Practice neco model questions vol1 financial_accounting 2017 Past Questions

Question 1 View Details

The trial balance of XYZ Ltd for the year ended shows the following figures (in Naira): Sales \(500,000\); Purchases \(300,000\); Opening Stock \(80,000\); Returns Inwards \(20,000\); Discount Received \(5,000\); Discount Allowed \(3,000\); Salaries \(50,000\); Rent \(30,000\). The closing stock figure is missing. Additional information: (i) The Purchases amount has been posted twice to the trial balance. (ii) Purchase returns of \(10,000\) were omitted. (iii) Closing stock is known to be \(20\%\) of the cost of goods sold. Determine the correct net profit for the year.

A. 222000

B. 237000

C. 217000

Correct D. 227000

Correct Answer: D

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Question 2 View Details

On 15 March, a company bought a new machine for cash costing \(120,000\) Naira and also paid a freight charge of \(5,000\) Naira on the same day. Record the appropriate double‑entry journal entry.

A. Machinery A\/c Dr 125,000; Cash A\/c Cr 130,000

Correct B. Machinery A/c Dr 125,000; Cash A/c Cr 125,000

C. Machinery A\/c Dr 120,000; Cash A\/c Cr 125,000

D. Machinery A\/c Dr 125,000; Cash A\/c Cr 120,000

Correct Answer: B

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Question 3 View Details

The single‑column cash book of ABC Co. for June shows an opening balance of \(15,000\) Naira. Recorded receipts are: cash sales \(40,000\) Naira; amount received from Debtor A \(12,000\) Naira; amount received from Debtor B \(7,080\) Naira (the correct amount should be \(7,800\) Naira); interest received \(1,200\) Naira. Recorded payments are: rent paid \(8,000\) Naira; payment to Creditor C \(5,000\) Naira; salaries paid \(9,000\) Naira; drawings \(3,000\) Naira. A bank commission of \(500\) Naira was deducted from the cash balance but not recorded. Determine the correct closing cash balance at the end of June.

Correct A. 50500

B. 51500

C. 50000

D. 49500

Correct Answer: A

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Question 4 View Details

A consulting firm performed services worth \(25,000\) Naira on 30 September. The client will pay on 15 October. Under the accrual basis of accounting, how should the transaction be recorded in September's books? State the journal entry.

A. Cash A\/c Dr 25,000; Service Revenue A\/c Cr 25,000

B. Accounts Receivable A\/c Dr 25,000; Service Revenue A\/c Dr 25,000

Correct C. Accounts Receivable A/c Dr 25,000; Service Revenue A/c Cr 25,000

D. Accounts Receivable A\/c Dr 20,000; Service Revenue A\/c Cr 20,000

Correct Answer: C

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Question 5 View Details

An asset was purchased on 1 March 2022 for \(500,000\) Naira. It has an estimated useful life of 5 years, a residual value of \(50,000\) Naira and is depreciated using the diminishing‑balance method at a rate of 40 % per annum. Depreciation is charged at year‑end. The asset was sold on 31 December 2024 for \(120,000\) Naira. Calculate the gain or loss on disposal.

A. 20000

B. 50000

Correct C. 0

D. -30000

Correct Answer: C

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Question 6 View Details

The cash book shows a balance of \(\text{₦}150,000\). The bank statement balance is \(\text{₦}145,000\). Outstanding checks total three checks. One check is for \(\text{₦}5,000\). The other two checks together are twice the amount of the smallest check, and the total of the three outstanding checks is \(\text{₦}27,000\). Deposits in transit amount to \(\text{₦}8,000\) and \(\text{₦}3,500\). The bank charged a service fee of \(\text{₦}1,200\) not recorded in the cash book. A customer's cheque of \(\text{₦}4,800\) was incorrectly credited to another customer's account and later corrected, appearing as a credit of \(\text{₦}4,800\) on the bank statement but not in the cash book. Determine the adjusted cash book balance after reconciliation.

A. ₦140,200

B. ₦136,900

Correct C. ₦138,100

D. ₦139,300

Correct Answer: C

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Question 7 View Details

On 15 March, ABC Ltd purchased inventory costing \(\text{₦}45,000\) on credit. On the same day it paid cash \(\text{₦}10,000\) for freight related to the purchase. It also received cash \(\text{₦}20,000\) from a customer as payment for a previously recorded credit sale. Record the journal entries for these transactions.

