Practice neco financial_accounting 2021 Past Questions

Question 1 View Details

Using the weighted‑average method, determine (i) the cost per equivalent unit for materials and for conversion, and (ii) the total cost of the units transferred out to finished goods.

A. Materials: ₦6 per unit; Conversion: ₦6.20 per unit (exactly ₦62\/10); Cost transferred out: ₦79,500.00

Correct B. Materials: ₦6 per unit; Conversion: ₦6.11 per unit (exactly ₦55/9); Cost transferred out: ₦78,722.22

C. Materials: ₦6 per unit; Conversion: ₦5.90 per unit (exactly ₦53\/9); Cost transferred out: ₦77,500.00

D. Materials: ₦5 per unit; Conversion: ₦6.11 per unit (exactly ₦55\/9); Cost transferred out: ₦80,000.00

Correct Answer: B

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Question 2 View Details

Prepare a bank reconciliation for the month and state the adjusted cash balance. The bank statement shows a balance of \(\text{₦}150,000\). The book balance is \(\text{₦}152,500\). Deposits in transit amount to \(\text{₦}8,000\). Outstanding checks total \(\text{₦}5,500\). The bank incorrectly debited a check of \(\text{₦}2,000\) that should have been credited. A customer's cheque was returned NSF for \(\text{₦}1,200\). Bank service charges of \(\text{₦}300\) were deducted. The bank also collected a note for the company amounting to \(\text{₦}3,500\) which is not yet recorded in the books.

A. Adjusted cash balance = ₦152,500

Correct B. Adjusted cash balance = ₦154,500

C. Adjusted cash balance = ₦153,300

D. Adjusted cash balance = ₦155,800

Correct Answer: B

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Question 3 View Details

A merchandising firm provides the following information for the year ended 31 December 2021:\n\n- Opening stock: \(\text{₦}45,000\)\n- Purchases: \(\text{₦}120,000\)\n- Purchase returns: \(\text{₦}5,000\)\n- Carriage inwards: \(\text{₦}2,000\)\n- Opening trade receivables: \(\text{₦}30,000\)\n- Sales: \(\text{₦}210,000\)\n- Sales returns: \(\text{₦}8,000\)\n- Closing trade receivables: \(\text{₦}25,000\)\n- Gross profit rate: 25% of net sales\n- Cash receipts from customers during the year: \(\text{₦}190,000\)\n- Overheads paid: \(\text{₦}15,000\)\n- Net profit for the year: \(\text{₦}18,000\)\n\nThe closing stock figure is missing. Determine the value of the closing stock and the cash payments made to suppliers during the year. Assume the opening cash balance was \(\text{₦}20,000\) and the closing cash balance was \(\text{₦}22,000\).

A. Closing stock = ₦9,500; Cash payments to suppliers = ₦175,500

B. Closing stock = ₦12,000; Cash payments to suppliers = ₦171,000

C. Closing stock = ₦10,500; Cash payments to suppliers = ₦170,000

Correct D. Closing stock = ₦10,500; Cash payments to suppliers = ₦173,000

Correct Answer: D

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Question 4 View Details

The trial balance of a sole trader as at 31 December 2021 shows the following figures (all amounts in \(\text{₦}\)):\n\n- Sales: 500,000\n- Opening stock: 60,000\n- Purchases: 300,000\n- Purchase returns: 10,000\n- Carriage inwards: 5,000\n- Sales returns: 12,000\n- Closing stock: 55,000\n- Salaries expense: 70,000\n- Rent expense paid: 24,000 (of which \(\text{₦}12,000\) is prepaid for the next year)\n- Depreciation expense: 15,000 (equipment cost \(\text{₦}150,000\), accumulated depreciation opening \(\text{₦}30,000\))\n- Interest received: 3,000\n- Interest payable (accrued): 2,000\n- Bad debts expense: 4,000 (allowance increased by \(\text{₦}1,000\))\n- Opening trade receivables: 40,000\n- Closing trade receivables: 45,000\n- Opening trade payables: 35,000\n- Closing trade payables: 30,000\n- Capital: 200,000\n- Drawings: 25,000\n\nCalculate the net profit for the year and the closing capital.

