Sales ₦560,000; Sales returns ₦15,000; and the gross profit for the year is reported as ₦120,000. Assuming no other transactions, determine the value of the closing stock. Use the formula \( \text{COGS}=\text{Opening Stock}+\text{Purchases}-\text{Purchase Returns}+\text{Freight‑in}-\text{Closing Stock} \).

A. 38000

Correct B. 33000

C. 35000

D. 30000

Correct Answer: B

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Question 2 View Details

Partners A and B share profits in the ratio 3:2. Their capital balances are A ₦120,000 and B ₦80,000. Goodwill of the firm is valued at ₦60,000 and is to be shared in the old profit‑sharing ratio. A new partner C is admitted with a 40 % share of future profits and brings in cash equal to his share of goodwill. At the same time, land is revalued upward by ₦30,000 and the revaluation surplus is shared between the old partners in their profit‑sharing ratio. Determine the amount of capital recorded for the new partner C on admission.

Correct A. 24000

B. 30000

C. 26000

D. 20000

Correct Answer: A

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Question 3 View Details

State the fundamental accounting equation and briefly describe what each component (Assets, Liabilities, and Owner's Equity) represents in a business.

A. Liabilities = Assets + Owner's Equity

B. Assets + Liabilities = Owner's Equity

Correct C. Assets = Liabilities + Owner's Equity

D. Assets = Owner's Equity - Liabilities

Correct Answer: C

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Question 4 View Details

Partners X, Y and Z share profits in the ratio 2:1:1. Their capital balances are X ₦150,000, Y ₦90,000 and Z ₦60,000. On dissolution, the partnership's assets are: cash ₦80,000, inventory at cost ₦70,000, equipment (net book value) ₦50,000 and an outstanding receivable of ₦20,000. Liabilities consist of a loan of ₦40,000 and creditors owed ₦30,000. Goodwill is valued at ₦30,000 and is to be shared in the profit‑sharing ratio. The receivable of ₦20,000 is written off as a bad debt. Determine the amount of cash each partner receives after all liabilities are settled, the bad debt is written off, and goodwill is distributed.

A. X: 90000, Y: 30000, Z: 40000

B. X: 75000, Y: 50000, Z: 35000

Correct C. X: 80000, Y: 40000, Z: 40000

D. X: 80000, Y: 35000, Z: 45000

Correct Answer: C

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Question 5 View Details

A local government budgets the following for the year: Tax revenue based on a 10 % rate on an assessable base of ₦1,200,000; non‑tax revenue ₦30,000; grants received ₦20,000; and total expenditures ₦150,000 (salaries ₦70,000, maintenance ₦40,000, interest ₦10,000, other ₦30,000). During the year, the tax rate is increased to 12 % for the second half of the year, while the assessable base remains unchanged. Non‑tax revenue exceeds the budget by 10 %. An unexpected emergency expenditure of ₦12,000 occurs, and maintenance costs rise by 5 % of the original maintenance budget. After settling all items, the council decides to transfer 5 % of any surplus to a development fund. Calculate the amount transferred to the development fund at year‑end.

A. 1200

B. 1150

C. 950

Correct D. 1050

Correct Answer: D

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Question 6 View Details

During the financial year, a government department received a multi‑year grant of \( \text{₦}12,000,000 \) to be used equally over three years. In Year 2 an additional supplementary grant of \( \text{₦}1,500,000 \) was received, to be recognised equally over the remaining two years. The department follows the accrual basis and recognises grant revenue in proportion to the expenses incurred, up to the amount allocated for the year. At the end of Year 1 expenses were \( \text{₦}3,200,000 \) and at the end of Year 2 expenses were \( \text{₦}3,800,000 \). In Year 3 the department incurred expenses of \( \text{₦}5,000,000 \). Determine (a) the amount of grant revenue that should be recognised in Year 3, and (b) the closing balance of the Grant Receivable account at 31 December Year 3.

A. Revenue recognised in Year 3: 5000000; Closing Grant Receivable: 1000000

Correct B. Revenue recognised in Year 3: 5000000; Closing Grant Receivable: 1500000

C. Revenue recognised in Year 3: 4750000; Closing Grant Receivable: 1750000

D. Revenue recognised in Year 3: 4500000; Closing Grant Receivable: 2500000

Correct Answer: B

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Question 7 View Details

The trial balance of a small enterprise shows the following balances: Dr Cash \( \text{₦}150,000 \), Dr Purchases \( \text{₦}80,000 \), Cr Sales \( \text{₦}200,000 \), Cr Capital \( \text{₦}30,000 \), Dr Suspense Account \( \text{₦}5,000 \). The total debits equal \( \text{₦}235,000 \) and total credits equal \( \text{₦}230,000 \). It is later discovered that a sales transaction of \( \text{₦}20,000 \) was mistakenly posted to Purchases instead of Sales. Determine the amount that must be transferred from the Suspense Account to correct the trial balance, and give the corrected balances of the Purchases and Sales accounts.

