Practice neco model questions vol1 financial_accounting 2018 Past Questions

Question 1 View Details

The purchases ledger shows purchases of \(\₦1,200,000\), purchase returns of \(\₦45,000\) and discounts received of \(\₦12,000\). The purchases control account carries a debit balance of \(\₦1,150,000\). It is later discovered that a purchase return of \(\₦8,000\) was omitted and a discount of \(\₦5,000\) was posted as a debit instead of a credit. Determine the corrected balance of the purchases control account and state whether the original balance was overstated or understated.

A. Corrected balance = \₦1,125,000 (debit); original balance was understated by \₦7,000.

Correct B. Corrected balance = \₦1,132,000 (debit); original balance was overstated by \₦18,000.

C. Corrected balance = \₦1,132,000 (credit); original balance was overstated by \₦18,000.

D. Corrected balance = \₦1,140,000 (debit); original balance was overstated by \₦10,000.

Correct Answer: B

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Question 2 View Details

On 1 March, a business purchased equipment for \(\₦500,000\) cash and paid freight of \(\₦20,000\) by cheque. Record the journal entries using the double‑entry system.

A. Debit Equipment \₦500,000; Debit Freight‑in \₦20,000; Credit Cash \₦500,000; Credit Bank \₦20,000; Credit Freight‑in \₦20,000.

Correct B. Debit Equipment \₦500,000; Debit Freight‑in \₦20,000; Credit Cash \₦500,000; Credit Bank \₦20,000.

C. Debit Equipment \₦480,000; Debit Freight‑in \₦20,000; Credit Cash \₦500,000; Credit Bank \₦0.

D. Debit Equipment \₦500,000; Debit Freight‑in \₦20,000; Credit Cash \₦520,000; Credit Bank \₦0.

Correct Answer: B

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Question 3 View Details

A trial balance lists the following debit balances: Cash \(\₦120,000\), Accounts Receivable \(\₦80,000\), Inventory \(\₦150,000\), Equipment \(\₦200,000\), Purchases \(\₦180,000\). The credit balances are: Capital \(\₦500,000\), Loans Payable \(\₦100,000\), Sales Revenue \(\₦300,000\). The totals do not balance. It is known that one of the debit figures was recorded with its digits transposed and that a missing expense account, which is a debit, is omitted. Identify the account with the transposed figure, its correct amount, and the amount of the missing expense needed to balance the trial balance.

A. Cash was transposed; correct cash balance = \\₦102,000. Missing expense (debit) = \\₦200,000.

B. Cash was transposed; correct cash balance = \\₦120,000. Missing expense (debit) = \\₦188,000.

C. Inventory was transposed; correct inventory balance = \\₦105,000. Missing expense (debit) = \\₦188,000.

Correct D. Cash was transposed; correct cash balance = \₦102,000. Missing expense (debit) = \₦188,000.

Correct Answer: D

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Question 4 View Details

The cash book shows a closing balance of \(\₦850,000\). The bank statement shows a closing balance of \(\₦820,000\). The following items are identified:\n- Outstanding checks: \(\₦45,000\)\n- Deposits in transit: \(\₦30,000\)\n- Bank service charge: \(\₦2,500\) (not yet recorded in the cash book)\n- Interest earned: \(\₦1,800\) (not yet recorded in the cash book)\n- A cheque of \(\₦44,300\) was recorded in the cash book but was omitted from the bank statement.\nPrepare the bank reconciliation and state the adjusted cash book balance.

A. Adjusted cash book balance = \\₦848,300.

B. Adjusted cash book balance = \\₦850,300.

C. Adjusted cash book balance = \\₦847,500.

Correct D. Adjusted cash book balance = \₦849,300.

