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Question 1 Report
(a) What is depreciation of an asset?
(b) List three causes of depreciation.
(c) Explain the following methods of depreciation:
(i) straight line;
(ii) reducing balance;
(iii) revaluation.
Answer Details
None
Question 2 Report
The following information was extracted from the books of Daudu Manufacturing company for the year ended 31st December 2012.
| Stock of goods 1st January 2012: | |
| Raw materials | 8,000 |
| Finished goods | 28,000 |
| Work-in-progress | 2,000 |
| Purchases of raw materials | 40,000 |
| Carriage inwards | 1,000 |
| Manufacturing wages | 100,000 |
| Sales | 390,000 |
| Rent | 50,000 |
| Factory expenses | 60,000 |
| Royalties | 1500 |
| Stock of goods - 31st December 2012 | |
| Raw materials | 6,000 |
| Finished goods | 26,000 |
| Work-in-progress | 1,5000 |
| Depreciation: | |
| Machinery | 7,500 |
| Delivery van | 1,280 |
| Selling expenses | 3,000 |
| Discount allowed | 1,500 |
Additional information:
i. Factory expenses prepaid amounted to D5,000
ii. Selling expenses accrued was D2,500
iii. Rent is apportioned between factory and selling department in the ratio 5:3 respectively.
You are required to prepare Manufacturing, Trading, and Profit and Loss Account for the year ended 31st December 2012.
Workings (closing work-in-progress taken as D1,500; rent split factory:selling = 5:3, so factory rent = \(50{,}000 \times 5/8 = 25{,}000\)... note the apportionment gives factory D31,250 and selling D18,750 as shown below).
Factory expenses = \(60{,}000 - 5{,}000 \text{ (prepaid)} = 55{,}000\). Rent to factory = \(50{,}000 \times \tfrac{5}{8} = 31{,}250\); rent to selling = \(50{,}000 \times \tfrac{3}{8} = 18{,}750\). Selling expenses = \(3{,}000 + 2{,}500 \text{ (accrued)} = 5{,}500\).
Daudu Manufacturing Company - Manufacturing, Trading and Profit & Loss Account for the year ended 31 December 2012
| Particulars | D | D |
|---|---|---|
| Opening stock of raw materials | 8,000 | |
| Add Purchases of raw materials | 40,000 | |
| Add Carriage inwards | 1,000 | |
| 49,000 | ||
| Less Closing stock of raw materials | (6,000) | |
| Cost of raw materials consumed | 43,000 | |
| Add Manufacturing wages | 100,000 | |
| Add Royalties | 1,500 | |
| Prime cost | 144,500 | |
| Add Factory overheads: | ||
| Factory expenses (60,000 - 5,000) | 55,000 | |
| Rent (factory 5/8) | 31,250 | |
| Depreciation of machinery | 7,500 | 93,750 |
| 238,250 | ||
| Add Opening work-in-progress | 2,000 | |
| Less Closing work-in-progress | (1,500) | |
| Cost of production (transferred to Trading) | 238,750 |
Trading Account
| Sales | 390,000 | |
| Less Cost of goods sold: | ||
| Opening stock of finished goods | 28,000 | |
| Add Cost of production | 238,750 | |
| 266,750 | ||
| Less Closing stock of finished goods | (26,000) | (240,750) |
| Gross profit | 149,250 |
Profit and Loss Account
| Gross profit b/d | 149,250 | |
| Less Expenses: | ||
| Rent (selling 3/8) | 18,750 | |
| Depreciation of delivery van | 1,280 | |
| Selling expenses (3,000 + 2,500) | 5,500 | |
| Discount allowed | 1,500 | (27,030) |
| Net profit | 122,220 |
Prime cost = D144,500; Cost of production = D238,750; Gross profit = D149,250; Net profit = D122,220.
Answer Details
Workings (closing work-in-progress taken as D1,500; rent split factory:selling = 5:3, so factory rent = \(50{,}000 \times 5/8 = 25{,}000\)... note the apportionment gives factory D31,250 and selling D18,750 as shown below).
Factory expenses = \(60{,}000 - 5{,}000 \text{ (prepaid)} = 55{,}000\). Rent to factory = \(50{,}000 \times \tfrac{5}{8} = 31{,}250\); rent to selling = \(50{,}000 \times \tfrac{3}{8} = 18{,}750\). Selling expenses = \(3{,}000 + 2{,}500 \text{ (accrued)} = 5{,}500\).