A. Net profit = ₦68,000; Closing capital = ₦243,000

B. Net profit = ₦78,000; Closing capital = ₦263,000

Correct C. Net profit = ₦78,000; Closing capital = ₦253,000

D. Net profit = ₦88,000; Closing capital = ₦253,000

Correct Answer: C

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Question 5 View Details

On 1 March 2021, XYZ Ltd purchased a machine for \(\text{₦}120,000\), paying \(\text{₦}30,000\) cash and the balance on a 6‑month note payable at 12% per annum. The machine has an estimated useful life of 5 years with no residual value. On 30 June 2021, XYZ paid \(\text{₦}10,000\) of the note and received a cash discount of 2% on the amount paid. On 15 July 2021, XYZ sold scrap metal obtained from the machine for \(\text{₦}5,000\) cash. Prepare the journal entries for each of these transactions and compute the depreciation expense for the six months ended 30 June 2021.

A. Journal entries:\n1 Mar 2021 - Dr Machinery ₦120,000; Cr Cash ₦30,000; Cr Notes Payable ₦95,000.\n30 Jun 2021 - Dr Notes Payable ₦10,000; Cr Cash ₦9,800; Cr Discount Received ₦200.\n15 Jul 2021 - Dr Cash ₦5,000; Cr Other Income (Scrap Sale) ₦5,000.\nDepreciation (6 months) = ₦12,000 (Dr Depreciation Expense ₦12,000; Cr Accumulated Depreciation ₦12,000).

Correct B. Journal entries:\n1 Mar 2021 - Dr Machinery ₦120,000; Cr Cash ₦30,000; Cr Notes Payable ₦90,000.\n30 Jun 2021 - Dr Notes Payable ₦10,000; Cr Cash ₦9,800; Cr Discount Received ₦200.\n15 Jul 2021 - Dr Cash ₦5,000; Cr Other Income (Scrap Sale) ₦5,000.\nDepreciation (6 months) = ₦12,000 (Dr Depreciation Expense ₦12,000; Cr Accumulated Depreciation ₦12,000).

C. Journal entries:\n1 Mar 2021 - Dr Machinery ₦120,000; Cr Cash ₦30,000; Cr Notes Payable ₦90,000.\n30 Jun 2021 - Dr Notes Payable ₦10,000; Dr Discount Received ₦200; Cr Cash ₦9,800.\n15 Jul 2021 - Dr Other Income (Scrap Sale) ₦5,000; Cr Cash ₦5,000.\nDepreciation (6 months) = ₦12,000 (Dr Depreciation Expense ₦12,000; Cr Accumulated Depreciation ₦12,000).

D. Journal entries:\n1 Mar 2021 - Dr Machinery ₦120,000; Cr Cash ₦30,000; Cr Notes Payable ₦90,000.\n30 Jun 2021 - Dr Notes Payable ₦10,000; Cr Cash ₦9,804; Cr Discount Received ₦196.\n15 Jul 2021 - Dr Cash ₦5,000; Cr Other Income (Scrap Sale) ₦5,000.\nDepreciation (6 months) = ₦10,000 (Dr Depreciation Expense ₦10,000; Cr Accumulated Depreciation ₦10,000).

Correct Answer: B

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Question 6 View Details

Partnership A, B and C share profit in the ratio 3:2:1. Their capital balances at the beginning of the year are \(\text{₦}120{,}000\), \(\text{₦}80{,}000\) and \(\text{₦}40{,}000\) respectively. The partnership earned a profit of \(\text{₦}48{,}000\) before charging interest on capital at \(10\%\) per annum. After interest, the remaining profit is distributed according to the old profit‑sharing ratio. Goodwill is valued at five times the average profit of the last three years, the average profit being \(\text{₦}45{,}000\). A new partner D is admitted on the basis of equal profit sharing (1:1:1:1). D agrees to pay cash equal to half of his share of goodwill. Calculate the amount of cash D must pay on admission.

