Practice neco model questions vol1 financial_accounting 2020 Past Questions

Question 1 View Details

During the month, the following transactions affected the Machinery account of XYZ Ltd.: - Opening balances: Machinery (debit) \(₦500,000\); Accumulated Depreciation (credit) \(₦120,000\). - Machinery purchased for \(₦80,000\). - Depreciation is charged at 12% per annum on the net book value at the start of the month, calculated monthly. - A machine with original cost \(₦50,000\) and accumulated depreciation \(₦30,000\) was sold for cash \(₦25,000\). Determine the closing net book value of the Machinery account at the end of the month.

A. ₦418,400

Correct B. ₦436,200

C. ₦430,800

D. ₦452,000

Correct Answer: B

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Question 2 View Details

A business receives a cash loan of \(₦150,000\) from a bank. State the effect of this transaction on the accounting equation (Assets = Liabilities + Equity).

A. Assets increase ₦150,000; Liabilities increase ₦0; Equity unchanged

B. Assets increase ₦150,000; Liabilities increase ₦150,000; Equity decrease ₦150,000

C. Assets increase ₦150,000; Liabilities increase ₦150,000; Equity increase ₦150,000

Correct D. Assets increase ₦150,000; Liabilities increase ₦150,000; Equity unchanged

Correct Answer: D

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Question 3 View Details

XYZ Co. prepared a cash book showing a balance of \(₦295,000\). The bank statement balance at the same date is \(₦300,000\). The following items are identified: - Deposits in transit: \(₦8,000\) - Outstanding checks: \(₦5,000\) - Bank service charge of \(₦400\) (not yet recorded in the cash book) - Interest earned of \(₦200\) (not yet recorded in the cash book) - A receipt of \(₦2,500\) was mistakenly recorded as \(₦25,000\) in the cash book. Calculate the corrected cash book balance after incorporating all adjustments.

A. ₦272,100

B. ₦292,300

Correct C. ₦272,300

D. ₦272,700

Correct Answer: C

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Question 4 View Details

Partnership of A and B shares profits in the ratio 3:2. Their capital balances are \(A: ₦150,000\) and \(B: ₦100,000\). At the beginning of the year the following occur: - The partnership revalues a building from its book value \(₦200,000\) to market value \(₦260,000\). The surplus is allocated to the partners in the profit‑sharing ratio. - Goodwill is valued at two years' average profit. The average profit for the last three years is \(₦60,000\). Goodwill is to be shared only between the existing partners. - A new partner C is admitted for a one‑fourth (\(1/4\)) share of the partnership, contributing cash of \(₦80,000\). C does not bring any goodwill. Determine (a) the amount to be credited to C's capital account on admission, and (b) the new capital balances of A, B and C after all adjustments.

A. C's capital ₦80,000; A ₦282,000; B ₦148,000; C ₦80,000

Correct B. C's capital ₦110,000; A ₦240,000; B ₦160,000; C ₦110,000

C. C's capital ₦128,000; A ₦246,000; B ₦184,000; C ₦128,000

D. C's capital ₦98,000; A ₦186,000; B ₦124,000; C ₦98,000

Correct Answer: B

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Question 5 View Details

ABC Ltd. has a cash book balance of \(₦175,500\) and a bank statement balance of \(₦180,000\). The following items are noted: - Outstanding checks: \(₦4,200\) - Deposits in transit: \(₦3,800\) - The bank omitted a deposit of \(₦2,500\) in its statement. - A bank service charge of \(₦150\) and interest earned of \(₦100\) have already been recorded in the cash book. - A cheque of \(₦1,200\) was recorded as \(₦12,000\) in the cash book. After making all necessary adjustments, what is the amount of unreconciled difference between the adjusted cash book and the adjusted bank statement balances?

A. ₦14,900

B. ₦4,200

Correct C. ₦17,400

D. ₦21,600

Correct Answer: C

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Question 6 View Details

A manufacturing firm has the following data for product A for the year: Opening raw material stock ₦120,000; purchases of raw materials ₦480,000; closing raw material stock ₦100,000; direct labour cost ₦250,000; variable manufacturing overhead is \(60\%\) of direct labour; fixed manufacturing overhead is ₦180,000 and is allocated on the basis of machine‑hours. The firm used 2,400 machine‑hours for product A out of a total of 3,000 machine‑hours. Production of product A was 12,000 units. \(i\) Determine the unit cost of product A. \(ii\) If product A is sold for ₦80 per unit, calculate the total profit or loss on product A for the year.

Correct A. -84000

B. -108000

C. -96000

D. -72000

Correct Answer: A

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Question 7 View Details

An equipment has a cost of ₦600,000. At the beginning of the year the accumulated depreciation recorded was ₦150,000. The entity applies a reducing‑balance depreciation method at a rate of \(20\%\) per annum on the book value (cost less accumulated depreciation). \(i\) Compute the depreciation expense for the current year. \(ii\) Determine the closing balance of accumulated depreciation at the end of the year.