A. 1) Debit Inventory ₦45,000; Credit Cash ₦45,000.\n2) Debit Freight Expense ₦10,000; Credit Accounts Payable ₦10,000.\n3) Debit Accounts Receivable ₦20,000; Credit Cash ₦20,000.

B. 1) Debit Inventory ₦45,000; Credit Accounts Payable ₦45,000.\n2) Debit Cash ₦10,000; Credit Freight Expense ₦10,000.\n3) Debit Cash ₦20,000; Credit Accounts Receivable ₦20,000.

C. 1) Debit Inventory ₦45,000; Credit Accounts Payable ₦45,000.\n2) Debit Freight Expense ₦10,000; Credit Cash ₦10,000.\n3) Debit Cash ₦20,000; Credit Sales Revenue ₦20,000.

Correct D. 1) Debit Inventory ₦45,000; Credit Accounts Payable ₦45,000. 2) Debit Freight Expense ₦10,000; Credit Cash ₦10,000. 3) Debit Cash ₦20,000; Credit Accounts Receivable ₦20,000.

Correct Answer: D

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Question 8 View Details

State the matching (or accrual) concept of accounting and illustrate it with a brief example that shows how revenue and the related expense are recognised in the same accounting period.

Correct A. The matching concept states that expenses should be recognised in the same period as the revenues they generate. For example, if a product is sold for ₦5,000 in June and its cost is ₦3,000, both the revenue of ₦5,000 and the expense of ₦3,000 are recorded in June.

B. The matching concept requires that expenses be recorded when cash is paid. For example, if a product is sold for ₦5,000 in June and its cost is ₦3,000, the expense is recorded in June when the cash for the raw material is paid.

C. The matching concept states that revenues should be recognised in the same period as the expenses they generate. For example, if a product is sold for ₦5,000 in June and its cost is ₦3,000, both the revenue of ₦5,000 and the expense of ₦3,000 are recorded in July.

D. According to the matching concept, only the revenue is recognised in the period of sale; the related expense is deferred until the next period. For example, a ₦5,000 sale in June would have the expense of ₦3,000 recorded in July.

Correct Answer: A

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Question 9 View Details

A manufacturing firm has the following data for the year:\n- Opening raw‑material stock: \(\text{₦}12,000\)\n- Purchases of raw material: \(\text{₦}48,000\)\n- Closing raw‑material stock: \(\text{₦}10,000\)\n- Direct labour cost is unknown but it constitutes 60 % of total conversion cost.\n- Overhead is applied at 40 % of direct labour cost.\n- Total conversion cost (direct labour + overhead) is \(\text{₦}28,000\).\n- Opening work‑in‑process (WIP) stock: \(\text{₦}5,000\)\n- Closing WIP stock: \(\text{₦}7,000\)\n- Opening finished‑goods stock: \(\text{₦}15,000\)\n- Closing finished‑goods stock: \(\text{₦}18,000\)\nCompute the cost of goods sold for the period.

A. ₦75,000

Correct B. ₦73,000

C. ₦71,000

D. ₦68,000

Correct Answer: B

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Question 10 View Details

Three partners A, B and C share profits in the ratio 3:2:1. Their capital balances are A: \(\text{₦}120,000\), B: \(\text{₦}80,000\), C: \(\text{₦}40,000\). A new partner D is admitted, contributing \(\text{₦}60,000\) for a 20 % share of future profits. At the same time the partnership revalues a building whose original cost is \(\text{₦}150,000\) and current market value is \(\text{₦}198,000\). The revaluation surplus is to be shared among the existing partners in their original profit‑sharing ratio. Goodwill of \(\text{₦}30,000\) is recognised and is to be shared equally among all four partners. After admission, the revaluation surplus and goodwill are transferred to the partners' capital accounts. Compute the new capital balance of each partner (A, B, C and D) after these adjustments.