A. 25000

B. 31250

Correct C. 28125

D. 30000

Correct Answer: C

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Question 7 View Details

A local government council prepared its annual financial statements. The budgeted revenue consisted of \(\text{₦}150{,}000\) from taxes and \(\text{₦}30{,}000\) from grants (total \(\text{₦}180{,}000\)). Actual cash receipts were \(\text{₦}140{,}000\) of taxes and \(\text{₦}35{,}000\) of grants. Budgeted expenditures were \(\text{₦}120{,}000\) operating and \(\text{₦}20{,}000\) capital (total \(\text{₦}140{,}000\)). Actual cash payments were \(\text{₦}115{,}000\) operating and \(\text{₦}25{,}000\) capital. At year‑end there were accrued expenses of \(\text{₦}8{,}000\) not yet paid and accrued revenues of \(\text{₦}5{,}000\) earned but not received. An unspent budgetary allocation of \(\text{₦}10{,}000\) must be returned to the central government. Determine the adjusted change in the council's fund balance for the year.

A. 30000

Correct B. 22000

C. 27000

D. 12000

Correct Answer: B

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Question 8 View Details

During the year XYZ Ltd recorded the following cash transactions: (i) Purchased inventory on credit for \(\text{₦}40{,}000\). (ii) Sold goods costing \(\text{₦}25{,}000\) for cash \(\text{₦}45{,}000\). (iii) Paid salaries cash \(\text{₦}12{,}000\). (iv) Received cash from a debtor \(\text{₦}15{,}000\). (v) Paid cash for equipment purchase \(\text{₦}20{,}000\). The opening balances were: Cash \(\text{₦}10{,}000\), Inventory \(\text{₦}30{,}000\), Accounts Receivable \(\text{₦}20{,}000\), Capital \(\text{₦}50{,}000\). No other transactions occurred. What is the closing cash balance at year‑end?

Correct A. 38000

B. 62000

C. 23000

D. 50000

Correct Answer: A

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Question 9 View Details

A sole trader's books are incomplete. The following information is available: Opening stock \(\text{₦}30{,}000\). Net sales \(\text{₦}150{,}000\). Gross profit is known to be \(25\%\) of sales. Purchases are missing. Closing stock \(\text{₦}20{,}000\). Operating expenses (excluding depreciation) \(\text{₦}20{,}500\). Depreciation on equipment \(\text{₦}5{,}000\). Net profit for the year is \(\text{₦}12{,}000\). Using the gross‑profit method, determine the amount of purchases for the year.

A. 105000

B. 112500

Correct C. 102500

D. 97500

Correct Answer: C

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Question 10 View Details

A company reports the following balances at year‑end (all figures in \(\text{₦}\)):\nCurrent assets - Cash \(25{,}000\), Accounts Receivable \(40{,}000\), Inventory \(35{,}000\).\nCurrent liabilities - Accounts Payable \(30{,}000\), Short‑term loan \(20{,}000\).\nNon‑current assets - Equipment \(80{,}000\) with accumulated depreciation \(20{,}000\).\nNon‑current liabilities - Long‑term loan \(50{,}000\).\nCapital \(70{,}000\), Retained earnings \(30{,}000\).\nProfit for the year \(15{,}000\); dividends paid \(5{,}000\). Compute (a) the working capital and (b) the current ratio.

Correct A. 50000, 2.0

B. 50000, 1.5

C. 45000, 2.0

D. 55000, 2.2

Correct Answer: A

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Question 11 View Details

A company recorded the following items for the year ended 31 December: Net sales of N1,200,000, sales returns of N30,000, opening stock of N80,000, purchases of N500,000, purchase returns of N20,000, freight inwards of N10,000, closing stock of N100,000, salaries expense of N150,000, equipment cost of N300,000 with straight‑line depreciation at \(12\%\) per annum, and interest expense of N8,000. Tax is charged at \(25\%\) of profit before tax. Compute the profit after tax for the year.

A. 406500

Correct B. 379500

C. 506000

D. 385500

Correct Answer: B

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Question 12 View Details

The cash book shows a balance of N250,000 as at 31 December. The bank statement balance for the same date is N240,000. Outstanding checks total N15,000 and deposits in transit total N8,000. The bank charged a service fee of N1,200 that has not been recorded in the cash book. A cheque was entered in the cash book for N5,000 but the actual amount paid was N5,500. Determine the corrected cash book balance after all adjustments.