Correct Answer: D

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Question 5 View Details

A manufacturing firm uses two production departments. The data for the month are as follows:\n\n**Department A (Materials)**\n- Beginning WIP: 2,000 units, 40% complete for materials, cost \(\₦120,000\).\n- Units started: 8,000 units.\n- Units transferred out to Department B: 7,500 units (100% complete for materials).\n- Ending WIP: 2,500 units, 60% complete for materials.\n- Materials cost added during the month: \(\₦560,000\).\n\n**Department B (Conversion)**\n- Beginning WIP: 1,500 units, 30% complete for conversion, cost \(\₦90,000\).\n- Units received from Department A: 7,500 units (100% complete for materials, 0% for conversion).\n- Conversion cost added during the month: \(\₦420,000\).\n- Units completed and transferred out: 6,800 units (100% complete for conversion).\n- Ending WIP: 2,000 units, 50% complete for conversion.\n\nUsing the weighted‑average method, determine:\n(a) the cost per equivalent unit for materials in Department A;\n(b) the cost per equivalent unit for conversion in Department B;\n(c) the total cost assigned to the ending WIP in Department B.

A. (a) \₦78.20 per EU (materials); (b) \₦62.50 per EU (conversion); (c) Ending WIP cost = \₦210,000.

B. (a) \₦80.00 per EU (materials); (b) \₦60.00 per EU (conversion); (c) Ending WIP cost = \₦200,000.

Correct C. (a) \₦75.56 per EU (materials); (b) \₦65.38 per EU (conversion); (c) Ending WIP cost = \₦216,496.

D. (a) \₦70.00 per EU (materials); (b) \₦68.00 per EU (conversion); (c) Ending WIP cost = \₦225,000.

Correct Answer: C

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Question 6 View Details

A partnership of three partners A, B and C share profits in the ratio 3:2:1. Their capital balances at the end of the year are \(\text{₦}120,000\), \(\text{₦}80,000\) and \(\text{₦}40,000\) respectively. Before a new partner D is admitted, the following revaluations are made: the building is revalued upwards by \(\text{₦}30,000\) and inventory is written down by \(\text{₦}10,000\). Goodwill is valued at \(\text{₦}60,000\) and is to be shared among the existing partners in their old profit‑sharing ratio. D is to be admitted with a \(\frac{1}{5}\) share of the profits. He will pay cash equal to his share of goodwill together with his share of the revaluation surplus. Determine (i) the amount of cash D must pay on admission, and (ii) the new capital balances of A, B, C and D after the admission.

A. Cash payable by D = ₦16,000. Capital after admission: A = ₦155,000; B = ₦103,333 ⅔; C = ₦51,666 ⅓; D = ₦16,000.

Correct B. Cash payable by D = ₦16,000. Capital after admission: A = ₦160,000; B = ₦106,666 ⅔; C = ₦53,333 ⅓; D = ₦16,000.

C. Cash payable by D = ₦20,000. Capital after admission: A = ₦160,000; B = ₦110,000; C = ₦55,000; D = ₦20,000.

D. Cash payable by D = ₦12,000. Capital after admission: A = ₦150,000; B = ₦100,000; C = ₦50,000; D = ₦12,000.

Correct Answer: B

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Question 7 View Details

XYZ Ltd has 10,000 ordinary shares of \(\text{₦}100\) each fully paid. During the year it issued 2,000 8% cumulative preference shares of \(\text{₦}100\) each at a premium of \(\text{₦}20\) per share and also bought back 200 ordinary shares which were cancelled. The company redeemed 500 debentures of \(\text{₦}1,000\) each at 105% of face value. The profit before tax for the year is \(\text{₦}1,200,000\) and the tax rate is 30%. Preference dividends for the current year are in arrears for one year. Compute the basic earnings per ordinary share (EPS) for the year, rounded to two decimal places.

A. ₦78.90 per ordinary share

Correct B. ₦82.45 per ordinary share

C. ₦85.30 per ordinary share

D. ₦80.00 per ordinary share

Correct Answer: B

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Question 8 View Details

Using the indirect method, prepare a statement of cash flows for ABC Enterprises for the year ended 31 December given the following information (all amounts in \(\text{₦}\)):\n- Net profit before tax: 500,000\n- Depreciation: 80,000\n- Gain on sale of equipment: 20,000\n- Increase in inventories: 30,000\n- Decrease in trade receivables: 15,000\n- Increase in trade payables: 25,000\n- Tax paid: 40,000\n- Interest paid: 10,000\n- Purchase of equipment: 120,000\n- Proceeds from sale of equipment: 50,000\n- Issue of share capital: 200,000\n- Repayment of long‑term loan: 70,000\nWhat is the net increase in cash and cash equivalents for the year?

