Practice neco model questions vol1 financial_accounting 2022 Past Questions

Question 1 View Details

The following items are extracted from the trial balance of XYZ Ltd for the year ended 31 December 2022: \(\text{Sales}=\)N1,200,000, \(\text{Opening Stock}=\)N150,000, \(\text{Purchases}=\)N800,000, \(\text{Closing Stock}=\)N180,000, \(\text{Carriage Inwards}=\)N30,000, \(\text{Salaries}=\)N120,000, \(\text{Rent}=\)N60,000, \(\text{Trade Receivables}=\)N200,000, \(\text{Bad Debts written off}=\)N10,000. The building cost is N500,000 with a residual value of N50,000 and a useful life of 10 years (straight‑line). A provision for doubtful debts equal to 5 % of net receivables after bad debts is required. Compute the net profit for the year.

Correct A. 165500

B. 165000

C. 170500

D. 160500

Correct Answer: A

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Question 2 View Details

During the month, the Purchases Returns Control Account recorded the following entries (all amounts in N):\n\(\text{Opening credit balance}=100,000\)\n\(\text{Return to Supplier A (debit)}=15,000\)\n\(\text{Return to Supplier B (debit)}=8,000\)\n\(\text{A credit entry of amount }X\) that was later discovered to be a mistake - it should have been a purchase (i.e., a debit).\nAt month‑end the individual supplier ledgers show credit balances of N12,000 (Supplier A), N6,000 (Supplier B) and N9,000 (Supplier C). The total of the supplier balances must equal the closing balance of the control account. Determine the value of \(X\) and state the correct closing balance of the Purchases Returns Control Account.

Correct A. Error: N50,000 (should be a debit); Closing balance: N27,000

B. Error: N55,000 (should be a debit); Closing balance: N24,000

C. Error: N40,000 (should be a debit); Closing balance: N31,000

D. Error: N45,000 (should be a debit); Closing balance: N30,000

Correct Answer: A

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Question 3 View Details

A trial balance for ABC Co. shows the following amounts (all in N):\n\(\text{Debits}\): Cash 120,000; Inventory 80,000; Equipment 150,000; Rent Expense 30,000; Salaries Expense 45,000; \(\text{Unknown account X (debit)} = ?\)\n\(\text{Credits}\): Capital 300,000; Sales Revenue 200,000; Accounts Payable 50,000; Loan Payable 75,000; Accumulated Depreciation 20,000.\nThe totals are not equal. It is known that one of the credit amounts has been recorded on the wrong side - it should be a debit. Identify the mis‑posted account and determine the amount of the unknown debit \(X\) that will balance the trial balance.

Correct A. Mis‑posted account: Accounts Payable (N50,000); Unknown debit X = N120,000

B. Mis‑posted account: Accumulated Depreciation (N20,000); Unknown debit X = N150,000

C. Mis‑posted account: Capital (N300,000); Unknown debit X = N30,000

D. Mis‑posted account: Loan Payable (N75,000); Unknown debit X = N115,000

Correct Answer: A

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Question 4 View Details

A trial balance shows total debits of N850,000 and total credits of N845,000, a difference of N5,000 (debits higher). Further investigation reveals two errors:\n1. A purchase of N12,000 was omitted entirely.\n2. A sales figure of N7,000 was transposed and recorded as N70,000. After correcting these errors, what amount should be transferred to the suspense account to bring the trial balance into balance?

A. 12000

Correct B. 80000

C. 63000

D. 5000

Correct Answer: B

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Question 5 View Details

The trial balance of DEF Ltd is balanced with total debits and credits each equal to N1,200,000. The profit shown before any adjustments is N150,000. The following adjusting entries are required for the year end:\n1. Accrued salary expense of N30,000.\n2. Insurance of N20,000 was originally recorded as an expense but is actually a prepaid expense.\n3. Depreciation on equipment (cost N100,000, residual N10,000, useful life 5 years, straight‑line).\n4. Unearned revenue of N40,000 should be recognized as revenue for the period.\nAfter posting all adjusting entries, what is the adjusted net profit?