A. A: ₦139,500; B: ₦99,500; C: ₦59,500; D: ₦79,500

Correct B. A: ₦151,500; B: ₦103,500; C: ₦55,500; D: ₦67,500

C. A: ₦154,000; B: ₦106,000; C: ₦58,000; D: ₦60,000

D. A: ₦154,000; B: ₦106,000; C: ₦58,000; D: ₦65,000

Correct Answer: B

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Question 11 View Details

A company has issued 10,000 ordinary shares at \(\text{₦}50\) each and 2,000 preference shares at \(\text{₦}100\) each carrying a 10 % cumulative dividend. During the year the reported profit before tax is \(1,200,000\). Tax is charged at 30 % of profit before tax. It is later discovered that depreciation was understated by \(80,000\). The company also has unadjusted retained earnings of \(150,000\) from the prior year. The board declares a final ordinary dividend of \(5\) per ordinary share and pays the full preference dividend. Determine the amount of profit available for ordinary shareholders after all adjustments and dividends.

A. 724000

Correct B. 714000

C. 734000

D. 694000

Correct Answer: B

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Question 12 View Details

A company receives a cash loan of \(200,000\) from a bank. State the effect of this transaction on the accounting equation (Assets = Liabilities + Equity).

A. Assets increase, Liabilities unchanged, Equity unchanged

B. Assets unchanged, Liabilities increase, Equity unchanged

C. Assets increase, Liabilities increase, Equity increase

Correct D. Assets increase, Liabilities increase, Equity unchanged

Correct Answer: D

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Question 13 View Details

An incomplete trial balance of a merchandising business balances at \(2,200,000\) on both sides. The following items are shown (all amounts in ₦):\n\nDebits: Purchases \(900,000\); Salaries expense \(150,000\); Depreciation expense recorded \(50,000\); Rent expense \(120,000\); Interest expense \(30,000\); Drawings \(70,000\); Opening Stock \(200,000\); Cash at bank \(?\).\n\nCredits: Sales \(1,500,000\); Capital \(500,000\); Closing Stock \(?\).\n\nThe depreciation recorded is understated; the actual depreciation for the year should be \(80,000\). Determine (i) the amount of Closing Stock, (ii) the cash balance at bank, and (iii) the profit for the year.

A. Closing Stock = 200,000; Cash at bank = 660,000; Profit = 240,000

B. Closing Stock = 210,000; Cash at bank = 670,000; Profit = 210,000

C. Closing Stock = 190,000; Cash at bank = 690,000; Profit = 230,000

Correct D. Closing Stock = 200,000; Cash at bank = 680,000; Profit = 220,000

Correct Answer: D

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Question 14 View Details

Given the following information for XYZ Ltd as at 31 December:\n\nCurrent assets - Cash \(120,000\), Debtors \(80,000\), Inventory \(150,000\).\nNon‑current assets - Machinery cost \(500,000\) with accumulated depreciation \(200,000\).\nCurrent liabilities - Trade payables \(90,000\), Bank overdraft \(30,000\).\nNon‑current liabilities - Loan \(150,000\).\nShare capital \(300,000\). The total assets equal total liabilities plus equity. Calculate the amount of retained earnings.

Correct A. 80000

B. 90000

C. 70000

D. 85000

Correct Answer: A

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Question 15 View Details

The bank statement for ABC Co shows a closing balance of \(850,000\) as at 31 March. The cash book balance is \(820,000\). The following reconciling items are identified:\n\n- Deposits in transit: \(5,800\)\n- Outstanding checks: \(30,000\)\n- Bank service fee not recorded in the cash book: \(5,000\)\n- A customer's cheque was recorded in the cash book as \(1,200\) instead of the correct amount \(12,000\).\n\nWhat is the corrected cash book balance after incorporating all adjustments?

A. 801600

B. 820000

C. 831600

Correct D. 825800

Correct Answer: D

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Question 16 View Details

The Purchases Control Account of XYZ Ltd. shows an opening debit balance of \(₦120,000\). During the month the total purchases recorded were \(₦560,000\). Cash payments made to suppliers amounted to \(₦505,000\) and the closing balance of the control account is a debit of \(₦135,000\). The Purchases Returns subsidiary ledger records total returns of \(₦48,000\). Determine the amount of purchase returns that were omitted from the Purchases Control Account.

