Practice neco financial_accounting 2022 Past Questions

Question 1 View Details

The Sales Ledger Control (SLC) account records total credit sales of $800,000$ naira for the year. Cash receipts from customers amounted to $500,000$ naira and sales returns (credit) amounted to $20,000$ naira. The trade receivables ledger shows a total outstanding balance of $274,000$ naira at year‑end. However, the SLC balance after posting the above entries shows a discrepancy of $6,000$ naira (i.e., the balance is higher than the ledger total). Determine the correct balance that should appear in the SLC and explain the source of the discrepancy.

A. 274600

Correct B. 274000

C. 268000

D. 280000

Correct Answer: B

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Question 2 View Details

The trial balance of XYZ Ltd shows a sales figure of $1,500,000$ naira and a reported gross profit of $300,000$ naira. Opening stock is $200,000$ naira and closing stock is $180,000$ naira. Carriage inwards of $12,000$ naira is recorded, but the purchase returns amount is missing from the trial balance. The purchase returns ledger, however, records a balance of $8,000$ naira. A discount received of $5,000$ naira was omitted from the trial balance. Determine the amount of purchases that should be recorded in the trial balance.

A. 1181000

B. 1164000

C. 1184000

Correct D. 1176000

Correct Answer: D

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Question 3 View Details

The company uses a weighted‑average process costing system. Opening work‑in‑process (WIP) consists of 2,000 units that are 30% complete as to conversion. During the month 8,000 units are started. Closing WIP consists of 1,500 units that are 40% complete as to conversion. Direct materials are added at the start of the process and total material cost incurred is $560,000$ naira. Direct labour cost incurred is $240,000$ naira and manufacturing overhead is applied at 150% of direct labour cost. Using the weighted‑average method, calculate (i) the total cost per equivalent unit for conversion, and (ii) the total cost assigned to units completed and transferred out.

A. Conversion cost per equivalent unit: 62.50 naira; Total cost transferred out: 990,000 naira

Correct B. Conversion cost per equivalent unit: 65.93 naira; Total cost transferred out: 1,036,440 naira

C. Conversion cost per equivalent unit: 70.00 naira; Total cost transferred out: 1,080,000 naira

D. Conversion cost per equivalent unit: 68.20 naira; Total cost transferred out: 1,050,000 naira

Correct Answer: B

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Question 4 View Details

A machine is purchased on 1 January 2022 for $500,000$ naira. Its estimated residual value is $50,000$ naira and its useful life is 5 years. The company uses the double‑declining balance method, but when the depreciation charge for a year would reduce the book value below the residual value, the method switches to straight‑line for the remaining years. Compute the depreciation expense for the year ended 31 December 2024 and the book value at that date.

Correct A. Depreciation 2024: 72,000 naira; Book value: 108,000 naira

B. Depreciation 2024: 80,000 naira; Book value: 120,000 naira

C. Depreciation 2024: 108,000 naira; Book value: 72,000 naira

D. Depreciation 2024: 90,000 naira; Book value: 230,000 naira

Correct Answer: A

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Question 5 View Details

The total input cost for a joint production process is $1,200,000$ naira. The physical output at the split point is 4,000 kg of Product A and 6,000 kg of Product B. Their respective market values are $3$ naira per kg for A and $2$ naira per kg for B. A by‑product C of 1,000 kg is also produced, with a market value of $0.5$ naira per kg. Using the market‑value method and treating the net realizable value of the by‑product as a reduction to the joint cost, determine the joint cost allocated to Product A.

A. 479800

B. 600000

C. 587755

Correct D. 599750

Correct Answer: D

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Question 6 View Details

Machine A was purchased for ₦500,000 and is expected to have a residual value of ₦50,000 at the end of its useful life. Under the straight‑line method the annual depreciation charge is $(\text{Cost} - \text{Residual})/n$ where $n$ is the useful life in years. Under the reducing‑balance method a constant rate of 20 % is applied to the book value at the start of each year. It is given that the accumulated depreciation after 5 years using the straight‑line method equals the accumulated depreciation after 3 years using the reducing‑balance method. Determine the useful life $n$ of the machine (in years), giving your answer correct to two decimal places.