Correct A. 162000

B. 168000

C. 160000

D. 150000

Correct Answer: A

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Question 6 View Details

ABC partnership consists of partners A, B and C sharing profit in the ratio 3:2:1. The opening capital balances are A - ₦120,000, B - ₦80,000 and C - ₦40,000. At year‑end the balance sheet shows Fixed assets of ₦150,000, Current assets of ₦80,000 and Liabilities of ₦30,000. The partners revalue the assets: Fixed assets increase by ₦40,000, Current assets increase by ₦30,000 and depreciation is reduced by ₦0, giving a net increase of ₦70,000. Goodwill is recognised at 10 % of the revalued net assets and is shared according to the old profit‑sharing ratio. A new partner D is admitted with a one‑fifth (\( \frac{1}{5} \)) share in the partnership and pays cash for his share. Calculate: (a) the amount of goodwill recognised; (b) the total capital of the partnership after goodwill; (c) the cash amount D must pay for his one‑fifth share; (d) the cash each existing partner (A, B, C) receives from D's payment.

A. Goodwill = ₦27,000; Total capital = ₦285,000; D pays ₦57,000; A receives ₦28,500; B receives ₦19,000; C receives ₦9,500

B. Goodwill = ₦24,300; Total capital = ₦291,300; D pays ₦58,260; A receives ₦29,130; B receives ₦19,420; C receives ₦9,710

Correct C. Goodwill = ₦27,000; Total capital = ₦297,000; D pays ₦59,400; A receives ₦29,700; B receives ₦19,800; C receives ₦9,900

D. Goodwill = ₦30,000; Total capital = ₦300,000; D pays ₦60,000; A receives ₦30,000; B receives ₦20,000; C receives ₦10,000

Correct Answer: C

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Question 7 View Details

XYZ Ltd has the following opening balances: Ordinary share capital (10,000 shares of ₦100 each) - ₦1,000,000; Ordinary share premium - ₦200,000; Preference share capital (5,000 shares of ₦100 each) - ₦500,000; Retained earnings - ₦300,000. During the year the company: - earned profit after tax of ₦1,200,000; - paid a 10 % dividend on preference shares; - issued 2,000 additional ordinary shares at ₦130 each; - redeemed 500 preference shares at ₦110 each. Assuming the redemption is funded from retained earnings, determine: (a) the total equity of the company at year‑end; (b) the earnings per ordinary share (EPS) for the year.

A. Total equity = ₦3,250,000; EPS = ₦92.50 per ordinary share

Correct B. Total equity = ₦3,305,000; EPS = ₦95.83 per ordinary share

C. Total equity = ₦3,305,000; EPS = ₦100.00 per ordinary share

D. Total equity = ₦3,315,000; EPS = ₦96.00 per ordinary share

Correct Answer: B

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Question 8 View Details

City Council operates two funds. General Fund: - Opening cash balance: ₦5,000,000 - Cash revenues received: ₦12,000,000 - Cash expenditures paid: ₦9,000,000 - Transfer to Capital Development Fund: ₦1,000,000 - Accrued expenses at year‑end (not yet paid): ₦800,000 Capital Development Fund: - Opening cash balance: ₦3,000,000 - Cash revenues received: ₦4,000,000 - Cash expenditures paid: ₦5,500,000 - Transfer received from General Fund: ₦1,000,000 - Unearned revenue at year‑end (cash received but not earned): ₦600,000 Determine: (a) the closing cash balance of the General Fund; (b) the closing cash balance of the Capital Development Fund; (c) the overall net position (assets minus liabilities) of the Council after incorporating the accrued expense and unearned revenue.

Correct A. General Fund cash = ₦7,000,000; Capital Development Fund cash = ₦2,500,000; Overall net position = ₦8,100,000

B. General Fund cash = ₦8,000,000; Capital Development Fund cash = ₦2,500,000; Overall net position = ₦9,100,000

C. General Fund cash = ₦6,000,000; Capital Development Fund cash = ₦2,500,000; Overall net position = ₦7,600,000

D. General Fund cash = ₦7,000,000; Capital Development Fund cash = ₦3,100,000; Overall net position = ₦8,700,000

Correct Answer: A

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Question 9 View Details

On 1 March, a company purchases equipment for ₦150,000 cash. Show how this transaction affects the accounting equation (Assets = Liabilities + Equity).