Correct A. 8000

B. 12000

C. 6000

D. 10000

Correct Answer: A

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Question 17 View Details

Alpha Co. opened the year with a Machinery account balance of \(₦200,000\) (debit). During the year it purchased machinery costing \(₦80,000\) on 1 March and \(₦20,000\) on 1 September, but the September purchase was omitted from the ledger initially and was recorded later by a correcting entry. The company depreciates machinery at \(15\%\) per annum on a straight‑line basis, charging depreciation for the period each asset is held during the year. No machinery was sold. Calculate the total depreciation expense that should be recorded for the year.

A. 38000

Correct B. 41000

C. 44000

D. 42000

Correct Answer: B

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Question 18 View Details

Beta Ltd. has a cash book balance at bank of \(₦150,000\) (debit). The bank statement shows a balance of \(₦165,000\) (debit). Outstanding checks amount to \(₦12,000\) and deposits in transit total \(₦8,000\). Bank service charges of \(₦1,200\) and interest earned of \(₦300\) have not yet been recorded in the cash book. Determine the corrected cash book balance after all adjustments.

A. 145900

B. 144100

C. 146100

Correct D. 145100

Correct Answer: D

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Question 19 View Details

Gamma Enterprises prepared the following trial balance (amounts in ₦):\nCash \(45,000\) Dr, Accounts Receivable \(30,000\) Dr, Inventory \(55,000\) Dr, Equipment \(120,000\) Dr, Rent Expense \(20,000\) Dr, Interest Expense \(5,000\) Dr, Accumulated Depreciation - Equipment \(40,000\) Cr, Accounts Payable \(25,000\) Cr, Capital \(150,000\) Cr, Sales Revenue \(80,000\) Cr.\nThe total debits equal \(275,000\) while total credits equal \(295,000\). Assuming only one debit‑side account is incorrectly recorded, identify the account and state the amount by which it should be increased to balance the trial balance.

A. Equipment - increase by 20,000

Correct B. Rent Expense - increase by 20,000

C. Interest Expense - increase by 5,000

D. Rent Expense - decrease by 20,000

Correct Answer: B

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Question 20 View Details

Delta Traders' trial balance before adjustments (amounts in ₦) is as follows:\nCash \(50,000\) Dr, Accounts Receivable \(40,000\) Dr, Prepaid Insurance \(12,000\) Dr, Salary Expense \(30,000\) Dr, Rent Expense \(20,000\) Dr, Purchases \(63,000\) Dr, Accumulated Depreciation \(25,000\) Cr, Accounts Payable \(35,000\) Cr, Capital \(80,000\) Cr, Sales Revenue \(70,000\) Cr, Accrued Salaries \(5,000\) Cr. The total debits and credits both equal \(215,000\). At year‑end the following adjusting entries are required: (i) Insurance expense for three months of the prepaid policy, (ii) Salary expense incurred but not yet paid, amounting to \(5,000\). After posting these adjustments, what is the total of the debit side of the adjusted trial balance?

Correct A. 223000

B. 221000

C. 225000

D. 218000

Correct Answer: A

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Question 21 View Details

Existing partners A, B and C share profits in the ratio 3:2:1 and have capital balances of \(\text{₦}120,000\), \(\text{₦}80,000\) and \(\text{₦}40,000\) respectively. A new partner D is admitted for a \(\frac{1}{5}\) share of profits, contributing \(\text{₦}50,000\) in cash. At the same time the partnership re‑values a building (carrying amount \(\text{₦}180,000\), market value \(\text{₦}250,000\)) and a bank loan (carrying amount \(\text{₦}30,000\), market value \(\text{₦}25,000\)). Goodwill is valued at two years' average profit of the last three years, where the profits were \(\text{₦}60,000\), \(\text{₦}70,000\) and \(\text{₦}80,000\). Goodwill and the net re‑valuation surplus are to be shared among the existing partners in their original profit‑sharing ratio, and the goodwill is treated as a bonus to them (D does not pay for goodwill). Determine the new capital balances of A, B, C and D after D's admission.

Correct A. A ₦222,500.00; B ₦148,333.34; C ₦74,166.66; D ₦50,000.00

B. A ₦225,000.00; B ₦150,000.00; C ₦75,000.00; D ₦50,000.00

C. A ₦227,500.00; B ₦151,666.67; C ₦75,833.33; D ₦50,000.00

D. A ₦185,000.00; B ₦114,666.67; C ₦57,333.33; D ₦76,000.00

Correct Answer: A

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Question 22 View Details

A firm receives \(\text{₦}200,000\) cash on 1 January as advance payment for a 4‑month consulting contract. Under the accrual concept, how much revenue should be recognised in the month of January?

