Practice neco model questions vol1 financial_accounting 2019 Past Questions

Question 1 View Details

On 1 January, partners A and B were sharing profits in the ratio \(3:2\). Their average profit for the past three years was \(\text{₦}120,000\). A new partner C is admitted on 1 July. The goodwill of the firm is valued at two years' average profit and is to be shared between the existing partners in their old profit‑sharing ratio. At the same time, the equipment is revalued upwards by \(\text{₦}30,000\) and inventory is written down by \(\text{₦}10,000\). The revaluation surplus is also shared between A and B in their old ratio. After admission, the profit‑sharing ratio becomes A:B:C = \(2:1:1\). Determine (i) the amount of cash C must pay on admission, (ii) the credit to A's capital account, and (iii) the credit to B's capital account.

A. Cash paid: 260000; A: 156000; B: 104000

B. Cash paid: 240000; A: 144000; B: 96000

C. Cash paid: 120000; A: 90000; B: 60000

Correct D. Cash paid: 240000; A: 156000; B: 104000

Correct Answer: D

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Question 2 View Details

XYZ Ltd has 10,000 ordinary shares of \(\text{₦}10\) each and 2,000 preference shares of \(\text{₦}50\) each carrying an 8 % dividend. The profit after tax for the year is \(\text{₦}1,200,000\). After paying the preference dividend, the company declares a 20 % bonus issue on the ordinary shares, funded from retained earnings. Calculate the earnings per ordinary share (EPS) after the bonus issue, expressing your answer in naira to two decimal places.

Correct A. 99.33

B. 100.00

C. 98.00

D. 119.20

Correct Answer: A

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Question 3 View Details

A business purchases equipment for \(\text{₦}150,000\) cash. State the effect of this transaction on the accounting equation \(\text{Assets} = \text{Liabilities} + \text{Owner's Equity}\).

Correct A. Assets: equipment +₦150,000; cash -₦150,000; total assets unchanged; liabilities unchanged; owner's equity unchanged.

B. Assets: equipment +₦150,000; cash -₦150,000; total assets unchanged; liabilities unchanged; owner's equity decreased by ₦150,000.

C. Assets: equipment +₦150,000; cash -₦150,000; total assets unchanged; liabilities increased by ₦150,000; owner's equity unchanged.

D. Assets: equipment +₦150,000; cash -₦150,000; total assets increased by ₦150,000; liabilities unchanged; owner's equity unchanged.

Correct Answer: A

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Question 4 View Details

The trial balance of a merchandising firm shows the following information (all amounts in naira):\n\n- Opening inventory: 100 units @ \(\text{₦}200\) each\n- Purchases: March 150 units @ \(\text{₦}210\) each; July 200 units @ \(\text{₦}220\) each; November 100 units @ \(\text{₦}230\) each\n- Sales revenue: \(\text{₦}180,000\)\n- Closing inventory: 80 units, consisting of the most recent purchases\n\nUsing the FIFO method, compute the gross profit for the year.

A. 80900

B. 82000

Correct C. 79900

D. 79500

Correct Answer: C

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Question 5 View Details

The cash book of ABC Ltd shows a balance of \(\text{₦}260,000\). The bank statement balance is \(\text{₦}250,000\). The following items are identified:\n\n- Outstanding checks: \(\text{₦}3,000\)\n- Deposits in transit: \(\text{₦}8,000\)\n- Bank error: the bank charged the company \(\text{₦}1,500\) that belongs to another customer\n- A customer's cheque of \(\text{₦}2,000\) was dishonoured and had already been recorded in the cash book\n\nPrepare the bank reconciliation and state the adjusted cash book balance.

A. 254500

Correct B. 256500

C. 259500

D. 255000

Correct Answer: B

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Question 6 View Details

A company had an opening capital of \(\,500,000\) Naira. During the year it introduced additional capital of \(\,63,000\) Naira and the owner withdrew drawings of \(\,30,000\) Naira. The profit before any adjustments was \(\,120,000\) Naira. The following items were not recorded in the trial balance: \(\) interest on a loan of \(\,200,000\) Naira at \(12\%\) per annum, a provision for doubtful debts equal to \(5\%\) of trade receivables of \(\,80,000\) Naira, and depreciation on plant which is \(10\%\) of the plant's cost. The closing capital shown in the balance sheet is \(\,610,000\) Naira. What is the cost of the plant?

A. 180,000

Correct B. 150,000

C. 200,000

D. 120,000

Correct Answer: B

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Question 7 View Details

For the year ended 31 December, a trader's incomplete records show the following figures (all amounts in Naira):\n\nCash sales: \(480,000\)\nCredit sales: \(320,000\)\nCash purchases: \(210,000\)\nCredit purchases: \(190,000\)\nCash expenses: \(50,000\)\nCredit expenses: \(30,000\)\nDrawings: \(40,000\)\nOpening capital: \(500,000\)\nClosing capital: \(560,000\)\nOpening stock: \(250,000\)\nTrade receivables at year‑end: \(80,000\)\nThe cash book records cash receipts of \(800,000\) and cash payments of \(730,000\) giving a cash balance of \(20,000\) at year‑end. Using this information, determine the value of the closing stock.