A. Assets: Equipment ↑ ₦150,000, Cash ↓ ₦150,000 (net no change); Liabilities: no change; Equity: ↑ ₦150,000

Correct B. Assets: Equipment ↑ ₦150,000, Cash ↓ ₦150,000 (net no change); Liabilities: no change; Equity: no change

C. Assets: Equipment ↑ ₦150,000, Cash ↑ ₦150,000 (net increase ₦300,000); Liabilities: no change; Equity: no change

D. Assets: Equipment ↑ ₦150,000, Cash ↓ ₦150,000 (net no change); Liabilities: ↑ ₦150,000; Equity: no change

Correct Answer: B

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Question 10 View Details

Record the journal entry for receiving a bank loan of ₦200,000 at 5 % interest payable annually.

A. Debit Loan Payable ₦200,000; Credit Cash ₦200,000

Correct B. Debit Cash ₦200,000; Credit Loan Payable ₦200,000

C. Debit Cash ₦200,000; Credit Loan Payable ₦210,000

D. Debit Cash ₦200,000; Credit Interest Payable ₦10,000

Correct Answer: B

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Question 11 View Details

The cash book for the month shows an opening balance of \(\₦50,000\). The following receipts were recorded: cash sales \(\₦120,000\), loan received \(\₦30,000\), interest received \(\₦2,500\). The following payments were recorded: rent \(\₦25,000\), salaries \(\₦45,000\), utilities \(\₦8,000\), purchase of inventory \(\₦60,000\). It was later discovered that a cash receipt of \(\₦5,000\) was mistakenly recorded as a payment, and a payment of \(\₦3,000\) was omitted. What is the corrected closing cash balance at the end of the month?

Correct A. ₦71,500

B. ₦66,500

C. ₦73,500

D. ₦68,000

Correct Answer: A

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Question 12 View Details

A company maintains a purchases journal. During a month it recorded 12 purchases on credit. Two of those purchases were later fully returned, each return being entered in the purchase returns journal. One purchase was partially returned: a return entry for \(\₦4,500\) was made and the remaining balance was recorded as a new purchase entry. A mistakenly recorded purchase of \(\₦7,200\) was subsequently reversed by a contra entry. How many total entries are recorded across the purchases journal, the purchase returns journal, and the correction entry for that month?

A. 15

B. 18

C. 16

Correct D. 17

Correct Answer: D

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Question 13 View Details

A municipal council prepares its statement of financial position (all amounts in \(\₦\) thousands). The data are as follows:\n\n- Non‑current assets at cost: 12,000; accumulated depreciation: 3,600.\n- Current assets: cash 2,500; receivables 1,800; inventory 900.\n- Current liabilities: accounts payable 1,200; accrued expenses 400.\n- Long‑term liabilities: loan payable 5,000.\n- Capital grant received during the year: 2,000, of which 1,200 was spent on acquiring a new building (cost 1,200) and the remaining 800 is unrestricted.\n- Depreciation for the year on existing non‑current assets (excluding the new building) is 600.\n- An unfunded pension liability of 1,500 must be disclosed but is not recognised as a liability.\n\nThe council uses the modified accrual basis, where capital grants are recognised as revenue when received, but the portion spent on capital assets is transferred to Capital Grants in Excess of Expenditure (CGEE) and shown as a reduction of capital‑grant revenue. Compute the net assets (total assets minus total liabilities) to be reported after adjusting for the capital‑grant treatment and depreciation.

Correct A. ₦7,600

B. ₦7,000

C. ₦8,200

D. ₦6,800

Correct Answer: A

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Question 14 View Details

A machine is purchased for \(\₦150,000\). It has an estimated residual value of \(\₦15,000\) and a useful life of 5 years. The company depreciates the asset using the double‑declining‑balance method for the first three years and then switches to the straight‑line method for the remaining years. Determine the depreciation expense for the fourth year and the book value at the end of the fourth year.

