Practice neco model questions vol1 financial_accounting 2024 Past Questions

Question 1 View Details

A company bought equipment on credit for \(500,000\) and paid cash \(50,000\) for its installation. Record the appropriate journal entries using the double‑entry system.

Correct A. Debit Equipment 500,000; Credit Accounts Payable 500,000. Debit Installation Expense 50,000; Credit Cash 50,000.

B. Debit Equipment 500,000; Credit Accounts Payable 500,000. Debit Installation Expense 60,000; Credit Cash 60,000.

C. Debit Equipment 550,000; Credit Accounts Payable 550,000. Debit Installation Expense 50,000; Credit Cash 50,000.

D. Debit Equipment 500,000; Credit Cash 500,000. Debit Installation Expense 50,000; Credit Accounts Payable 50,000.

Correct Answer: A

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Question 2 View Details

The cash book of XYZ Ltd. shows an opening cash balance of \(120,000\). During the month the following cash transactions occurred: cash sales of \(250,000\); cash received from debtors of \(70,000\); cash purchases of \(80,000\); cash salaries paid of \(60,000\); and cash payments recorded as a total of \(210,000\). The amount paid for rent is not shown separately. Determine the amount paid for rent and the closing cash balance at the end of the month.

Correct A. Rent paid = 70,000; Closing cash balance = 230,000

B. Rent paid = 60,000; Closing cash balance = 240,000

C. Rent paid = 80,000; Closing cash balance = 220,000

D. Rent paid = 50,000; Closing cash balance = 250,000

Correct Answer: A

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Question 3 View Details

The trial balance of ABC Trading as at 31 December shows the following balances (in naira): Cash Dr 80,000; Bank Dr 50,000; Purchases Dr 300,000; Rent Expense Dr 40,000; Salaries Expense Dr 60,000; Capital Cr 200,000. It is later discovered that the purchases entry was recorded twice and the sales entry of \(200,000\) was omitted. What amount should be transferred to the suspense account to balance the trial balance?

Correct A. ₦330,000 (credit to suspense account)

B. ₦130,000 (credit to suspense account)

C. ₦330,000 (debit to suspense account)

D. ₦430,000 (credit to suspense account)

Correct Answer: A

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Question 4 View Details

During the month, a cash receipt of \(120,000\) from a customer was mistakenly posted to the Bank account instead of the Cash account. Assuming the original entry was Debit Bank \(120,000\) and Credit Sales Revenue \(120,000\), show the correcting journal entries and state the effect of the error on the trial balance.

A. Reverse: Dr Sales Revenue 120,000; Cr Bank 120,000. Then correct: Dr Cash 120,000; Cr Sales Revenue 120,000. Trial balance remains balanced with a debit excess of 120,000.

B. Reverse: Dr Bank 120,000; Cr Sales Revenue 120,000. Then correct: Dr Cash 120,000; Cr Sales Revenue 120,000. Trial balance remains balanced.

C. Reverse: Dr Sales Revenue 120,000; Cr Bank 120,000. Then correct: Dr Cash 120,000; Cr Sales Revenue 120,000. Trial balance is out of balance by 120,000.

Correct D. Reverse: Dr Sales Revenue 120,000; Cr Bank 120,000. Then correct: Dr Cash 120,000; Cr Sales Revenue 120,000. Trial balance remains balanced.

Correct Answer: D

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Question 5 View Details

A local government records its finances on a modified accrual basis. For the year the revenues were: taxes \(2,000,000\), grants \(500,000\) and fees \(300,000\). Expenditures were: salaries \(1,200,000\), infrastructure projects \(800,000\) (capital expenditure) and debt service \(200,000\). Capital expenditures are recorded as assets and not expensed. (a) Calculate the cash surplus for the year. (b) If 30 % of the surplus is transferred to the Capital Projects Fund, how much is transferred to the Fund Balance - Unassigned?