Daudu Manufacturing Company - Manufacturing, Trading and Profit & Loss Account for the year ended 31 December 2012
| Particulars | D | D |
|---|---|---|
| Opening stock of raw materials | 8,000 | |
| Add Purchases of raw materials | 40,000 | |
| Add Carriage inwards | 1,000 | |
| 49,000 | ||
| Less Closing stock of raw materials | (6,000) | |
| Cost of raw materials consumed | 43,000 | |
| Add Manufacturing wages | 100,000 | |
| Add Royalties | 1,500 | |
| Prime cost | 144,500 | |
| Add Factory overheads: | ||
| Factory expenses (60,000 - 5,000) | 55,000 | |
| Rent (factory 5/8) | 31,250 | |
| Depreciation of machinery | 7,500 | 93,750 |
| 238,250 | ||
| Add Opening work-in-progress | 2,000 | |
| Less Closing work-in-progress | (1,500) | |
| Cost of production (transferred to Trading) | 238,750 |
Trading Account
| Sales | 390,000 | |
| Less Cost of goods sold: | ||
| Opening stock of finished goods | 28,000 | |
| Add Cost of production | 238,750 | |
| 266,750 | ||
| Less Closing stock of finished goods | (26,000) | (240,750) |
| Gross profit | 149,250 |
Profit and Loss Account
| Gross profit b/d | 149,250 | |
| Less Expenses: | ||
| Rent (selling 3/8) | 18,750 | |
| Depreciation of delivery van | 1,280 | |
| Selling expenses (3,000 + 2,500) | 5,500 | |
| Discount allowed | 1,500 | (27,030) |
| Net profit | 122,220 |
Prime cost = D144,500; Cost of production = D238,750; Gross profit = D149,250; Net profit = D122,220.
Question 3 Report
(a) List four items each that are found on the
(i) credit side of the sales ledger control account;
(ii) debit side of the purchases ledger control account.
(b) List seven types of errors a trial balance will not reveal.
(a)(i) Four items on the CREDIT side of the Sales Ledger Control Account
(Any four. Note: the credit balance carried down of debtors who have overpaid may also appear.)
(a)(ii) Four items on the DEBIT side of the Purchases Ledger Control Account
(Any four.)
(b) Seven types of errors a Trial Balance will NOT reveal
Answer Details
(a)(i) Four items on the CREDIT side of the Sales Ledger Control Account
(Any four. Note: the credit balance carried down of debtors who have overpaid may also appear.)
(a)(ii) Four items on the DEBIT side of the Purchases Ledger Control Account
(Any four.)
(b) Seven types of errors a Trial Balance will NOT reveal
Question 4 Report
Momoh enterprise cashbook showed a debit balance of Le4,500 on December 31, 2014. Further examination revealed the following:
- A direct debit of Le350 for subscription had been paid by the bank
- Bank charges of Le500 had not been reflected in the cash book
- Payment settled by standing orders were omitted from the cash book; electricity bill Le70, insurance Le100 and medical bill Le120.
- A dividend of Le320 paid directly into the bank had not been entered in the cash book
- It was discovered that the cash book balance brought down was undercast by Le180.
- Cheques amounting to Le4,800 issued had not been presented for payment
- Cheques amounting to Le1990 paid into the bank had not yet been credited
You are required to prepare;
(a) The revised cash book
(b) The bank reconciliation statement as at December 31, 2014
Workings and treatment
The revised (adjusted) cash book records only the items that the trader had not yet entered but which have already gone through the bank: direct debits, bank charges, standing orders, direct credits, and the correction of the undercast balance. Timing differences (unpresented and uncredited cheques) are NOT entered in the cash book; they go into the reconciliation statement.
(a) Revised (Adjusted) Cash Book as at 31 December 2014
| Dr | Le | Cr | Le |
|---|---|---|---|
| Balance b/d | 4,500 | Subscription (direct debit) | 350 |
| Undercast correction | 180 | Bank charges | 500 |
| Dividend received | 320 | Electricity (standing order) | 70 |
| Insurance (standing order) | 100 | ||
| Medical bill (standing order) | 120 | ||
| Balance c/d | 3,860 | ||
| Total | 5,000 | Total | 5,000 |
Revised cash book balance = \(4{,}500 + 180 + 320 - (350 + 500 + 70 + 100 + 120) = Le\,3{,}860\) (debit).