Correct A. Depreciation expense = ₦8,700; Book value = ₦23,700

B. Depreciation expense = ₦8,250; Book value = ₦24,450

C. Depreciation expense = ₦9,000; Book value = ₦24,000

D. Depreciation expense = ₦7,800; Book value = ₦25,200

Correct Answer: A

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Question 15 View Details

On 1 January 2022 a delivery van was recorded at cost \(\₦200,000\) with a residual value of \(\₦20,000\) and a useful life of 8 years. The straight‑line method was used. On 1 July 2024 the van was revalued upwards to a fair value of \(\₦180,000\). At the same date an impairment loss of \(\₦30,000\) was recognised because of damage. The remaining useful life after revaluation is 5 years (i.e., until 30 June 2029). Calculate the depreciation expense for the year ending 31 December 2025.

A. ₦24,000

B. ₦28,000

Correct C. ₦26,000

D. ₦30,000

Correct Answer: C

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Question 16 View Details

At the beginning of the year, partners A and B have capital balances of \(\₦500,000\) and \(\₦300,000\) respectively and share profits in the ratio 3:2. During the year the partnership earned a profit of \(\₦120,000\) which is to be distributed before the admission of a new partner C. C is to be admitted on 1 July with a profit‑sharing ratio of \(\frac14\), leaving A and B to share the remaining \(\frac34\) in their old ratio. The partners agree that goodwill of the partnership is \(\₦80,000\) and that it will be shared between A and B in their old profit‑sharing ratio. On admission, C pays cash equal to his share of goodwill plus an amount equal to 20 % of the total goodwill. In addition, C brings equipment whose book value is \(\₦30,000\) and whose market value is \(\₦50,000\); the excess market value is also credited to his capital account. On the same day A withdraws \(\₦30,000\) cash. Determine the amount that should be credited to C's capital account after all adjustments.

Correct A. ₦56,000

B. ₦48,000

C. ₦64,000

D. ₦70,000

Correct Answer: A

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Question 17 View Details

The cash book of a business shows a closing balance of \(\₦150,000\) at the end of the month. The following items are known:\n- Unpresented cheques totalling \(\₦25,000\).\n- Deposits in transit totalling \(\₦12,000\).\n- Bank charges of \(\₦1,200\) (not yet recorded in the cash book).\n- Discount received of \(\₦800\) (recorded in the cash book but not yet reflected in the bank statement).\n- A cash receipt was mistakenly entered as \(\₦50,000\) instead of the correct \(\₦5,000\).\nDetermine the corrected cash book balance after adjusting for the error and prepare the bank reconciliation figure that should appear on the reconciliation statement.

A. ₦92,600

B. ₦90,600

C. ₦89,600

Correct D. ₦91,600

Correct Answer: D

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Question 18 View Details

The trade receivables control account opened with a debit balance of \(\₦200,000\). During the year the following transactions were recorded:\n- Credit sales: \(\₦480,000\)\n- Sales returns: \(\₦20,000\)\n- Cash received from debtors: \(\₦430,000\)\nAt year‑end a doubtful debt is to be written off. The subsidiary ledger shows that the total of individual debtor balances (excluding the doubtful debt) is \(\₦190,000\), which is \(\₦30,000\) less than the balance shown in the control account before the write‑off. Determine the amount of doubtful debt that must be written off so that the control account agrees with the subsidiary ledger.

A. ₦30,000

B. ₦60,000

C. ₦50,000

Correct D. ₦40,000

Correct Answer: D

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Question 19 View Details

A partnership purchases equipment with a list price of \(\₦150,000\). The supplier offers a 5 % trade discount if payment is made within 30 days. The partnership pays \(\₦30,000\) cash immediately and the balance is due in 60 days. Record the journal entry on the date of purchase.