Correct A. 30,000

B. 50,000

C. 20,000

D. 40,000

Correct Answer: A

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Question 8 View Details

The bank statement for a company shows a balance of \(85,000\) Naira at 31 March. The cash book balance for the same date is \(78,000\) Naira. The following items are known:\n\n• Outstanding checks: \(5,000\) Naira, \(4,000\) Naira and \(3,000\) Naira.\n• Deposits in transit: \(7,500\) Naira.\n• The bank charged a service fee of \(1,200\) Naira not yet recorded in the cash book.\n• A customer's cheque of \(2,800\) Naira was returned unpaid and is not recorded in the cash book.\n• The bank mistakenly credited \(3,600\) Naira to the account; this amount must be deducted.\n• A direct cash deposit of \(2,500\) Naira made at the bank was omitted from the cash book.\nDetermine the corrected cash book balance after reconciling all the above items.

A. 74,000

B. 73,200

C. 71,500

Correct D. 72,900

Correct Answer: D

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Question 9 View Details

A small business records revenue only when cash is received, ignoring sales that have been earned but not yet collected. Which fundamental accounting concept is being violated?

A. Accrual (expense‑recognition) concept

B. Matching (revenue‑recognition) concept

C. Cash (revenue‑recognition) concept

Correct D. Accrual (revenue‑recognition) concept

Correct Answer: D

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Question 10 View Details

A cash book (two‑column) shows an opening balance of \(15,000\) Naira. During the month the following cash receipts were recorded: cash sales \(45,000\) Naira, loan received \(8,000\) Naira and interest received \(5,000\) Naira. The cash payments recorded were: purchases \(12,000\) Naira, salaries \(6,000\) Naira, utilities \(3,000\) Naira, drawings \(2,000\) Naira and an erroneous bank charge of \(500\) Naira. Later it was discovered that a cash receipt of \(1,200\) Naira had been omitted. What is the corrected closing cash balance?

A. 49,500

B. 51,200

C. 50,200

Correct D. 50,700

Correct Answer: D

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Question 11 View Details

On 1 March, XYZ Ltd purchased a computer for (₦150{,}000) cash and also incurred a service fee of (₦20{,}000) to be paid later. Prepare the journal entry recording this transaction.

A. Debit Computer Equipment ₦150,000; Debit Service Expense ₦20,000; Credit Cash ₦20,000; Credit Accounts Payable ₦150,000.

Correct B. Debit Computer Equipment ₦150,000; Debit Service Expense ₦20,000; Credit Cash ₦150,000; Credit Accounts Payable ₦20,000.

C. Debit Computer Equipment ₦150,000; Debit Service Expense ₦20,000; Credit Cash ₦150,000; Credit Service Payable ₦20,000.

D. Debit Computer Equipment ₦150,000; Credit Service Expense ₦20,000; Credit Cash ₦150,000; Credit Accounts Payable ₦20,000.

Correct Answer: B

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Question 12 View Details

A machine was purchased for (₦500{,}000) with an estimated residual value of (₦50{,}000) and a useful life of 5 years. The company depreciated the asset using the straight‑line method for the first 2 years and then switched to the diminishing‑balance method so that the total depreciation over the 5 years equals the depreciable amount. What is the depreciation expense for the third year (the first year of the diminishing‑balance method)?

A. ₦152,480

B. ₦150,000

C. ₦140,000

Correct D. ₦147,520

Correct Answer: D

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Question 13 View Details

For the year ended 31 December, a company reported the following figures: Sales (credit) (₦500{,}000); Opening Stock (₦80{,}000); Closing Stock (₦70{,}000); Gross Profit (₦120{,}000). The Purchases amount is missing from the trial balance. Using the relationship between these items, determine the amount that should be posted to the Purchases ledger.

A. ₦350,000

B. ₦400,000

C. ₦380,000

Correct D. ₦370,000

Correct Answer: D

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Question 14 View Details

On 15 July, ABC Ltd paid (₦45{,}000) cash for office supplies and at the same time received (₦20{,}000) from a customer into the bank. Which book of original entry should be used to initially record this compound transaction, and why?

Correct A. Cash Book, because it records both cash payments and bank receipts in one entry.