A. Cash surplus = 600,000; Transfer to Fund Balance - Unassigned = 420,000

B. Cash surplus = 1,400,000; Transfer to Fund Balance - Unassigned = 420,000

C. Cash surplus = 1,400,000; Transfer to Fund Balance - Unassigned = 840,000

Correct D. Cash surplus = 1,400,000; Transfer to Fund Balance - Unassigned = 980,000

Correct Answer: D

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Question 6 View Details

An asset 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 double‑declining‑balance method for the remaining years. What is the book value of the asset at the end of year 4?

A. 140000

Correct B. 115200

C. 106667

D. 64800

Correct Answer: B

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Question 7 View Details

An asset costing ₦(240,000) has a residual value of ₦(20,000) and a useful life of 4 years. The sum‑of‑the‑years‑digits (SYD) method is being considered. After three years the observed book value is reported as ₦(80,000). Determine whether the SYD method could produce this book value, and if so, state the depreciation expense for the third year.

A. No; the SYD depreciation for year 3 would be ₦40,000

Correct B. No; the SYD depreciation for year 3 would be ₦44,000

C. No; the SYD depreciation for year 3 would be ₦48,000

D. Yes; the SYD depreciation for year 3 would be ₦44,000

Correct Answer: B

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Question 8 View Details

A sole trader starts the business with cash of ₦(150,000) and purchases equipment on credit for ₦(80,000). During the month the business records cash sales of ₦(60,000), pays cash expenses of ₦(20,000), and makes a cash repayment of ₦(30,000) towards the credit purchase. Using the accounting equation, determine the ending balances of assets, liabilities and owner's equity.

Correct A. Assets: 240000, Liabilities: 50000, Owner's equity: 190000

B. Assets: 230000, Liabilities: 50000, Owner's equity: 180000

C. Assets: 250000, Liabilities: 50000, Owner's equity: 200000

D. Assets: 240000, Liabilities: 80000, Owner's equity: 160000

Correct Answer: A

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Question 9 View Details

Company XYZ's trial balance at 31 December 2024 includes the following items (all figures in ₦): - Sales Revenue - Credit (1,200,000) - Purchases - Debit (720,000) - Opening Stock - Debit (150,000) - Closing Stock - Credit (180,000) - Salaries Expense - Debit (200,000) - Rent Expense - Debit (80,000) - Machinery (cost) - Debit (500,000) - Accumulated Depreciation - Machinery - Credit (120,000) - Loan Payable - Credit (300,000) - Interest Expense (accrued) - Debit (15,000) - Accounts Receivable - Debit (250,000) - Bad Debts Expense - (to be estimated at 2 % of Accounts Receivable) - Dividend Paid - Debit (50,000) - Capital - Credit (600,000) - Drawings - Debit (40,000) Additional information: - Machinery is depreciated straight‑line over 10 years with a residual value of ₦(50,000); the current year's depreciation has not yet been recorded. - Bad debts are to be provided at 2 % of Accounts Receivable. - The loan bears interest at 5 % per annum, payable at year‑end; the accrued amount shown ((15,000)) is only a partial estimate. Prepare the statement of profit or loss for the year and compute the closing retained earnings, assuming there were no retained earnings carried forward.

A. Profit: 150000, Retained earnings: 100000

B. Profit: 180000, Retained earnings: 130000

Correct C. Profit: 165000, Retained earnings: 115000

D. Profit: 210000, Retained earnings: 160000

Correct Answer: C

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Question 10 View Details

The following trial balance for ABC Ltd. shows a discrepancy: | Account | Debit (₦) | Credit (₦) | |---------|-----------|------------| | Cash | 210,000 | | | Inventory | 120,000 | | | Equipment | 230,000 | | | Accounts Payable | 20,000 | | | Sales Revenue | | 300,000 | | Loan Payable | | 100,000 | | Capital | | 140,000 | The total debit side is ₦(580,000) and the total credit side is ₦(540,000). It is known that exactly one account has been posted on the wrong side, and the amount of that account is ₦(20,000). Identify the misposted account and state the corrected debit and credit totals after the error is rectified.