A. Transfer ₦35,000 to Suspense (debit); corrected Purchases = ₦80,000; corrected Sales = ₦200,000

B. Transfer ₦35,000 to Suspense (credit); corrected Purchases = ₦60,000; corrected Sales = ₦220,000

C. Transfer ₦15,000 to Suspense (debit); corrected Purchases = ₦70,000; corrected Sales = ₦210,000

Correct D. Transfer ₦35,000 to Suspense (debit); corrected Purchases = ₦60,000; corrected Sales = ₦220,000

Correct Answer: D

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Question 8 View Details

On 1 March the school purchased computer equipment costing \( \text{₦}500,000 \) on credit. Record the journal entry required to reflect this transaction.

A. Debit Computer Equipment ₦400,000; Credit Accounts Payable ₦400,000

B. Debit Computer Equipment ₦500,000; Credit Cash ₦500,000

C. Debit Accounts Payable ₦500,000; Credit Computer Equipment ₦500,000

Correct D. Debit Computer Equipment ₦500,000; Credit Accounts Payable ₦500,000

Correct Answer: D

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Question 9 View Details

A company maintains a Trade Receivables Control Account. The subsidiary ledger balances at 31 December are: A - \( \text{₦}12,000 \), B - \( \text{₦}8,500 \), C - \( \text{₦}15,200 \), D - \( \text{₦}9,300 \). During December the following transactions occurred: a credit sale to A of \( \text{₦}4,000 \); a cash receipt from B of \( \text{₦}3,500 \); a write‑off of D's account as uncollectible for \( \text{₦}2,000 \); and a discount allowed to C of 2 % on its balance. Determine the balance of the Trade Receivables Control Account after posting these transactions.

Correct A. ₦43,196

B. ₦43,500

C. ₦45,500

D. ₦44,590

Correct Answer: A

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Question 10 View Details

A municipal council purchased a road‑maintenance vehicle for \( \text{₦}24,000,000 \) on 1 January 2022. The vehicle was depreciated using the straight‑line method over 5 years with no residual value. From 1 January 2024 the council must apply the diminishing‑balance method at a rate of 40 % per annum on the carrying amount at the beginning of each year. Compute: (a) the depreciation expense for the year ended 31 December 2024; (b) the carrying amount of the vehicle at 31 December 2024; (c) the amount of depreciation expense that should be transferred to the Capital Maintenance Fund for 2024.

Correct A. (a) 5,760,000; (b) 8,640,000; (c) 5,760,000

B. (a) 4,320,000; (b) 10,080,000; (c) 4,320,000

C. (a) 4,800,000; (b) 9,600,000; (c) 4,800,000

D. (a) 9,600,000; (b) 14,400,000; (c) 9,600,000

Correct Answer: A

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Question 11 View Details

Control Account - Receivables (Medium) The Receivables Control Account had an opening balance of \(₦120,000\) at the start of the month. During the month the following transactions occurred: - Credit sales of \(₦250,000\). - Cash sales of \(₦30,000\) (recorded in the sales journal). - Sales returns amounting to \(₦5,000\). - Trade discounts allowed totalling \(₦3,000\). - Total cash received from debtors recorded in the cash book was \(₦200,000\), which inadvertently includes the cash sales. Determine the closing balance of the Receivables Control Account at month‑end.

A. ₦162,000

B. ₦222,000

Correct C. ₦192,000

D. ₦332,000

Correct Answer: C

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Question 12 View Details

Incomplete Records - Hard A merchandising firm's trial balance for the month is incomplete. The following information is available: - Opening stock: \(₦40,000\). - Closing stock: \(₦55,000\). - Sales (recorded): \(₦300,000\). - Gross profit is known to be 25 % of sales. - The cash book shows cash receipts of \(₦120,000\) and cash payments of \(₦80,000\). - The bank statement for the same period shows cash receipts of \(₦115,000\) and cash payments of \(₦78,000\). Using the gross‑profit method, determine: (a) The amount of purchases for the month. (b) The adjusted net profit after correcting the cash book for the discrepancies with the bank statement.