Correct A. 241300

B. 242300

C. 240800

D. 239300

Correct Answer: A

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Question 13 View Details

A machine was purchased for N500,000 with an estimated residual value of N50,000 and a useful life of 5 years. Compute the annual straight‑line depreciation. Then, using the diminishing‑balance method at a rate of \(40\%\) per annum, determine the book value at the end of year 3. Finally, state which method results in a higher accumulated depreciation after three years.

Correct A. Diminishing balance method

B. Sum‑of‑the‑years‑digits method

C. Straight‑line method

D. Units of production method

Correct Answer: A

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Question 14 View Details

The following trial balance is extracted from the books of XYZ Ltd.\n\nDebit side:\nCash N120,000\nPurchases N80,000\nSalaries N45,000\nRent expense N20,000\nEquipment N50,000\n\nCredit side:\nSales N200,000\nCapital N90,000\nLoans N30,000\nCreditors N5,000\n\nThe total of the debit side is N315,000 and the total of the credit side is N325,000. What amount should be entered in the suspense account on the debit side to balance the trial balance?

A. 5000

B. 15000

C. 20000

Correct D. 10000

Correct Answer: D

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Question 15 View Details

Company ABC has 1,000,000 ordinary shares of \(\text{N}1\) each and 100,000 cumulative preference shares of \(\text{N}2\) each, carrying a \(10\%\) dividend. The profit after tax for the year is \(\text{N}5,000,000\). Preference dividends are in arrears for two years, including the current year. During the year the company bought back 50,000 ordinary shares at \(\text{N}5\) each on 1 January and issued an additional 200,000 ordinary shares at \(\text{N}8\) each on 1 July. Calculate the earnings per ordinary share (EPS) for the year, rounding to two decimal places.

A. 3.90

B. 5.10

C. 4.55

Correct D. 4.72

Correct Answer: D

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Question 16 View Details

The Trade Receivables control account shows an opening balance of \(\text{₦}150,000\). During the year credit sales of \(\text{₦}420,000\) were recorded, cash receipts of \(\text{₦}380,000\) were received and returns outwards of \(\text{₦}10,000\) were made. The closing balance shown in the control account is \(\text{₦}180,000\), while the total of all customers' subsidiary ledger balances is \(\text{₦}190,000\). Assuming only one error has been made, determine the amount and nature of the error and state the corrected closing balance of the control account.

Correct A. Omitted credit sale of \(\text{₦}10,000\); corrected closing balance \(\text{₦}180,000\)

B. Omitted cash receipt of \\ (\\text{₦}10,000\\); corrected closing balance \\ (\\text{₦}190,000\\)

C. Omitted returns outwards of \\ (\\text{₦}10,000\\); corrected closing balance \\ (\\text{₦}170,000\\)

D. Omitted credit sale of \\ (\\text{₦}20,000\\); corrected closing balance \\ (\\text{₦}190,000\\)

Correct Answer: A

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Question 17 View Details

A business purchased inventory on credit for \(\text{₦}250,000\), terms \(2\%\) discount if paid within 30 days. Within 20 days it returned goods worth \(\text{₦}30,000\) and then paid the remaining amount within the discount period. The purchase journal records a debit to Purchases \(\text{₦}250,000\) and a credit to Accounts Payable \(\text{₦}250,000\). The cash payments journal records a credit to Cash \(\text{₦}215,600\) and a debit to Accounts Payable \(\text{₦}215,600\). Identify the missing journal entries that should have been recorded, and compute the net cash actually paid after considering the returns and discount.

A. Missing entries: Debit Purchases Returns \\(\\text{₦}30,000\\), Credit Accounts Payable \\(\\text{₦}30,000\\); Debit Purchases Discount Received \\(\\text{₦}0\\), Credit Accounts Payable \\(\\text{₦}0\\). Net cash paid \\(\\text{₦}220,000\\)

Correct B. Missing entries: Debit Purchases Returns \(\text{₦}30,000\), Credit Accounts Payable \(\text{₦}30,000\); Debit Purchases Discount Received \(\text{₦}4,400\), Credit Accounts Payable \(\text{₦}4,400\). Net cash paid \(\text{₦}215,600\)

C. Missing entries: Debit Purchases Returns \\(\\text{₦}30,000\\), Credit Accounts Payable \\(\\text{₦}30,000\\); Debit Purchases Discount Received \\(\\text{₦}5,000\\), Credit Accounts Payable \\(\\text{₦}5,000\\). Net cash paid \\(\\text{₦}215,000\\)