Correct A. Accounts Payable; corrected totals - Debit 560000, Credit 560000

B. Cash; corrected totals - Debit 560000, Credit 560000

C. Accounts Payable; corrected totals - Debit 560000, Credit 540000

D. Accounts Payable; corrected totals - Debit 580000, Credit 580000

Correct Answer: A

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Question 11 View Details

The trial balance of XYZ Ltd for the year ended 31 December 2024 shows the following items (all figures in Naira):\n\nSales \(1,200,000\)\nOpening Stock \(150,000\)\nPurchases \(720,000\)\nClosing Stock \(180,000\)\nCarriage Inwards \(30,000\)\nSalaries \(120,000\)\nRent \(45,000\)\nMachinery cost \(300,000\) with residual value \(30,000\) and useful life 5 years (straight‑line)\nLoan balance \(80,000\) at 12% interest per annum\nTrade receivables \(100,000\)\n\nNo depreciation, provision for doubtful debts or interest has been recorded in the trial balance. Compute the net profit for the year.

A. 251400

Correct B. 246400

C. 260000

D. 245400

Correct Answer: B

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Question 12 View Details

A business has a cash book balance of \(850,000\) Naira and a bank statement balance of \(820,000\) Naira at month‑end. The following items are identified:\n\nOutstanding cheques: \(45,000\) Naira\nDeposits in transit: \(74,300\) Naira\nBank service charges of \(2,500\) Naira (not yet recorded in the cash book)\nInterest earned of \(1,800\) Naira (not yet recorded in the cash book)\nA cheque of \(12,000\) Naira was incorrectly credited by the bank.\n\nPrepare the bank reconciliation and state the adjusted cash book balance after all adjustments.

A. 849300

Correct B. 837300

C. 835000

D. 842000

Correct Answer: B

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Question 13 View Details

On 1 March, a sole trader had a cash balance of \(50,000\) Naira. On that day the business received a cash loan of \(200,000\) Naira from a bank and purchased inventory on credit for \(80,000\) Naira. Record the journal entries for these two transactions and state the cash balance after posting them.

A. 200000

B. 300000

Correct C. 250000

D. 50000

Correct Answer: C

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Question 14 View Details

A municipal council prepares its statement of financial position for the year ended 31 December 2024. The following information is given (all amounts in Naira):\n\n* Capital assets: Buildings cost \(5,000,000\) with accumulated depreciation \(1,200,000\) (straight‑line); Land cost \(2,000,000\) (no depreciation); Equipment cost \(1,500,000\) with accumulated depreciation \(300,000\) (reducing‑balance at 20% per annum, depreciation for the current year already charged).\n* Current assets: Cash \(800,000\); Receivables \(250,000\) of which 10% is estimated uncollectible; Inventory \(400,000\).\n* Liabilities: Bonds payable \(1,500,000\) with accrued interest \(50,000\) not yet paid; Accounts payable \(200,000\); Accrued salaries \(120,000\).\n* Fund balances: Unrestricted fund \(1,200,000\); Restricted fund (for road repair) \(500,000\).\n\nThe council decides to revalue the land upward by 15% and record the revaluation surplus in the restricted fund. Determine:\n\n(a) Total assets after the revaluation,\n(b) Total liabilities,\n(c) Net fund balance after adjustments, and\n(d) The amount transferred to the restricted fund because of the land revaluation.

A. {"total_assets":8825000,"total_liabilities":1870000,"net_fund_balance":6855000,"revaluation_transfer":250000}

Correct B. {"total_assets":8825000,"total_liabilities":1870000,"net_fund_balance":6855000,"revaluation_transfer":300000}