A. Dr Equipment ₦150,000; Cr Cash ₦30,000; Cr Accounts Payable ₦120,000

B. Dr Equipment ₦142,500; Cr Cash ₦35,000; Cr Accounts Payable ₦107,500

Correct C. Dr Equipment \₦142,500; Cr Cash \₦30,000; Cr Accounts Payable \₦112,500

D. Dr Equipment ₦145,000; Cr Cash ₦30,000; Cr Accounts Payable ₦115,000

Correct Answer: C

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Question 20 View Details

The manufacturing accounts of a firm contain the following information for the month:\n- Opening work‑in‑process (WIP) inventory: \(\₦40,000\) (materials \₦20,000, labour \₦10,000, overhead \₦10,000).\n- Direct materials purchased: \(\₦120,000\). Of these, \(\₦15,000\) were already included in the opening WIP.\n- Direct labour incurred: \(\₦80,000\).\n- Manufacturing overhead is applied at 150 % of direct labour. Actual overhead incurred is \(\₦120,000\).\n- Closing WIP inventory: \(\₦30,000\) (materials \₦12,000, labour \₦8,000, overhead \₦10,000).\n- Opening finished‑goods inventory: \(\₦60,000\).\n- Sales for the month: \(\₦500,000\).\n- Selling and administrative expenses: \(\₦40,000\).\nDetermine the gross profit for the month.

A. ₦160,000

B. ₦100,000

C. ₦120,000

Correct D. ₦142,000

Correct Answer: D

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Question 21 View Details

The trial balance of XYZ Ltd shows the following balances (in N):\nDebit: Cash \(50,000\); Accounts Receivable \(30,000\); Inventory \(45,000\); Salaries Expense \(27,500\); Equipment \(62,500\). Total Debit \(215,000\).\nCredit: Capital \(100,000\); Accounts Payable \(40,000\); Sales Revenue \(65,000\); Loan \(5,000\). Total Credit \(210,000\).\nIt is known that only the amount recorded for Salaries Expense is incorrect. Determine the correct amount that should be recorded for Salaries Expense.

Correct A. 22500

B. 30000

C. 23500

D. 25000

Correct Answer: A

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Question 22 View Details

The Purchases Returns Control account carries a balance of \(18,000\) on 31 December. The subsidiary ledger of purchase returns lists three suppliers with balances \(5,000\), \(7,000\) and \(6,500\). A posting error omitted a return of \(1,500\) to Supplier B. Determine the corrected balance of the Purchases Returns Control account.

A. 18500

B. 19000

Correct C. 20000

D. 21500

Correct Answer: C

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Question 23 View Details

A merchandising firm has the following incomplete records for the year ended 31 December:\n- Opening stock: \(45,000\)\n- Closing stock: \(55,000\)\n- Sales (cash and credit) recorded in the cash book: \(210,000\)\n- Cash receipts from customers: \(190,000\)\n- Cash payments to suppliers: \(120,000\)\n- Cash expenses (rent, salaries, etc.): \(30,000\)\nThe firm applies a gross‑profit margin of 25 % on cost. No purchases are recorded in the books. Determine the amount of purchases for the year.

A. 177500

B. 176800

Correct C. 178000

D. 179200

Correct Answer: C

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Question 24 View Details

The following information relates to ABC Ltd for the year ended 31 December:\n- Sales revenue: \(500,000\)\n- Cost of goods sold (as per trial balance): \(300,000\)\n- Administrative expenses (as per trial balance): \(80,000\)\n- Depreciation on plant (tax schedule): \(25,000\)\n- Depreciation charged in trial balance: \(15,000\)\n- Prepaid insurance at 1 January: \(12,000\)\n- Insurance expense recorded in trial balance: \(8,000\)\n- Insurance premium paid during the year: \(20,000\)\nPrepare the profit or loss for the year.

A. 97000

B. 100500

C. 99000

Correct D. 98000

Correct Answer: D

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Question 25 View Details

XYZ Manufacturing produces a single product. The following information is available for the year ended 31 December:\n- Opening raw material stock: \(40,000\)\n- Purchases of raw material: \(150,000\)\n- Closing raw material stock: \(30,000\)\n- Direct labour wages incurred: \(120,000\)\n- Factory overhead applied at 150 % of direct labour cost.\n- Actual factory overhead incurred: \(190,000\)\n- Opening work‑in‑process (WIP): \(25,000\)\n- Closing work‑in‑process (WIP): \(35,000\)\n- Opening finished goods stock: \(50,000\)\n- Closing finished goods stock: \(45,000\)\n- Sales revenue for the year: \(500,000\)\n- Selling and administrative expenses: \(60,000\)\nDetermine the gross profit for the year.

A. 45000

B. 30000

C. 40000

Correct D. 35000

Correct Answer: D

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