A. ₦590,000

B. ₦560,000

C. ₦600,000

Correct D. ₦580,000

Correct Answer: D

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Question 9 View Details

The following entries were posted to the general ledger for March (all amounts in \(\text{₦}\)):\n1. Purchases \(\text{Dr}\) 150,000; Cash \(\text{Cr}\) 150,000.\n2. Sales \(\text{Cr}\) 200,000; Accounts Receivable \(\text{Dr}\) 200,000.\n3. Cash received from customers \(\text{Dr}\) 180,000; Sales \(\text{Cr}\) 180,000 (should have been credited to Accounts Receivable).\n4. A purchase of 30,000 was omitted from Purchases and only a credit to Accounts Payable \(\text{Cr}\) 30,000 was recorded.\n5. An expense of 20,000 was recorded twice, each time \(\text{Dr}\) Expenses 20,000; \(\text{Cr}\) Cash 20,000.\n6. The trial balance did not balance; a difference of 10,000 was entered in the Suspense account on the debit side.\nAfter correcting all the errors, what should be the correct balance (debit or credit and amount) of the Suspense account?

Correct A. Credit ₦40,000

B. Credit ₦30,000

C. Debit ₦10,000

D. Debit ₦40,000

Correct Answer: A

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Question 10 View Details

Given the following trial‑balance items (all amounts in \(\text{₦}\)):\n- Sales: 785,000\n- Returns inwards: 15,000\n- Opening stock: 50,000\n- Purchases: 300,000\n- Returns outwards: 20,000\n- Closing stock: 70,000\n- Salaries expense: 120,000\n- Accrued salaries: 15,000\n- Rent expense: 60,000\n- Prepaid rent: 10,000\n- Depreciation expense: 40,000\n- Interest income: 5,000\n- Tax expense: 50,000\n- Capital (opening): 200,000\n- Drawings: 30,000\nPrepare a statement of profit or loss and compute (i) the net profit for the year and (ii) the closing capital.

A. Net profit = ₦225,000; Closing capital = ₦395,000

B. Net profit = ₦260,000; Closing capital = ₦430,000

Correct C. Net profit = ₦240,000; Closing capital = ₦410,000

D. Net profit = ₦240,000; Closing capital = ₦390,000

Correct Answer: C

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Question 11 View Details

A company's bank statement shows a balance of \(\N150,000\). The cash book balance is \(\N158,000\). The following items are identified during reconciliation:\n- Outstanding checks: three checks totalling \(\N12,000\).\n- Deposits in transit: two deposits, one of \(\N5,000\) and the total of deposits in transit is \(\N9,000\).\n- Bank service charge of \(\N500\) appears on the statement but not in the cash book.\n- A customer's cheque of \(\N3,000\) was returned unpaid and is recorded in the cash book but not yet cleared by the bank.\nCalculate the adjusted cash book balance after all these items are taken into account.

A. 152500

B. 149500

Correct C. 151500

D. 150500

Correct Answer: C

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Question 12 View Details

On 1 March, a company purchased equipment for \(\N120,000\) cash and paid \(\N20,000\) for its installation. Record the journal entry using double‑entry bookkeeping and state the total debit amount recorded for this transaction.

A. 130000

B. 20000

Correct C. 140000

D. 120000

Correct Answer: C

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Question 13 View Details

The Sales ledger for the month shows an opening credit balance of \(\N500,000\). During the month the company recorded cash sales of \(\N200,000\) and credit sales of \(\N150,000\). Sales returns amounting to \(\N30,000\) were posted to the Sales Returns account (debit). A trade discount of 5% was allowed on all credit sales and recorded in the Discount Allowed account (debit). What is the closing credit balance of the Sales account after posting the returns and discount?

Correct A. 812500

B. 820000

C. 842500

D. 805000

Correct Answer: A

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Question 14 View Details

A combined cash book shows an opening cash balance of \(\N20,000\). The following transactions were recorded during the month:\n- Receipts: cash sales \(\N45,000\), loan received \(\N30,000\).\n- Payments: rent \(\N15,000\), salaries \(\N12,000\), purchase of inventory \(\N20,000\).\nBank charges of \(\N500\) and interest on an overdraft of 2% per month (overdraft amount \(\N5,000\)) were not yet recorded in the cash book. Determine the adjusted closing cash balance after recording these bank items.