D. Missing entries: Debit Purchases Returns \\(\\text{₦}25,000\\), Credit Accounts Payable \\(\\text{₦}25,000\\); Debit Purchases Discount Received \\(\\text{₦}4,500\\), Credit Accounts Payable \\(\\text{₦}4,500\\). Net cash paid \\(\\text{₦}220,500\\)

Correct Answer: B

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Question 18 View Details

A machine was purchased on 1\ Jan\ 2020 for \(\text{₦}500,000\). It has a residual value of \(\text{₦}50,000\) and a useful life of 5\ years. The company used the straight‑line method initially. After two full years, on 1\ Jan\ 2022, management revised the residual value to \(\text{₦}30,000\), reduced the remaining useful life to 3\ years and switched to the diminishing‑balance method at a rate of \(40\%\) per annum applied to the opening book value each year. Determine the depreciation expense for the year ended 31\ Dec\ 2022 and the carrying amount of the machine at that date.

Correct A. Depreciation expense \(\text{₦}128,000\); carrying amount \(\text{₦}192,000\)

B. Depreciation expense \\(\\text{₦}96,000\\); carrying amount \\(\\text{₦}216,000\\)

C. Depreciation expense \\(\\text{₦}120,000\\); carrying amount \\(\\text{₦}200,000\\)

D. Depreciation expense \\(\\text{₦}140,000\\); carrying amount \\(\\text{₦}180,000\\)

Correct Answer: A

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Question 19 View Details

The combined cash‑and‑bank book for March shows: opening cash balance \(\text{₦}45,000\), opening bank balance \(\text{₦}120,000\); cash receipts \(\text{₦}85,000\), cash payments \(\text{₦}70,000\); bank receipts \(\text{₦}150,000\), bank payments \(\text{₦}165,000\). The cash‑book closing balances are cash \(\text{₦}60,000\) and bank \(\text{₦}105,000\). The bank statement shows a closing balance of \(\text{₦}98,000\) and lists an unpresented cheque of \(\text{₦}7,000\) and a bank service charge of \(\text{₦}500\) not yet recorded in the cash‑book. After adjusting for these items, determine the corrected cash‑book balances and state whether any cash needs to be transferred between cash and bank to reconcile the cash‑book with the bank statement.

A. Corrected balances - cash \\(\\text{₦}60,000\\), bank \\(\\text{₦}105,500\\); no cash transfer needed

B. Corrected balances - cash \\(\\text{₦}60,000\\), bank \\(\\text{₦}104,500\\); transfer ₦5,500 from cash to bank

Correct C. Corrected balances - cash \(\text{₦}60,000\), bank \(\text{₦}104,500\); no cash transfer needed

D. Corrected balances - cash \\(\\text{₦}59,500\\), bank \\(\\text{₦}104,500\\); no cash transfer needed

Correct Answer: C

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Question 20 View Details

When preparing the trial balance, the total of debit balances was \(\text{₦}1,245,000\) and the total of credit balances was \(\text{₦}1,230,000\), giving a difference of \(\text{₦}15,000\) (debits higher). It was later found that a purchase entry of \(\text{₦}7,500\) was mistakenly recorded as a debit instead of a credit, and a sales entry of \(\text{₦}30,000\) was omitted entirely. Assuming no other errors, determine the effect of these errors on the trial balance totals and calculate the amount that should be posted to the suspense account to balance the trial balance.

Correct A. Errors cause a debit excess of \(\text{₦}15,000\); post a credit of \(\text{₦}15,000\) to the suspense account to balance the trial balance

B. Errors cause a debit excess of \(\text{₦}7,500\); post a credit of \(\text{₦}7,500\) to the suspense account to balance the trial balance

C. Errors cause a credit excess of \(\text{₦}15,000\); post a debit of \(\text{₦}15,000\) to the suspense account to balance the trial balance

D. Errors cause a debit excess of \(\text{₦}22,500\); post a credit of \(\text{₦}22,500\) to the suspense account to balance the trial balance

Correct Answer: A

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Question 21 View Details

A trial balance shows total debits of \( \text{₦}125,000 \) and total credits of \( \text{₦}124,200 \). The accountant discovers that a purchase invoice of \( \text{₦}1,200 \) was recorded on the debit side only. Determine the amount that should be transferred to the suspense account to balance the trial balance and state the type of error.