A. 120,000; 300,000

B. 105,000; 255,000

C. 75,000; 225,000

Correct D. 90,000; 240,000

Correct Answer: D

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Question 8 View Details

The cash book of a business for the month shows the following balances (all figures in ₦): Cash column - opening balance = 50,000; cash receipts = 120,000; cash payments = 80,000. Bank column - opening balance = 200,000; bank receipts = 150,000; bank payments = 130,000. The bank statement issued at month‑end shows a closing balance of 225,000. The following reconciling items are identified: - Outstanding checks amounting to 15,000. - Deposits in transit amounting to 10,000. - A bank error that resulted in an extra credit of 5,000 to the company's account. After adjusting for these items, what is the corrected total balance (cash + bank) that should appear in the cash book at month‑end?

Correct A. 300000

B. 295000

C. 310000

D. 305000

Correct Answer: A

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Question 9 View Details

On 1 March the business purchased inventory on credit for ₦180,000 and paid cash for freight charges of ₦20,000. (a) Record the appropriate journal entry for these transactions. (b) State the effect of each part of the entry on the accounting equation (Assets = Liabilities + Equity).

Correct A. Debit Inventory 180,000; Debit Freight Expense 20,000; Credit Accounts Payable 180,000; Credit Cash 20,000. Net effect: Assets +160,000; Liabilities +180,000; Equity -20,000.

B. Credit Inventory 180,000; Debit Freight Expense 20,000; Credit Accounts Payable 180,000; Credit Cash 20,000. Net effect: Assets -160,000; Liabilities +180,000; Equity -20,000.

C. Debit Inventory 180,000; Debit Freight Expense 20,000; Credit Accounts Payable 180,000; Credit Cash 10,000. Net effect: Assets +170,000; Liabilities +180,000; Equity -10,000.

D. Debit Inventory 180,000; Debit Freight Expense 20,000; Credit Accounts Payable 200,000; Credit Cash 20,000. Net effect: Assets +160,000; Liabilities +200,000; Equity -40,000.

Correct Answer: A

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Question 10 View Details

A local government department had the following information for the fiscal year (all amounts in ₦): - Budgeted revenue = 5,000,000; actual cash receipts = 4,600,000; uncollected receivables at year‑end = 300,000; accrued revenue not yet received = 200,000. - Budgeted expenses = 4,200,000; actual cash payments = 4,000,000; accrued expenses payable at year‑end = 150,000; prepaid expenses = 80,000. The opening fund balance at the start of the year was 1,200,000. Using the accrual basis of accounting, compute the adjusted fund balance at the end of the year.

A. 2150000

B. 2700000

Correct C. 2230000

D. 2000000

Correct Answer: C

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Question 11 View Details

The trial balance of XYZ Ltd. shows total debit balances of \(312,750\) and total credit balances of \(307,200\). It is later discovered that the cash balance was overstated by \(5,500\) because of a transposition error. After correcting the cash balance, what amount should be posted to the Suspense Account to bring the trial balance into balance?

Correct A. 50

B. 5

C. 55

D. 0

Correct Answer: A

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Question 12 View Details

State the accounting concept that requires expenses to be recognised in the same accounting period as the revenues they help generate.

A. Accrual concept

B. Consistency concept

C. Revenue concept

Correct D. Matching concept

Correct Answer: D

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Question 13 View Details

The Trade Receivables Control Account of ABC Co. shows an opening debit balance of \(45,000\). During the year, credit sales amounted to \(120,000\), cash received from customers was \(110,000\) and write‑offs of doubtful debts were \(5,000\). The closing debit balance shown in the control account is \(50,000\). The subsidiary ledger of customers A, B and C totals \(48,000\). What amount is owed by the remaining customer D that reconciles the subsidiary ledger with the control account?

A. 2500

B. 1500

Correct C. 2000

D. 3000

Correct Answer: C

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Question 14 View Details

Three partners A, B and C share profits in the ratio \(3:2:1\). A new partner D is admitted, contributing cash of \(30,000\) for a one‑quarter share of future profits. Existing partners agree that D's share will be \(\frac{1}{4}\) of the profit and the remaining \(\frac{3}{4}\) will continue to be divided between A, B and C in their original ratio. What is the new profit‑sharing ratio among A, B, C and D expressed in simplest whole numbers?

A. 5:3:2:2

B. 3:2:1:1

Correct C. 3:2:1:2

D. 4:3:2:1

Correct Answer: C

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Question 15 View Details

A government department follows the modified accrual basis. At the start of the fiscal year it has an unspent appropriation cash balance of \(150,000\). During the year it incurs expenses of \(200,000\), of which cash payments total \(140,000\) and the remainder are accrued expenses not yet paid. Cash revenues received amount to \(80,000\) and accrued revenues recognised amount to \(30,000\). What cash surplus does the department report at year‑end?