A. 47500

B. 48000

Correct C. 47400

D. 47250

Correct Answer: C

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Question 15 View Details

The trial balance of a firm shows the following balances (in \(\N\) ):\n\n- Cash: Debit \N50,000\n- Accounts Receivable: Debit \N30,000\n- Inventory: Debit \N40,000\n- Equipment: Debit \N80,000\n- Purchases: Debit \N70,000\n- Rent Expense: Debit \N10,000\n- Salaries Expense: Debit \N15,000\n- Accounts Payable: Credit \N45,000\n- Capital: Credit \N120,000\n- Sales Revenue: Credit \N150,000\n\nThe total debits equal \N295,000 and the total credits equal \N315,000, giving a credit excess of \N20,000. It is known that one account has been misstated. Identify the account and state its correct balance so that the trial balance is properly balanced. Also give the corrected total of debits and credits.

Correct A. Capital should be \N100,000; corrected totals = \N295,000 debits and \N295,000 credits

B. Capital should be \N115,000; corrected totals = \N310,000 debits and \N310,000 credits

C. Capital should be \N130,000; corrected totals = \N325,000 debits and \N325,000 credits

D. Capital should be \N90,000; corrected totals = \N285,000 debits and \N285,000 credits

Correct Answer: A

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Question 16 View Details

On 1 March, XYZ Ltd purchased equipment for \(\text{₦}150,000\) on credit. On 15 March, it paid \(\text{₦}40,000\) cash to the creditor. Assuming no other transactions, what is the balance in the Creditors (Accounts Payable) ledger after the payment?

A. ₦40,000

Correct B. ₦110,000

C. ₦100,000

D. ₦150,000

Correct Answer: B

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Question 17 View Details

The trial balance of ABC Ltd for the year ended 31 December shows the following items (all figures in \(\text{₦}\) thousands):\n\nSales: 1,200\nOpening Stock: 80\nPurchases: 500\nCarriage Inwards: 20\nSalaries: 150\nRent: 60\nPlant and Machinery (cost): 300\nAccumulated Depreciation (contra): 90\nBad Debts written off: 12\nTrade Receivables (net): 80\nTrade Payables: 70\n\nAdditional information:\n1. Closing stock is 30% of the cost of goods sold.\n2. Depreciation for the year is 10% of the plant cost.\n3. A provision for doubtful debts equal to 2% of trade receivables after adjusting for the bad debts written off is required.\n\nDetermine the Net Profit for the year.

A. ₦475,074

B. ₦480,074

Correct C. ₦485,074

D. ₦490,074

Correct Answer: C

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Question 18 View Details

On 1 January, XYZ Services received \(\text{₦}200,000\) in cash for services that will be performed evenly over the next 12 months. How should this transaction be recorded in the books at the time of receipt?

Correct A. Debit Cash, Credit Unearned Revenue (Liability)

B. Debit Cash, Credit Service Revenue

C. Debit Unearned Revenue, Credit Cash

D. Debit Cash, Credit Revenue (Liability)

Correct Answer: A

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Question 19 View Details

Partners A, B and C run a firm with the following capital balances: A - \(\text{₦}120,000\), B - \(\text{₦}80,000\), C - \(\text{₦}100,000\). Their profit‑sharing ratio is 3:2:1. Interest on capital is charged at 10% per annum. Salaries are paid as follows: A - \(\text{₦}30,000\), B - \(\text{₦}20,000\), C - \(\text{₦}0\). Partner B is retiring and goodwill is valued at \(\text{₦}60,000\); the retiring partner is to be compensated for his share of goodwill in the profit‑sharing ratio of the remaining partners. The net profit before adjustments is \(\text{₦}150,000\). After accounting for interest, salaries and goodwill compensation, what amount is transferred to each partner's current account?