(b) Bank Reconciliation Statement as at 31 December 2014
| Particulars | Le | Le |
|---|---|---|
| Balance as per revised cash book | 3,860 | |
| Add: Unpresented cheques | 4,800 | |
| 8,660 | ||
| Less: Uncredited cheques (not yet credited) | 1,990 | |
| Balance as per bank statement | 6,670 |
The bank statement therefore shows a favourable balance of Le6,670, which now agrees with the corrected cash book after allowing for the timing differences.
Answer Details
Workings and treatment
The revised (adjusted) cash book records only the items that the trader had not yet entered but which have already gone through the bank: direct debits, bank charges, standing orders, direct credits, and the correction of the undercast balance. Timing differences (unpresented and uncredited cheques) are NOT entered in the cash book; they go into the reconciliation statement.
(a) Revised (Adjusted) Cash Book as at 31 December 2014
| Dr | Le | Cr | Le |
|---|---|---|---|
| Balance b/d | 4,500 | Subscription (direct debit) | 350 |
| Undercast correction | 180 | Bank charges | 500 |
| Dividend received | 320 | Electricity (standing order) | 70 |
| Insurance (standing order) | 100 | ||
| Medical bill (standing order) | 120 | ||
| Balance c/d | 3,860 | ||
| Total | 5,000 | Total | 5,000 |
Revised cash book balance = \(4{,}500 + 180 + 320 - (350 + 500 + 70 + 100 + 120) = Le\,3{,}860\) (debit).
(b) Bank Reconciliation Statement as at 31 December 2014
| Particulars | Le | Le |
|---|---|---|
| Balance as per revised cash book | 3,860 | |
| Add: Unpresented cheques | 4,800 | |
| 8,660 | ||
| Less: Uncredited cheques (not yet credited) | 1,990 | |
| Balance as per bank statement | 6,670 |
The bank statement therefore shows a favourable balance of Le6,670, which now agrees with the corrected cash book after allowing for the timing differences.
Question 5 Report
What is a general journal?
State six uses of the general journal
What is a general journal?
The general journal (also called the journal proper) is a book of original (prime) entry used to record transactions that do not fit into any of the other special day books such as the sales, purchases, returns or cash books. Each entry shows the accounts to be debited and credited, the amounts, and a short explanation called the narration. It provides a first, chronological record of these transactions before they are posted to the ledger.
Six uses of the general journal
Answer Details
What is a general journal?
The general journal (also called the journal proper) is a book of original (prime) entry used to record transactions that do not fit into any of the other special day books such as the sales, purchases, returns or cash books. Each entry shows the accounts to be debited and credited, the amounts, and a short explanation called the narration. It provides a first, chronological record of these transactions before they are posted to the ledger.
Six uses of the general journal
Question 6 Report
The following information relates to the books of accounts of Adom Ltd.
Trading, profit, and loss account for the year ended 31st December 2014
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Balance sheet as at 31st December 2014
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You are required to calculate any six of the following
(a) Gross profit percentage
(b) Net profit percentage
(c) Return on capital employed
(d) Current ratio
(e) Acid test ratio
(f) Rate of stock of turnover
(g) Working capital
(h) Shareholders fund
(i) Liquid assets
Answer Details
None
Question 7 Report
The following is the receipt and payments account of Kayode social club for the year ended 31st December 2014.
Receipts and payments for the year ended 31st December 2014
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Additional Information;
i. Equipment was valued at N3,250 and furniture N1,550 on 31st December 2013
ii. Depreciation to be provided as follows:
Equipment N505
Furniture N55
iii. The following expenses were outstanding
| Salaries | N300 |
| Transport | N100 |
| Repairs | N250 |
iv. Subscriptions owing by members were as follows:
| 31st December 2013 | N1,200 |
| 31st December 2014 | N2,100 |
v. The balance in the bank deposit account at 31st December 2013 was N300
You are required to prepare;
(a) Statement of affairs as at 31st December 2013.
(b) Subscription account for the year ended 31st December 2014.
(c) Income and Expenditure account for the year ended 31st December 2014
Answer Details
None
Question 8 Report
(a) Outline three distinguished features of public and private companies.
(b) State three rights available to an ordinary shareholder.
Answer Details
None
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