Correct A. Purchases = ₦240,000; Adjusted net profit = ₦72,000

B. Purchases = ₦250,000; Adjusted net profit = ₦75,000

C. Purchases = ₦245,000; Adjusted net profit = ₦68,000

D. Purchases = ₦235,000; Adjusted net profit = ₦70,000

Correct Answer: A

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Question 13 View Details

Manufacturing Accounts - Process Costing (Hard) A process costing system records the following data for the month: - Opening work‑in‑process (WIP): 10,000 units, 100 % materials added, 30 % conversion completed. - Direct materials added: \(₦50,000\). - Direct labour incurred: \(₦30,000\). - Manufacturing overhead incurred: \(₦20,000\). - Normal loss: 5 % of total input, costing 60 % of the conversion cost. - By‑product from the normal loss sold for \(₦8,000\). - Closing WIP: 8,000 units, 100 % materials added, 40 % conversion completed. - Total units started during the month: 12,000. - Sales revenue from the good units: \(₦120,000\). Calculate the profit for the month.

A. ₦84,405

B. ₦86,805

C. ₦90,000

Correct D. ₦85,405

Correct Answer: D

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Question 14 View Details

Manufacturing Accounts - Job Order Costing (Hard) A company applies overhead on the basis of machine‑hours. The overhead budget is \(₦150,000\) for an expected 5,000 machine‑hours. Actual overhead incurred for the month was \(₦165,000\) and the actual machine‑hours used were 5,400. Three jobs were processed as follows: | Job | Direct Materials (₦) | Direct Labour (₦) | Machine‑hours | |-----|----------------------|-------------------|---------------| | A | 20,000 | 12,000 | 1,200 | | B | 15,000 | 9,000 | 1,000 | | C | 25,000 | 15,000 | 1,800 | (a) Compute the overhead applied to each job and the total cost of each job. (b) Determine the amount of under‑applied overhead and allocate it to Cost of Goods Sold on a proration basis using the total job costs (including applied overhead). What is the total cost of Job C after the allocation of the under‑applied overhead?

Correct A. ₦113,584

B. ₦110,400

C. ₦112,800

D. ₦115,200

Correct Answer: A

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Question 15 View Details

Bank Reconciliation - Medium The cash book of a company shows a balance of \(₦85,000\) at 31 March. The bank statement for the same date shows a balance of \(₦78,500\). The following items are identified: - Deposits in transit: \(₦7,000\) - Outstanding checks: \(₦680\) - A bank error: cheque No 102 was recorded by the bank as \(₦1,200\) instead of the correct amount \(₦1,020\). - An NSF cheque from a customer for \(₦2,500\). - Interest earned on the account: \(₦350\). Prepare the bank reconciliation and state the adjusted cash‑book balance.

A. ₦85,350

B. ₦84,320

C. ₦82,500

Correct D. ₦82,850

Correct Answer: D

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Question 16 View Details

The company's cash book shows a balance of \(\text{\u20A6}150,000\). The bank statement balance is \(\text{\u20A6}158,000\). Deposits in transit amount to \(\text{\u20A6}12,000\) and outstanding checks total \(\text{\u20A6}9,500\). A cheque that was deposited was later returned as NSF for \(\text{\u20A6}3,200\). The bank mistakenly credited the account with an unknown amount \(X\). After preparing the bank reconciliation, the adjusted cash‑book balance must equal the adjusted bank‑statement balance. What is the value of \(X\)?

A. 13,000

B. 14,700

Correct C. 13,700

D. 12,700

Correct Answer: C

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Question 17 View Details

Company X's income statement shows a net profit after tax of \(\text{\u20A6}84,000\). The tax rate is 20\% of profit before tax and interest expense is \(\text{\u20A6}12,000\). Depreciation expense is unknown. Cost of goods sold is \(\text{\u20A6}180,000\) and gross profit is 40\% of sales. Determine the depreciation expense.

A. 12,000

Correct B. 3,000

C. 6,000

D. 9,000

Correct Answer: B

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Question 18 View Details

The Purchases Ledger opened with a debit balance of \(\text{\u20A6}45,000\). During the month the following entries were posted: a debit of \(\text{\u20A6}12,000\) for cash purchases, a credit of \(\text{\u20A6}8,000\) for purchase returns, and a credit of \(\text{\u20A6}5,000\) for payments to the supplier. The trial balance, however, shows the Purchases Ledger balance as a credit of \(\text{\u20A6}6,000\). Assuming only one credit entry was omitted, what is the amount of the missing credit entry?

A. 55,000

Correct B. 50,000

C. 40,000

D. 45,000

Correct Answer: B

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Question 19 View Details

At month‑end the Sales Ledger Control Account carries a debit balance of \(\text{\u20A6}120,000\). The subsidiary customer balances are: A - \(\text{\u20A6}45,000\), B - \(\text{\u20A6}30,000\), C - \(\text{\u20A6}25,000\), D - \(\text{\u20A6}20,000\). During the month a credit note of \(\text{\u20A6}12,000\) was issued to Customer B and a cash receipt of \(\text{\u20A6}15,000\) from Customer C was received, but neither was posted to the control account. After posting these items, what should be the corrected debit balance of the Sales Ledger Control Account?