C. {"total_assets":8725000,"total_liabilities":1870000,"net_fund_balance":6755000,"revaluation_transfer":300000}

D. {"total_assets":8825000,"total_liabilities":1970000,"net_fund_balance":6755000,"revaluation_transfer":300000}

Correct Answer: B

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Question 15 View Details

Three partners A, B and C share profits in the ratio 3:2:1. Their opening capital balances are A \(300,000\) Naira, B \(200,000\) Naira and C \(100,000\) Naira. Before admitting a new partner D, the partnership revalues its assets as follows:\n\n* Building cost \(500,000\) Naira, increased by 20%.\n* Equipment cost \(150,000\) Naira, decreased by 10%.\n\nThe net revaluation surplus is to be shared among the existing partners in the old profit‑sharing ratio. Goodwill is valued at three times the average of the partners' capital after the revaluation. D is admitted for cash equal to half of the goodwill value and will share future profits in the ratio 1:2:3:4 (A:B:C:D). After admission the partnership decides to retain 10% of the profit for reserves. Assume the profit for the year before retention is \(120,000\) Naira. Compute:\n\n(a) The total goodwill transferred to the existing partners,\n(b) The cash contributed by D,\n(c) The new capital balances of A, B, C and D after admission and after retaining 10% of profit (show amounts rounded to the nearest Naira).

A. {"goodwill":1950000,"cash_contributed_D":975000,"capital_A":1350000,"capital_B":910000,"capital_C":470000,"capital_D":1040000}

Correct B. {"goodwill":2055000,"cash_contributed_D":1027500,"capital_A":1380800,"capital_B":934933,"capital_C":489067,"capital_D":1070700}

C. {"goodwill":2055000,"cash_contributed_D":1000000,"capital_A":1380000,"capital_B":935000,"capital_C":490000,"capital_D":1070000}

D. {"goodwill":2100000,"cash_contributed_D":1050000,"capital_A":1390000,"capital_B":940000,"capital_C":495000,"capital_D":1080000}

Correct Answer: B

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Question 16 View Details

A machine was purchased for ₦500,000 with an estimated residual value of ₦50,000. After two years the book value shown in the ledger is ₦380,000. Assuming the useful life is the same under either straight‑line or double‑declining balance method, determine which depreciation method could have produced the observed book value and state the useful life (in years) if the straight‑line method was used.

Correct A. Straight‑line method; useful life = 7.5 years

B. Double‑declining balance method; useful life = 6 years

C. Double‑declining balance method; useful life = 7.5 years

D. Straight‑line method; useful life = 8 years

Correct Answer: A

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Question 17 View Details

A business bought inventory on credit for ₦120,000. It paid cash freight of ₦5,000 and later received a cash discount of 2 % on the purchase amount. Identify the appropriate books of original entry for each transaction and calculate the net amount that must be paid to the supplier after accounting for the discount.

A. Purchase journal, Cash payments journal, Cash receipts journal; net amount payable = ₦117,500

B. Purchase journal, Cash payments journal, Discount received journal; net amount payable = ₦118,400

Correct C. Purchase journal, Cash payments journal, Discount received journal; net amount payable = ₦117,600

D. Purchase journal, General journal, Discount received journal; net amount payable = ₦117,600

Correct Answer: C

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Question 18 View Details

The original budget for a government department for the year 2024 was ₦200 million. Actual expenditure recorded at year‑end was ₦185 million. Inflation during the year was 8 % on the budgeted amounts. Compute the inflation‑adjusted budget, the variance between the adjusted budget and the actual expenditure, and state whether the variance is favourable or unfavourable.

A. Adjusted budget = ₦216 million; variance = ₦31 million unfavourable

Correct B. Adjusted budget = ₦216 million; variance = ₦31 million favourable

C. Adjusted budget = ₦208 million; variance = ₦23 million favourable

D. Adjusted budget = ₦224 million; variance = ₦39 million favourable

Correct Answer: B

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Question 19 View Details

The cash book shows a closing cash balance of ₦46,000. The bank statement balance at the same date is ₦48,500. The following items are identified: (i) a bank service fee of ₦150 not recorded in the cash book; (ii) a cheque of ₦1,200 was entered twice in the cash book; (iii) a cash receipt of ₦3,150 was omitted from the cash book; (iv) outstanding checks total ₦3,200; (v) deposits in transit total ₦2,500. Determine the corrected cash book balance after all adjustments.