A. 10.00

Correct B. 9.22

C. 7.50

D. 8.75

Correct Answer: B

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Question 7 View Details

ABC Traders reported the following information for the year ended 31 December 2022:\n- Sales: ₦1,200,000\n- Purchases: ₦720,000\n- Opening stock: ₦80,000\n- Closing stock: ₦100,000\n- Salaries expense: ₦150,000\n- Rent expense: ₦60,000\n- Equipment cost: ₦300,000; residual value: ₦30,000; straight‑line depreciation over 5 years.\n- Credit sales constitute 80 % of total sales.\n- A doubtful‑debt expense equal to 2 % of credit sales is recognised.\nCalculate the net profit for the year.

A. 236000

Correct B. 216800

C. 116800

D. 203300

Correct Answer: B

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Question 8 View Details

The cash book shows a balance of ₦85,000. The bank statement balance is ₦78,500. The following items are identified:\n- Deposits in transit: ₦4,200\n- Outstanding checks: ₦3,600\n- Bank service charges: ₦250\n- Interest earned: ₦120\n- The cash book contains an error: a payment was recorded ₦150 too high.\n- A cheque for an amount not recorded in the cash book has been issued.\nAfter adjusting for all items, what should be the corrected cash book balance? (State the amount in naira.)

A. 78800

B. 79500

Correct C. 79100

D. 79250

Correct Answer: C

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Question 9 View Details

XYZ Ltd has 50,000 ordinary shares of ₦2 each and 5,000 8 % cumulative preference shares of ₦5 each. The profit after tax for the year is ₦1,200,000. Preference dividends are in arrears for two years. The company declares a 10 % bonus issue to ordinary shareholders and pays a final dividend of ₦3 per ordinary share. Compute the earnings per ordinary share (EPS) after the bonus issue, giving your answer to two decimal places.

A. 23.88

Correct B. 21.71

C. 21.78

D. 24.00

Correct Answer: B

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Question 10 View Details

The trial balance of DEF Ltd shows the following totals:\n- Total debits: ₦1,250,000\n- Total credits: ₦1,240,000\nIt is discovered that a sales return of ₦10,000 was mistakenly debited instead of being credited. After correcting this error, what will be the new total of debits and credits, and by how much was the trial balance originally out of balance?

A. The trial balance was out of balance by ₦20,000; after correction both debit and credit totals are ₦1,260,000.

B. The trial balance was out of balance by ₦10,000; after correction both debit and credit totals are ₦1,240,000.

C. The trial balance was out of balance by ₦0; after correction both debit and credit totals are ₦1,250,000.

Correct D. The trial balance was out of balance by ₦10,000; after correction both debit and credit totals are ₦1,250,000.

Correct Answer: D

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Question 11 View Details

ABC Manufacturing Ltd produced a single product. The following data are for the year:\n- Opening raw material stock: \$120,000\$ Naira\n- Purchases of raw material: \$480,000\$ Naira\n- Closing raw material stock: \$80,000\$ Naira\n- Opening work‑in‑progress: \$50,000\$ Naira\n- Closing work‑in‑progress: \$30,000\$ Naira\n- Direct labour incurred: \$210,000\$ Naira\n- Manufacturing overhead is applied at \$150\\%\$ of direct labour.\n- Actual factory overhead incurred: \$320,000\$ Naira\n- Opening finished goods: \$150,000\$ Naira\n- Closing finished goods: \$90,000\$ Naira\n- Sales revenue: \$1,200,000\$ Naira\nCalculate the gross profit for the period.

A. 80,000

B. 60,000

C. 95,000

Correct D. 70,000

Correct Answer: D

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Question 12 View Details

XYZ Ltd has the following equity balances at the beginning of the year:\n- Share capital (ordinary shares $\text{N}\$10$ each): \$500,000\$ Naira\n- Share premium: \$150,000\$ Naira\n- Retained earnings: \$200,000\$ Naira\nDuring the year the company:\n1. Issued 5,000 new ordinary shares at $\text{N}\$15$ each.\n2. Declared and paid a dividend of $10\%$ on the total ordinary share capital after the issue.\n3. Purchased its own shares costing $120,000$ Naira at market price.\n4. Reported profit before tax of $300,000$ Naira and tax expense of $30\%$ of profit before tax.\n5. Received interest income of $20,000$ Naira and paid interest expense of $15,000$ Naira.\nPrepare the statement of changes in equity and determine the closing retained earnings.