A. 108,000

B. 105,000

C. 120,000

Correct D. 93,000

Correct Answer: D

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Question 20 View Details

During preparation of the trial balance the following errors were discovered: (i) A purchase invoice of \(\text{\u20A6}6,000\) was recorded as a credit to Purchases instead of a debit. (ii) A cash receipt of \(\text{\u20A6}4,200\) from a customer was omitted entirely. (iii) A bank charge of \(\text{\u20A6}150\) was entered as a debit of \(\text{\u20A6}14,350\). After posting all other accounts correctly, the trial balance shows that total debits exceed total credits by \(\text{\u20A6}2,200\). What amount should be transferred to the suspense account to restore balance, and which error(s) caused the imbalance?

A. 2,200 (credit to suspense; caused by errors i and iii)

B. 1,950 (debit to suspense; caused by errors i and iii)

C. 2,200 (debit to suspense; caused by errors i and ii)

Correct D. 2,200 (debit to suspense; caused by errors i and iii)

Correct Answer: D

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Question 21 View Details

Given the following trial balance extracts (amounts in naira): Cash Dr 45,000; Accounts Receivable Dr 30,000; Inventory Dr 25,000; Equipment Dr 80,000; Cost of Goods Sold Dr 90,000; Rent Expense Cr 5,000 (recorded on the wrong side); Accumulated Depreciation - Equipment Cr 20,000; Accounts Payable Cr 35,000; Loan Payable Cr 50,000; Capital Cr 70,000; Sales Revenue Cr 120,000; and an unknown account ?. The total debits and credits do not balance. Determine the amount (debit) of the unknown account required to balance the trial balance.

A. 25000

Correct B. 20000

C. 30000

D. 15000

Correct Answer: B

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Question 22 View Details

A company's opening retained earnings are \(\text{₦}150,000\). The profit before tax (excluding amortisation and depreciation) for the year is \(\text{₦}120,000\). The company amortises goodwill of \(\text{₦}50,000\) straight‑line over 5 years and depreciates equipment costing \(\text{₦}200,000\) (residual value \(\text{₦}20,000\)) straight‑line over 10 years. The tax rate is 30\% and the dividend payout ratio is 40\% of profit after tax. Compute the retained earnings at year‑end.

A. 187800

B. 195080

C. 191400

Correct D. 188640

Correct Answer: D

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Question 23 View Details

The cash book (bank column) shows an opening balance of \(\text{₦}20,000\). During the month the following cash transactions were recorded:\n1. Receipt from Customer A \(\text{₦}12,500\)\n2. Payment of rent \(\text{₦}4,800\)\n3. Receipt from sale of equipment \(\text{₦}8,000\)\n4. Payment of utilities \(\text{₦}1,200\)\n5. Receipt from Customer B \(\text{₦}?\) (unknown)\n6. Payment of salaries \(\text{₦}6,500\)\n7. A payment of \(\text{₦}2,000\) was mistakenly recorded as a receipt.\nIf the closing cash balance should be \(\text{₦}30,000\), determine the amount received from Customer B.

A. 3000

B. 5000

C. 6000

Correct D. 4000

Correct Answer: D

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Question 24 View Details

An asset was purchased for \(\text{₦}150,000\) with an estimated residual value of \(\text{₦}15,000\) and a useful life of 5\,years. Compute the book value after 3\,years using the double‑declining‑balance method (rate = 2/useful life) and state how much higher this book value is compared with the straight‑line method after the same period.

A. \text{₦}32,400; \text{₦}36,600 higher than straight‑line

B. \text{₦}34,800; \text{₦}34,200 lower than straight‑line

C. \text{₦}30,000; \text{₦}39,000 lower than straight‑line

Correct D. \text{₦}32,400; \text{₦}36,600 lower than straight‑line

Correct Answer: D

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Question 25 View Details

During the month the following credit purchases of inventory were made:\nSupplier X: \(\text{₦}25,000\)\nSupplier Y: \(\text{₦}18,500\)\nSupplier Z: \(\text{₦}?\) (missing amount)\nSupplier W: \(\text{₦}12,750\)\nPurchase returns amounted to \(\text{₦}3,000\) and freight‑in of \(\text{₦}2,000\) was added to the net purchases. The total recorded in the purchases journal for the month is \(\text{₦}70,000\). Determine the amount of the purchase from Supplier Z.

A. 12750

B. 16750

C. 13750

Correct D. 14750

Correct Answer: D

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