Correct A. ₦50,000

B. ₦66,667

C. ₦100,000

D. ₦0

Correct Answer: A

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Question 23 View Details

A business had opening trade receivables of \(\text{₦}120,000\). Credit sales during the year were \(\text{₦}560,000\). Cash received from debtors (including cash sales) amounted to \(\text{₦}480,000\). Sales returns were \(\text{₦}20,000\) and discount allowed on early payment was \(\text{₦}8,000\). At year‑end the firm estimates that 2 % of the closing trade receivables will be uncollectible and creates a provision. Determine (a) the closing balance of the trade receivables control account before provision, (b) the amount of the provision, and (c) the net realizable value of trade receivables.

A. Closing balance ₦180,000; Provision ₦3,600; Net realizable value ₦176,400

B. Closing balance ₦172,000; Provision ₦4,000; Net realizable value ₦168,000

C. Closing balance ₦170,000; Provision ₦3,400; Net realizable value ₦166,600

Correct D. Closing balance ₦172,000; Provision ₦3,440; Net realizable value ₦168,560

Correct Answer: D

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Question 24 View Details

The cash book shows the following bank column entries for March:\n\nOpening balance: \(\text{₦}20,000\)\n\nReceipts:\n- Cash transferred from cash side: \(\text{₦}40,000\)\n- Interest received: \(\text{₦}3,000\)\n\nPayments:\n- Cheque to Supplier X: \(\text{₦}5,000\) (dated 5 Mar)\n- Cheque to Supplier Y: \(\text{₦}3,000\) (dated 12 Mar)\n- Bank service charge: \(\text{₦}200\) (dated 20 Mar)\n\nThe bank statement for the month shows:\nOpening balance: \(\text{₦}20,000\)\nDeposits credited: \(\text{₦}40,000\)\nCheques cleared: only the cheque to Supplier X of \(\text{₦}5,000\)\nService charge of \(\text{₦}200\) not yet presented\nClosing balance: \(\text{₦}27,000\)\n\nIdentify the amount of the outstanding cheque and any unpresented charge, and state the corrected cash‑book bank balance after reconciliation.

Correct A. Outstanding cheque = ₦3,000; Unpresented charge = ₦200; Corrected bank balance = ₦27,000

B. Outstanding cheque = ₦3,000; Unpresented charge = ₦0; Corrected bank balance = ₦27,200

C. Outstanding cheque = ₦5,000; Unpresented charge = ₦0; Corrected bank balance = ₦28,000

D. Outstanding cheque = ₦2,000; Unpresented charge = ₦200; Corrected bank balance = ₦27,200

Correct Answer: A

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Question 25 View Details

Partners M, N and O share profits in the ratio 2:3:5 and have capital balances of \(\text{₦}150,000\), \(\text{₦}225,000\) and \(\text{₦}375,000\) respectively. Partner O retires. The firm values goodwill at three years' average profit; the profits for the last three years were \(\text{₦}100,000\), \(\text{₦}120,000\) and \(\text{₦}140,000\). A piece of equipment is re‑valued from a carrying amount of \(\text{₦}200,000\) to a market value of \(\text{₦}260,000\). Goodwill and the re‑valuation surplus are to be shared between the remaining partners M and N in their profit‑sharing ratio (2:3). O is to be paid his original capital plus his share of goodwill. Calculate (a) the cash amount payable to O, and (b) the revised capital balances of M and N after accounting for goodwill and the re‑valuation surplus.

A. Cash payable to O = ₦570,000; M's new capital = ₦240,000; N's new capital = ₦384,000

Correct B. Cash payable to O = ₦555,000; M's new capital = ₦246,000; N's new capital = ₦369,000

C. Cash payable to O = ₦525,000; M's new capital = ₦252,000; N's new capital = ₦363,000

D. Cash payable to O = ₦540,000; M's new capital = ₦258,000; N's new capital = ₦372,000

Correct Answer: B

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