A. A: ₦90,000; B: ₦32,000; C: ₦28,000

B. A: ₦85,000; B: ₦35,000; C: ₦30,000

Correct C. A: ₦92,000; B: ₦31,333; C: ₦26,667

D. A: ₦95,000; B: ₦30,000; C: ₦25,000

Correct Answer: C

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Question 20 View Details

The cash book of DEF Ltd for June shows the following entries (all amounts in \(\text{₦}\)):\n\nOpening cash balance (1 June): 50,000\nCash receipts: cash sales 120,000; bank loan received 30,000\nCash payments: rent 25,000; utilities 10,000; inventory purchases 40,000\nBank column deposits: cash sales deposited 100,000; loan deposited 30,000\nBank column cheque payments: rent cheque 20,000; utilities cheque 10,000; inventory cheque 35,000\n\nThe bank statement at 30 June shows a closing balance of 85,000. Outstanding checks total \(\text{₦}5,000\) (part of the rent cheque) and deposits in transit amount to \(\text{₦}20,000\) (the remainder of cash‑sales deposit). What is the corrected total cash‑book balance (cash on hand plus true bank balance) at 30 June?

A. ₦210,000

Correct B. ₦225,000

C. ₦215,000

D. ₦235,000

Correct Answer: B

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Question 21 View Details

A company purchased office equipment for \(150,000\) cash. Record the journal entry.

A. Office Equipment Dr 150,000; Accounts Payable Cr 150,000

B. Office Equipment Dr 100,000; Cash Cr 150,000

Correct C. Office Equipment Dr 150,000; Cash Cr 150,000

D. Office Equipment Dr 150,000; Cash Cr 100,000

Correct Answer: C

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Question 22 View Details

A government department received an original appropriation of \(2,000,000\). During the year it recorded the following expenditures: Salaries \(800,000\), Supplies \(250,000\) and Capital outlay \(600,000\). An audit later shows that \(50,000\) of the supplies expense was mistakenly charged to Capital outlay and should be re‑classified to Supplies. At year‑end the department intends to transfer any unspent balance of \(100,000\) to the next year's appropriation. Determine (a) the adjusted unspent balance of the appropriation at year‑end, and (b) the amount to be transferred.

Correct A. Adjusted unspent balance 250,000; Transfer amount 100,000

B. Adjusted unspent balance 250,000; Transfer amount 150,000

C. Adjusted unspent balance 300,000; Transfer amount 100,000

D. Adjusted unspent balance 350,000; Transfer amount 100,000

Correct Answer: A

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Question 23 View Details

A trial balance shows a discrepancy of \(12,500\) on the debit side. Investigation reveals two errors: (i) a purchase invoice of \(45,000\) was recorded as \(54,000\); (ii) a sales invoice of \(30,000\) was omitted. What entry should be made to the suspense account to correct the trial balance?

A. Credit Suspense 45,000

Correct B. Credit Suspense 39,000

C. Debit Suspense 39,000

D. Credit Suspense 12,500

Correct Answer: B

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Question 24 View Details

The Sales Ledger Control Account opened with a debit balance of \(500,000\). During the year credit sales of \(1,200,000\) were posted and cash receipts from customers amounted to \(950,000\). At year‑end the subsidiary sales ledger shows outstanding balances: Customer A \(80,000\), Customer B \(45,000\) and Customer C \(30,000\). (a) What is the closing balance of the Sales Ledger Control Account? (b) Reconcile this balance with the total of the subsidiary ledger.

Correct A. Closing balance debit 750,000; discrepancy 595,000

B. Closing balance credit 750,000; discrepancy 595,000

C. Closing balance debit 800,000; discrepancy 645,000

D. Closing balance debit 750,000; discrepancy 650,000

Correct Answer: A

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Question 25 View Details

A sole trader's trial balance includes: Sales \(2,500,000\); Purchases \(1,200,000\); Opening Stock \(300,000\); Closing Stock \(350,000\); Salaries expense \(250,000\); Rent expense \(120,000\); Depreciation expense \(80,000\); Interest expense \(30,000\); Drawings \(100,000\); Capital (beginning) \(500,000\). The trader also bought a delivery van for cash \(400,000\) during the year. The van is depreciated straight‑line over 5 years with no residual value (depreciation recorded as above). Compute (a) the profit for the year and (b) the closing capital.

A. Profit 790,000; Closing capital 1,190,000

B. Profit 870,000; Closing capital 1,170,000

C. Profit 950,000; Closing capital 1,350,000

Correct D. Profit 870,000; Closing capital 1,270,000

Correct Answer: D

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