A. 350,000

B. 300,000

Correct C. 360,000

D. 370,000

Correct Answer: C

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Question 13 View Details

The sales ledger control account shows a closing balance of \$820,000\$ Naira. The subsidiary ledger of three customers records the following outstanding balances: Customer A - \$300,000\$ Naira, Customer B - \$250,000\$ Naira, Customer C - \$260,000\$ Naira. During the period it was discovered that (i) a credit note of \$20,000\$ Naira was issued to Customer B and recorded in the control account but omitted from the subsidiary ledger, and (ii) a payment of \$30,000\$ Naira from Customer C was recorded in the subsidiary ledger but omitted from the control account. Determine the corrected closing balance of the sales ledger control account.

A. 790,000

B. 820,000

Correct C. 840,000

D. 860,000

Correct Answer: C

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Question 14 View Details

State the dual‑aspect (double‑entry) concept of accounting and illustrate it with a transaction involving the purchase of equipment for cash.

Correct A. Every transaction affects at least two accounts, with equal debits and credits. Example: Debit Equipment 150,000 Naira; Credit Cash 150,000 Naira.

B. The dual‑aspect concept states that assets increase with credits and decrease with debits. Example: Debit Equipment 150,000 Naira; Credit Cash 150,000 Naira.

C. Each transaction impacts a single account, with either a debit or a credit. Example: Debit Equipment 150,000 Naira; Credit Cash 150,000 Naira.

D. Every transaction affects at least two accounts, but debits and credits need not be equal. Example: Debit Equipment 150,000 Naira; Credit Cash 140,000 Naira.

Correct Answer: A

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Question 15 View Details

A trial balance shows total debits of \$1,250,000\$ Naira and total credits of \$1,240,000\$ Naira. It is discovered that a sales return of \$10,000\$ Naira was recorded as a debit to Sales Returns but the corresponding credit to Sales Revenue was omitted. After correcting this error, what will be the new totals of debits and credits in the trial balance?

Correct A. Debits = 1,250,000 Naira; Credits = 1,250,000 Naira

B. Debits = 1,250,000 Naira; Credits = 1,240,000 Naira

C. Debits = 1,240,000 Naira; Credits = 1,250,000 Naira

D. Debits = 1,260,000 Naira; Credits = 1,250,000 Naira

Correct Answer: A

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Question 16 View Details

During June, the cash book shows a debit balance of $150,000$. The bank statement balance at 30 June is $145,000$. The following items are identified:\n- Outstanding checks totalling $8,700$.\n- Deposits in transit amounting to $8,000$.\n- Bank service charges of $1,200$ not yet recorded in the cash book.\n- A cheque issued for $5,000$ was mistakenly entered in the cash book as $500$.\nPrepare the bank reconciliation and state the corrected cash book balance after all adjustments.

Correct A. 144300

B. 144800

C. 145300

D. 143300

Correct Answer: A

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Question 17 View Details

A company pays $50,000$ for a 5‑month insurance policy starting on 1 July. At the end of July, how much insurance expense should be recognised and what is the balance in the prepaid insurance account?

A. Insurance expense = 5,000; Prepaid insurance = 45,000

B. Insurance expense = 12,500; Prepaid insurance = 37,500

Correct C. Insurance expense = 10,000; Prepaid insurance = 40,000

D. Insurance expense = 20,000; Prepaid insurance = 30,000

Correct Answer: C

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Question 18 View Details

Record the journal entry for the purchase of equipment costing $120,000$ paid in cash.

A. Debit Cash 120,000; Credit Equipment 120,000

B. Debit Equipment 100,000; Credit Cash 100,000

Correct C. Debit Equipment 120,000; Credit Cash 120,000

D. Debit Equipment 120,000; Credit Accounts Payable 120,000

Correct Answer: C

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Question 19 View Details

The owner withdraws $30,000$ cash for personal use. State the effect of this transaction on the accounting equation (Assets = Liabilities + Owner's Equity).