A. 110000

B. 70000

C. 130000

Correct D. 90000

Correct Answer: D

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Question 16 View Details

The Debtors Ledger (Accounts Receivable) had an opening debit balance of \(N200,000\). During the month the following transactions were recorded:\n- Credit sales of \(N150,000\).\n- Sales returns of \(N10,000\).\n- Discount allowed on credit sales at \(2\%\) of the credit sales amount.\n- Cash received from debtors amounting to \(N50,000\).\n- Bad debts written off amounting to \(N8,000\).\nCash sales of \(N80,000\) do not affect the Debtors Ledger. Determine the closing debit balance of the Debtors Ledger at the end of the month.

A. 289000

B. 282000

Correct C. 279000

D. 287000

Correct Answer: C

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Question 17 View Details

The Purchases Returns Control Account is being prepared. The opening debit balance is \(N30,000\). Returns recorded from suppliers are: Supplier A \(N5,000\), Supplier B \(N7,500\), Supplier C \(N4,000\). During the period a purchase return of \(N3,000\) was mistakenly posted to the Purchases Account instead of the Purchases Returns Control Account. In addition, a credit entry of \(N2,000\) that should have been recorded in the control account was omitted. Compute the correct closing debit balance of the Purchases Returns Control Account.

A. 44500

Correct B. 47500

C. 46000

D. 49500

Correct Answer: B

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Question 18 View Details

While preparing the trial balance, the following errors were discovered:\n1. A purchase invoice of \(N45,000\) was recorded as \(N54,000\).\n2. A cash receipt of \(N12,500\) was omitted.\n3. A sales return of \(N6,000\) was entered as a sales discount of the same amount.\n4. A credit entry of \(N8,000\) was posted to the Sales Account instead of the Sales Returns Account.\nAfter posting all entries, the trial balance shows a debit excess of \(N5,000\). Assuming all other entries are correct, determine the amount that should be transferred to the Suspense Account to rectify the trial balance.

A. 5000

Correct B. 4000

C. 3000

D. 6000

Correct Answer: B

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Question 19 View Details

The trial balance of XYZ Ltd. shows the following balances (in Naira):\nCash \(120,000\) debit\nAccounts Receivable \(85,000\) debit\nInventory \(150,000\) debit\nEquipment \(200,000\) debit\nAccumulated Depreciation—Equipment \(30,000\) credit\nAccounts Payable \(70,000\) credit\nCapital \(435,000\) credit\nDrawings \(40,000\) debit\nSales \(250,000\) credit\nPurchases \(180,000\) debit\nRent Expense \(25,000\) debit\nThe total of the debit side exceeds the credit side by \(N15,000\). It is known that depreciation expense for the year was omitted. The equipment was purchased at the beginning of the year for \(N200,000\) and is depreciated on a straight‑line basis over 5 years with a residual value of \(N50,000\). Determine the depreciation expense that should be recorded and state whether the trial balance will balance after recording it.

A. Depreciation expense = N20,000; trial balance will still not balance (debit excess remains N15,000)

B. Depreciation expense = N40,000; trial balance will still not balance (debit excess remains N15,000)

C. Depreciation expense = N30,000; trial balance will balance after recording it

Correct D. Depreciation expense = N30,000; trial balance will still not balance (debit excess remains N15,000)

Correct Answer: D

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Question 20 View Details

A machine was purchased on 1 January 2020 for \(N500,000\). Its estimated residual value is \(N50,000\) and its useful life is 5 years. The company uses the straight‑line method for financial reporting and a reducing‑balance method at a rate of \(40\%\) per annum for tax purposes.\n\na) Calculate the book value of the machine at the end of Year 3 under each method.\nb) Find the difference between the depreciation expense recorded in Year 3 under the two methods.

Correct A. Straight‑line book value = N230,000; Reducing‑balance book value = N108,000; Difference in Year 3 expense = N18,000

B. Straight‑line book value = N225,000; Reducing‑balance book value = N108,000; Difference in Year 3 expense = N15,000

C. Straight‑line book value = N240,000; Reducing‑balance book value = N108,000; Difference in Year 3 expense = N22,000

D. Straight‑line book value = N230,000; Reducing‑balance book value = N112,000; Difference in Year 3 expense = N18,000

Correct Answer: A

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Question 21 View Details

A cash book for the month shows the following data:\nOpening cash balance: \(\text{₦}8{,}000\)\nOpening bank balance: \(\text{₦}12{,}000\)\nCash receipts: \(\text{₦}22{,}000\) and an unknown cash receipt of \(x\)\nCash payments: \(\text{₦}9{,}000\) (rent) and \(\text{₦}4{,}000\) (utilities)\nBank receipts: \(\text{₦}30{,}000\) and \(\text{₦}7{,}000\)\nBank payments: \(\text{₦}15{,}000\) and an unknown bank payment of \(y\)\nClosing cash balance: \(\text{₦}20{,}000\)\nClosing bank balance: \(\text{₦}24{,}000\)\nFind the amount of the unknown cash receipt \(x\).

