Neco 2021 Financial Accounting Question 5

Practice objective / multiple choice question 5 from the 2021 Neco Financial Accounting examination.

Neco 2021 Financial Accounting Objective / Multiple Choice Medium Difficulty
Question 5 NECO • 2021 • FINANCIAL_ACCOUNTING • objective

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.

Answer Options

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 Answer 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
Correct Option:
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).

About This Question

This is Neco 2021 Financial Accounting Question 5. It is one of the objective questions from the 2021 Neco Financial Accounting examination.

Difficulty level: Medium .

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