Waec Model Questions Vol1 2019 Financial Accounting Question 38

A municipal council receives a capital grant of N50,000 at the start of the year to purchase a vehicle costing N120,000. The council also receives annual operating revenue of N200,000 and incurs operating expenses of N180,000 (excluding depreciation). The vehicle is depreciated straight‑line over 5 years with no residual value. The grant agreement requires that at least 20% of the grant be retained as a reserve and cannot be used for operating expenses. At year‑end the council reports a cash balance of N30,000. Determine the cash surplus (or deficit) for the year after accounting for the depreciation expense, the reserve requirement, and the cash outflow for the vehicle purchase. State whether the surplus is cash or non‑cash.