A. 5000

B. 4000

Correct C. 3000

D. 2000

Correct Answer: C

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Question 22 View Details

For a trading year the following information is given:\nSales: \(\text{₦}200{,}000\)\nSales returns: \(\text{₦}20{,}000\)\nOpening stock: \(\text{₦}10{,}000\)\nPurchases: \(\text{₦}120{,}000\)\nPurchase returns: \(\text{₦}10{,}000\)\nCarriage inwards: \(\text{₦}8{,}000\)\nClosing stock is such that gross profit equals 30% of net sales.\nDepreciation on machinery (cost \(\text{₦}40{,}000\)) is charged at 10% per annum.\nSalaries: \(\text{₦}12{,}000\)\nRent: \(\text{₦}8{,}000\)\nInterest on loan: \(\text{₦}1{,}500\)\nFind the net profit for the year.

A. 27500

Correct B. 28500

C. 26000

D. 29500

Correct Answer: B

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Question 23 View Details

A trader's trial balance for the year ended 31 December shows the following debit items (in ₦):\nCash 12,000; Debtors 9,000; Opening stock 5,000; Purchases 40,000; Returns outwards 2,000; Carriage inwards 3,000; Salaries 8,000; Rent 4,000; Depreciation 5,000.\nCredit items (in ₦) are: Sales 70,000; Returns inwards 1,500; Creditors 6,000; Loan 15,000; Capital ?.\nAdditional information: Closing stock is 7,000 and the net profit for the year is 9,500. Determine the amount of Capital.

A. 4000

B. 5000

C. 5500

Correct D. 4500

Correct Answer: D

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Question 24 View Details

A manufacturing firm provides the following data for the year:\nOpening raw‑material stock: \(\text{₦}25{,}000\)\nPurchases of raw materials: \(\text{₦}80{,}000\)\nClosing raw‑material stock: \(\text{₦}15{,}000\)\nDirect labour: \(\text{₦}45{,}000\)\nDirect expenses (electricity for production): \(\text{₦}12{,}000\)\nManufacturing overhead is applied at 150 % of direct labour.\nOpening work‑in‑progress (WIP): \(\text{₦}20{,}000\)\nClosing WIP is 40 % of the total manufacturing costs incurred.\nOpening finished‑goods stock: \(\text{₦}30{,}000\)\nClosing finished‑goods stock: \(\text{₦}35{,}000\)\nSales: \(\text{₦}250{,}000\)\nSales returns: \(\text{₦}10{,}000\)\nAdministrative expenses: \(\text{₦}18{,}000\)\nSelling expenses: \(\text{₦}12{,}000\)\nInterest on loan: \(\text{₦}5{,}000\)\nDetermine (a) the amount of closing work‑in‑progress and (b) the net profit for the year.

Correct A. Closing WIP = 85800; Net profit = 61300

B. Closing WIP = 85800; Net profit = 60000

C. Closing WIP = 86000; Net profit = 62000

D. Closing WIP = 85000; Net profit = 61300

Correct Answer: A

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Question 25 View Details

An incomplete set of records for a trader shows:\nSales for the year: \(\text{₦}500{,}000\)\nPurchases: \(\text{₦}300{,}000\)\nOpening stock: \(\text{₦}80{,}000\)\nThe gross‑profit ratio is 25 % of sales.\nCash receipts during the year: \(\text{₦}420{,}000\)\nCash payments during the year: \(\text{₦}380{,}000\)\nOpening cash balance: \(\text{₦}20{,}000\)\nAt year‑end the bank overdraft stands at \(\text{₦}15{,}000\).\nOther known cash payments are: Salaries \(\text{₦}45{,}000\), Rent \(\text{₦}30{,}000\), Depreciation on equipment (cost \(\text{₦}120{,}000\)) at 10 %, and cash interest on a loan of \(\text{₦}50{,}000\) at 10 % (interest paid in cash).\nThe remaining cash payments are for cash purchases of raw materials.\nDetermine (a) the closing stock and (b) the net profit for the year.

Correct A. Closing stock = 5000; Net profit = 33000

B. Closing stock = 7500; Net profit = 25000

C. Closing stock = 2500; Net profit = 40000

D. Closing stock = 10000; Net profit = 28000

Correct Answer: A

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