Correct A. ₦47,800

B. ₦48,500

C. ₦50,200

D. ₦46,300

Correct Answer: A

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Question 20 View Details

A company's opening balances are: share capital ₦500,000; retained earnings ₦200,000; goodwill ₦150,000 (to be amortised straight‑line over 5 years). During the year the company issued new shares for cash amounting to ₦120,000, incurred a loss of ₦30,000 and purchased equipment for ₦80,000 cash. Compute (a) the closing retained earnings, (b) the net book value of goodwill at year‑end, and (c) the total equity at year‑end.

Correct A. Retained earnings = ₦170,000; goodwill = ₦120,000; total equity = ₦910,000

B. Retained earnings = ₦170,000; goodwill = ₦150,000; total equity = ₦940,000

C. Retained earnings = ₦170,000; goodwill = ₦120,000; total equity = ₦820,000

D. Retained earnings = ₦200,000; goodwill = ₦120,000; total equity = ₦940,000

Correct Answer: A

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Question 21 View Details

Using the opening balances and the following transactions, determine the closing balance of the Cash account at month‑end. Opening balances (debit unless stated): Cash ₦50,000; Accounts Receivable ₦30,000; Inventory ₦40,000; Accounts Payable ₦20,000 (credit); Capital ₦100,000 (credit). Transactions during the month: 1. Purchased inventory on credit for ₦25,000; a 2 % cash‑discount is offered if payment is made within 10 days. 2. Sold goods costing ₦18,000 for ₦30,000 on credit. 3. Paid cash for utilities amounting to ₦5,000. 4. Received cash of ₦12,000 from a customer against accounts receivable. 5. At month‑end the company takes the discount and pays the supplier.

A. 35000

B. 28000

Correct C. 32500

D. 30500

Correct Answer: C

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Question 22 View Details

Given the following data for a manufacturing company for the month, compute the gross profit after adjusting for over‑ or under‑applied overhead. - Opening raw‑materials inventory: ₦15,000 - Purchases of raw materials: ₦45,000 - Direct labour incurred: ₦30,000 - Manufacturing overhead is applied at 150 % of direct labour cost. - Closing raw‑materials inventory: ₦10,000 - Opening work‑in‑process (WIP): ₦20,000; closing WIP: ₦12,000 - Opening finished‑goods inventory: ₦25,000; closing finished‑goods inventory: ₦30,000 - Sales revenue: ₦120,000 - Selling and distribution expenses: ₦15,000 - Administrative expenses: ₦10,000 - Actual overhead incurred: ₦48,000 Determine the amount of under‑applied overhead and the resulting gross profit (sales less adjusted cost of goods sold).

Correct A. -11000

B. -9000

C. -13000

D. -15000

Correct Answer: A

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Question 23 View Details

On 15 March the company bought a delivery van for ₦80,000 cash and simultaneously obtained a bank loan of ₦50,000, part of which was used to pay for the van. Registration fees of ₦5,000 were also paid in cash on the same day. Prepare the journal entry for 15 March and state the total debit amount recorded in the journal.

A. 80000

B. 90000

C. 135000

Correct D. 85000

Correct Answer: D

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Question 24 View Details

The trial balance shows a debit balance of ₦12,000 in the Suspense Account. It is later discovered that a purchase invoice of ₦7,500 was omitted entirely (neither debit nor credit was recorded). All other entries are correct. What adjustment should be made to the Suspense Account, and what will be its balance after the correction?

A. Debit ₦12,000, leaving a zero balance

B. Credit ₦7,500, leaving a credit balance of ₦7,500

Correct C. Credit ₦12,000, leaving a zero balance

D. Debit ₦7,500, leaving a debit balance of ₦4,500

Correct Answer: C

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Question 25 View Details

At year‑end the company must record depreciation on equipment costing ₦120,000. The equipment has a useful life of 8 years, no salvage value, and is depreciated on a straight‑line basis. The company had previously recorded depreciation of ₦10,000 for the year (which is incorrect). In addition, an accrued salary expense of ₦9,600 for the last month of the year is recognised. Prepare the adjusting journal entries required to correct depreciation and to record the accrued salaries, and state the net increase in the total debit side of the trial balance after posting these entries.

Correct A. 14600

B. 19600

C. 24600

D. 5000

Correct Answer: A

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