A. Assets -30,000; Liabilities -30,000; Owner's Equity unchanged

B. Assets -30,000; Liabilities unchanged; Owner's Equity unchanged

C. Assets unchanged; Liabilities unchanged; Owner's Equity -30,000

Correct D. Assets -30,000; Liabilities unchanged; Owner's Equity -30,000

Correct Answer: D

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Question 20 View Details

A partnership of A and B shares profits in the ratio 3:2. Their capital balances are $150,000$ (A) and $100,000$ (B).\nA new partner C is admitted, bringing in $80,000$ cash for a 25% share of future profits. Goodwill of the firm is valued at $60,000$ and is to be shared between A and B in their old profit‑sharing ratio. A building with original cost $200,000$ and accumulated depreciation $50,000$ is revalued to its market value of $250,000$; the upward revaluation surplus is also shared between A and B in the old ratio. After all adjustments, determine the new capital balances of A, B and C.

A. A = 240,000; B = 160,000; C = 80,000

B. A = 250,000; B = 150,000; C = 80,000

Correct C. A = 246,000; B = 164,000; C = 80,000

D. A = 246,000; B = 164,000; C = 70,000

Correct Answer: C

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Question 21 View Details

Partnership A and B share profit in the ratio 3:2. At the end of the year their capital accounts are $108{,}000$ and $72{,}000$ respectively and the net assets of the partnership amount to $180{,}000$. They decide to admit a new partner C who will share future profits in the ratio $\frac{1}{5}$ (i.e., C will receive one‑fifth of the profit). Goodwill is valued at $30\%$ of the net assets after revaluation. Goodwill is to be shared between the existing partners in their profit‑sharing ratio and credited to their capital accounts. Determine the amount of cash C must contribute on admission so that his capital reflects his profit‑sharing proportion.

Correct A. 46,800

B. 48,000

C. 45,600

D. 52,200

Correct Answer: A

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Question 22 View Details

A company had 5,000 ordinary shares at the start of the year. On 1 March it issued 1,500 shares at a premium, on 30 June it bought back 800 shares, and on 30 September it performed a 2‑for‑1 stock split. The profit after tax for the year was $720{,}000$. Compute the basic earnings per share (EPS) for the year.

A. 61.54

B. 123.08

Correct C. 98.97

D. 91.43

Correct Answer: C

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Question 23 View Details

The following trial balance (in Naira) was prepared at year‑end. Identify the errors and state the amount that must be recorded as Accrued Expenses (credit) to bring the trial balance into balance after correcting the misclassification of Capital.\n\nCash Dr 120,000\nAccounts Receivable Dr 85,000\nInventory Dr 150,000\nEquipment Dr 200,000\nAccumulated Depreciation Cr 50,000\nAccounts Payable Cr 70,000\nBank Loan Cr 100,000\nCapital Dr 30,000 (should be Cr)\nSales Revenue Cr 300,000\nCost of Goods Sold Dr 180,000\nRent Expense Dr 20,000\nInterest Expense Dr 10,000\nDiscount Received Cr 5,000 (omitted)\n\nWhat amount of Accrued Expenses should be recorded on the credit side?

A. 220,000

B. 200,000

C. 230,000

Correct D. 210,000

Correct Answer: D

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Question 24 View Details

A merchant keeps incomplete records. The following information is available for the year:\n\nOpening stock: $40,000$\nPurchases (recorded): $180,000$\nReturns outwards: $5,000$\nReturns inwards (sales returns): $8,000$\nSales (recorded): $260,000$\nCash receipts from customers: $240,000$\nCash payments to suppliers: $150,000$\nSalaries paid: $30,000$\nRent paid: $20,000$\nDepreciation on equipment (straight line): $12,000$\nClosing stock: $45,000$\n\nIt is later discovered that a cash sale of $12,000$ and a cash purchase of $8,000$ were omitted from the records. Determine the net profit for the year.

A. 28,000

B. 36,000

Correct C. 32,000

D. 24,000

Correct Answer: C

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Question 25 View Details

The cash book shows a bank balance of $85,000$ as at 31 March. The bank statement for the same date shows a closing balance of $78,000$. The following items explain the differences:\n\nDeposits in transit at 31 March: $12,000$ (recorded in cash book but not yet on bank statement)\nOutstanding checks: $9,000$ (recorded in cash book but not cleared)\nBank charges: $1,200$ (deducted by bank, not yet recorded in cash book)\nInterest earned: $800$ (credited by bank, not yet recorded in cash book)\nA bank error credited the company's account with $4,000$.\nCompute the corrected cash book balance after all adjustments.

A. 81,800

B. 84,600

Correct C. 80,600

D. 79,400

Correct Answer: C

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