B. Sales Journal, because it is used for recording cash sales and receipts from customers.

C. Petty Cash Book, because it handles small cash disbursements and receipts separately.

D. General Journal, because it records all transactions in chronological order.

Correct Answer: A

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Question 15 View Details

The trial balance of DEF Ltd shows the following balances: Purchases - Debit (₦120{,}000); Cash - Credit (₦120{,}000); Accounts Payable - Credit (₦0). The purchase was intended to be on credit, but the credit was mistakenly posted to Cash instead of Accounts Payable. Identify the error and show the correcting entries using a suspense account.

A. Error: Cash was debited instead of Accounts Payable. Correcting entries: (i) Credit Cash ₦120,000; Debit Suspense ₦120,000. (ii) Credit Suspense ₦120,000; Debit Accounts Payable ₦120,000.

B. Error: Accounts Payable was credited instead of Cash. Correcting entries: (i) Debit Accounts Payable ₦120,000; Credit Suspense ₦120,000. (ii) Debit Suspense ₦120,000; Credit Cash ₦120,000.

C. Error: Purchases was credited instead of Accounts Payable. Correcting entries: (i) Debit Purchases ₦120,000; Credit Suspense ₦120,000. (ii) Debit Suspense ₦120,000; Credit Cash ₦120,000.

Correct D. Error: Cash was credited instead of Accounts Payable. Correcting entries: (i) Debit Cash ₦120,000; Credit Suspense ₦120,000. (ii) Debit Suspense ₦120,000; Credit Accounts Payable ₦120,000.

Correct Answer: D

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Question 16 View Details

During the month, the Purchases Returns Control Account had an opening credit balance of \(N10,000\). Two credit entries were recorded: \(N5,000\) and an unknown amount \(X\). Debit entries recorded were \(N2,000\) and \(N1,500\). The total credit balances of the suppliers' ledger amount to \(N12,000\). Assuming the control account must agree with the suppliers' ledger, determine the value of \(X\).

A. 1,000

Correct B. 500

C. 400

D. 600

Correct Answer: B

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Question 17 View Details

In the journal, two transactions were recorded:\\ 1. Debit Rent Expense \(N80,000\); Credit Cash (unknown) and Credit Unearned Rent (unknown).\\ 2. Debit Salaries Expense \(N40,000\); Credit Cash (unknown) and Credit Accrued Salaries (unknown).\\ It is known that the cash credit in Transaction 1 is twice the cash credit in Transaction 2, and the total cash credited in both transactions is \(N90,000\). Find the cash amounts credited in each transaction and the amounts credited to Unearned Rent and Accrued Salaries.

A. Cash Transaction 1 = 50,000; Cash Transaction 2 = 40,000; Unearned Rent = 20,000; Accrued Salaries = 10,000

Correct B. Cash Transaction 1 = 60,000; Cash Transaction 2 = 30,000; Unearned Rent = 20,000; Accrued Salaries = 10,000

C. Cash Transaction 1 = 60,000; Cash Transaction 2 = 30,000; Unearned Rent = 15,000; Accrued Salaries = 15,000

D. Cash Transaction 1 = 70,000; Cash Transaction 2 = 20,000; Unearned Rent = 20,000; Accrued Salaries = 10,000

Correct Answer: B

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Question 18 View Details

The trial balance of a firm shows the following balances (debit unless indicated):\n\nCash D \(N45,000\); Accounts Receivable D \(N30,000\); Inventory D \(N25,000\); Equipment D \(N80,000\); Accumulated Depreciation C \(N20,000\); Accounts Payable C \(N15,000\); Capital C \(N100,000\); Sales Revenue C \(N120,000\); Rent Expense D \(N10,000\); Interest Expense D \(N5,000\).\n\nThe totals do not balance. To make the trial balance balance, a missing debit entry is to be added to the account "Bank Loan". It is known that the amount of this missing debit equals twice the Accounts Receivable balance. Determine the amount that should be recorded as the Bank Loan debit.

A. 90,000

Correct B. 60,000

C. 30,000

D. 45,000

Correct Answer: B

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Question 19 View Details

For the month, a manufacturing company reported the following data:\\ - Opening Work‑in‑Progress (WIP): 200 units, each costing \(N150\).\\ - Raw materials: opening inventory \(N20,000\); purchases \(N150,000\); ending inventory \(N10,000\).\\ - Units started into production: 800.\\ - Direct labour cost: \(N80,000\).\\ - Manufacturing overhead is applied at 150 % of direct labour cost.\\ - Actual overhead incurred: \(N130,000\).\\ - Closing WIP: 150 units with a total cost of \(N30,000\).\\ Using the above information, calculate the total cost of goods manufactured (COGM) for the month.

A. 400,000

B. 360,000

Correct C. 370,000

D. 340,000

Correct Answer: C

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Question 20 View Details

The business purchased equipment for cash. The equipment cost \(N150,000\) and a delivery charge of \(N5,000\) was paid in the same cash transaction. Record the journal entry for this purchase.