A. Transfer ₦800 to the suspense account; the error is a commission error.

B. Transfer ₦400 to the suspense account; the error is a principle of double‑entry error.

Correct C. Transfer ₦400 to the suspense account; the error is an error of omission.

D. Transfer ₦1,200 to the suspense account; the error is a transposition error.

Correct Answer: C

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Question 22 View Details

Which fundamental accounting concept is violated when a company fails to record depreciation expense on its fixed assets?

A. The revenue recognition concept is violated.

B. The prudence concept is violated.

C. The historical cost concept is violated.

Correct D. The matching concept is violated.

Correct Answer: D

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Question 23 View Details

In a partnership, A and B share profit in the ratio 3:2. Their capital balances are \( \text{₦}120,000 \) and \( \text{₦}80,000 \) respectively. The partnership earned a net profit of \( \text{₦}50,000 \) for the year. A new partner C is to be admitted with a 25% share of future profits. Goodwill is valued at two years' average profit, and the existing partners agree to receive goodwill in the ratio of their capital balances. No cash contribution is made by C other than goodwill. Determine (a) the total goodwill payable, (b) the amount of goodwill each existing partner receives, and (c) the new capital balances of A, B and C after admission.

Correct A. Total goodwill = ₦100,000; A receives ₦60,000, B receives ₦40,000; New capital balances - A: ₦180,000, B: ₦120,000, C: ₦100,000.

B. Total goodwill = ₦100,000; A receives ₦70,000, B receives ₦30,000; New capital balances - A: ₦190,000, B: ₦110,000, C: ₦100,000

C. Total goodwill = ₦80,000; A receives ₦48,000, B receives ₦32,000; New capital balances - A: ₦168,000, B: ₦112,000, C: ₦80,000

D. Total goodwill = ₦120,000; A receives ₦72,000, B receives ₦48,000; New capital balances - A: ₦192,000, B: ₦128,000, C: ₦120,000

Correct Answer: A

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Question 24 View Details

A company's cash book shows a closing balance of \( \text{₦}85,000 \). The bank statement for the same date shows a closing balance of \( \text{₦}90,000 \). Outstanding checks total \( \text{₦}7,000 \) and deposits in transit total \( \text{₦}4,000 \). Additionally, a cheque of \( \text{₦}2,500 \) was recorded in the cash book as \( \text{₦}2,050 \). Determine the adjusted cash book balance after correcting the error and the balance per bank after reconciliation.

A. Adjusted cash book balance = ₦84,550; Balance per bank after reconciliation = ₦86,000.

B. Adjusted cash book balance = ₦85,000; Balance per bank after reconciliation = ₦87,000.

Correct C. Adjusted cash book balance = ₦84,550; Balance per bank after reconciliation = ₦87,000.

D. Adjusted cash book balance = ₦85,450; Balance per bank after reconciliation = ₦87,000.

Correct Answer: C

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Question 25 View Details

A local government prepares its annual financial statements on a modified accrual basis. The following information is available for the fiscal year: cash revenue collected \( \text{₦}15,000,000 \), accrued revenue not yet collected \( \text{₦}3,500,000 \), cash expenditure paid \( \text{₦}12,000,000 \), accrued expenditure unpaid \( \text{₦}2,200,000 \), capital grants received in cash \( \text{₦}4,000,000 \), capital grants receivable \( \text{₦}1,000,000 \), and depreciation expense \( \text{₦}800,000 \). Compute the net assets at year‑end and state whether net assets increased or decreased compared with an opening net assets of \( \text{₦}5,000,000 \).

Correct A. Net assets at year‑end = ₦20,500,000, which is an increase of ₦15,500,000 over the opening balance.

B. Net assets at year‑end = ₦21,200,000, which is an increase of ₦16,200,000 over the opening balance.

C. Net assets at year‑end = ₦19,800,000, which is an increase of ₦14,800,000 over the opening balance.

D. Net assets at year‑end = ₦20,500,000, which is a decrease of ₦15,500,000 over the opening balance.

Correct Answer: A

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