A. Debit Equipment N150,000; Credit Cash N150,000

B. Debit Equipment N155,000; Credit Cash N160,000

C. Debit Equipment N155,000; Credit Cash N150,000

Correct D. Debit Equipment N155,000; Credit Cash N155,000

Correct Answer: D

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Question 21 View Details

The trial balance of a merchandising firm before adjustments shows the following balances (in Naira): \begin{tabular}{lrr} Account & Dr & Cr\\ Cash & 45,000 & \\ Accounts Receivable & 30,000 & \\ Inventory & \(\,?\) & \\ Equipment & 120,000 & \\ Accumulated Depreciation - Equipment & & 20,000\\ Accounts Payable & & 50,000\\ Capital & & 150,000\\ Drawings & 10,000 & \\ Sales Revenue & & 200,000\\ Cost of Goods Sold & 130,000 & \\ Salaries Expense & 25,000 & \\ \end{tabular} During the year the following adjusting entries are required: 1. Depreciation expense of 12,000 Naira. 2. Accrued salaries expense of 5,000 Naira (to be recorded as Salaries Expense and Salaries Payable). After posting the adjustments, the trial balance must balance (total debits = total credits). What is the correct balance of the Inventory account?

Correct A. 60000

B. 55000

C. 70000

D. 50000

Correct Answer: A

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Question 22 View Details

An asset is depreciated using the straight‑line method over 5 years with zero salvage value. After two years the company switches to the double‑declining‑balance method for the remaining useful life. The depreciation expense recorded in the third year (the first year under double‑declining) is 24,000 Naira. What was the original cost of the asset?

A. 120000

Correct B. 100000

C. 90000

D. 80000

Correct Answer: B

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Question 23 View Details

A local government prepares an annual operating budget for its Education Department. The original budgeted cash receipts were ₦12,000,000 and cash payments were ₦9,500,000, giving a projected cash surplus. Mid‑year, actual cash receipts turned out to be 80 % of the budgeted amount and cash payments were 110 % of the budgeted amount. Later in the year the department received a special grant of ₦1,200,000 that was not included in the original budget. Assuming the second half of the year follows the original budgeted amounts, determine: (a) the revised cash surplus or deficit at year‑end, and (b) the percentage variance of the revised surplus/deficit from the original projected surplus.

Correct A. Revised surplus = 1600000 Naira; variance = -36%

B. Revised surplus = 2500000 Naira; variance = 0%

C. Revised surplus = 1200000 Naira; variance = -52%

D. Revised surplus = 1600000 Naira; variance = -30%

Correct Answer: A

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Question 24 View Details

A municipal corporation maintains two separate funds. **Opening balances** - General Fund cash: ₦5,000,000 - Capital Projects Fund cash: ₦2,000,000 **Transactions during the year** 1. General Fund receives tax revenues of ₦8,000,000 and pays operating expenses of ₦6,500,000. 2. Capital Projects Fund receives a loan of ₦3,000,000 and pays construction costs of ₦6,500,000. 3. An inter‑fund transfer of ₦2,000,000 is made from the General Fund to the Capital Projects Fund. **Statutory cash‑balance requirements** - General Fund must end with cash at least 20 % of its total outflows (operating expenses plus the inter‑fund transfer). - Capital Projects Fund must end with cash at least 10 % of its total outflows (construction costs plus the amount received from the inter‑fund transfer). Determine whether each fund meets its statutory minimum cash‑balance requirement at year‑end. If a fund fails, state the additional cash needed to satisfy the requirement.

Correct A. General Fund: meets requirement; Capital Projects Fund: needs 350000 Naira

B. General Fund: needs 150000 Naira; Capital Projects Fund: meets requirement

C. General Fund: meets requirement; Capital Projects Fund: needs 400000 Naira

D. General Fund: meets requirement; Capital Projects Fund: needs 250000 Naira

Correct Answer: A

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Question 25 View Details

The trial balance of a service company before adjustments (in Naira) is shown below: \begin{tabular}{lrr} Account & Dr & Cr\\ Sales Revenue & & 250,000\\ Service Revenue & & 80,000\\ Rent Expense & 30,000 & \\ Salaries Expense & 45,000 & \\ Utilities Expense & 12,000 & \\ Supplies & 8,000 & \\ Accounts Receivable & 20,000 & \\ Accounts Payable & & 15,000\\ Capital & & 150,000\\ Drawings & 10,000 & \\ \end{tabular} Adjusting entries are required at year‑end: 1. Supplies on hand are counted and valued at ₦3,000. 2. Utilities expense accrued but not yet paid amounts to ₦2,000. 3. Service revenue earned but not yet billed amounts to ₦5,000. After posting these adjustments, calculate the net profit for the year. (Profit = Total Revenues - Total Expenses).

A. 241000

B. 239000

C. 245000

Correct D. 243000

Correct Answer: D

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