NOUN TMA Questions and Answers: SMS204 / ACC204 - Introduction to Financial Accounting II Contd

Q31 An increase in inventories of N500 and a decrease in the bank balance of N600 and an increase in payables of N1,400 results in:

A. A decrease in working ca pital of N1,500

Q32 On 1 June year 1, H paid an insurance invoice of N2,400 for the year to 31 May year 2. What is the charge to the income statement and the entry in the financial statement for the year ended 31 December year 1?

C. N1,400 income statement and prepayment of N1, 000.

Q33 The profit of a business may be calculated by using which one of the following formulae?

C. Opening capital + drawings - capital introduced - closing capital

Q34 H began trading on 1 July. The company is now preparing its accounts for the accounting year ended 30 June year 1. Rent is charged for the year from 1 April to 31 March, and was N1,800 for the year ended 31 March year 1 and N2,000 for the year ended 31 March year 2. Rent is payable quarterly in advance, plus any arrears, on 1 March, 1 June, 1 September and 1 December.The charge to H 􀳦??S income statement for rent for the year ended 30 June year 2 is

B. 1,700

Q35 S purchased equipment for 80,000 on 1 July year 1. The company􀳦??s accounting year end is 31 December. It is S􀳦??s policy to charge a full year􀳦??s depreciation in the year of purchase. S depreciates its equipment on the reducing balance basis at 25% per annum.What is the net book value of the equipment at 31 December year 4?

B. 25,3 12

Q36 SSG bought a machine for N40,000 in January year 1. The machine had an expected useful life of six years and an expected residual value of N10,000. The machine was depreciated on the straight-line basis where a full year􀳦??s charge in made in the year of purchase and none in the year of sale. In December year 4, the machine was sold for N15,000. The company has a policy in its internal accounts of combining the depreciation charge with the profit or loss on disposal of assets. Its year end is 31 December.What is
the total amount of profit/loss charged to the income statement over the life of the machine?

C. 25,000

Q37 Which ONE of the following expenses should be included in prime cost in a manufacturing account?

B. Direct production wages.

Q38 N purchased a machine for N15,000. The transportation costs were N1,500 and installation costs were N750. The machine broke down at the end of the first month in use and cost N400 to repair. N depreciates machinery at 10% each year on cost, assuming no residual value.What is the net book value of the machine after one year?

C. 15,525

Q39 A company bought a machine on 1 October year 1 for N52,000. The machine had an expected life of eight years and an estimated residual value of N4,000. On 31 March year 6, the machine was sold for N35,000. The company􀳦??s yearend is 31 December. The company uses the straight-line method for depreciation and it charges a full year􀳦??s depreciation in the year of purchase and none in the year of sale. What is the profit or loss on disposal of the machine?

D. Profit 13,000

Q40 A car was purchased for N12,000 on 1 April in year 1 and has been depreciated at 20% each year straight line, assuming no residual value. The company policy is to charge a full year􀳦??s depreciation in the year of purchase and no depreciation in the year of sale. The car was traded in for a replacement vehicle on 1 August in year 4 for an agreed figure of N5,000. What was the profit or loss on the disposal of the vehicle in year 4?


Q41 Which of these books of account could be classified as a subsidiary book as well as a ledger

Cash book

Q42 Which of these statements CANNOT be defined as income?

Decrease in economic benefits during the accounting period

Q43 Which of the following is NOT correct in differentiating between sole trader and limited liability companies?

A sole trader􀳦??s financial statem ents are private and never made available to any other equity holder

Q44 A vehicle was purchased on 1 January 2011 at a cost of N2,000,000 and was depreciated at 25% on cost. It was sold on 31 December 2013 for N1,400,000. Full-year depreciation 25% on cost. It was sold on 31 December 2013 for N1,400,000. Full-year depreciation was charged in the years of purchase and disposal. Determine the profit or loss on the disposal

N900,000 prof it

Q45 The source of data for the recording of sales day book of a business enterprise is


Q46 On 1 January 2013 a motor vehicle, with the expected useful life span of 5 years and residual value of N100,000, was acquired for N1,600,000. Using sum-of-the-years digit method, what is the second year depreciation provision of the motor vehicle?


Q47 Depreciation of an asset with fixed period of legal life is often referred to as?


Q48 The fall in value of non-current intangible assets as a result of passage of time is referred to as?


Q49 The cash book of a trader shows an overdrawn account. Which of the following will reduce the balance when the necessary recordings are completed?

Dividend received b y bank on behalf of customer.

Q50 Which of the following reconciliation items will affect the cash book balance?(I)Bank error overstating the bank balance(II)Cash book error, overstating the bank balance (III)Income received through the bank (IV) Imprest cheques

II and I II

Q51 Using straight line method, what would be the annual depreciation charge for the second year of usage?


Q52 What is the depreciable amount of the machine?


Q53 Annual rent payable is 500,000. Rent prepaid at 1 January, 2016 was 80,000 and rent accrued at 31December 2016 was 60,000. How much was paid in respect of rent in 2016


Q54 A customer owing 200,000 was allowed to pay 180,000 in full settlement of his indebtedness. This results in a

Decrease Receivables, increase cash and decrease capital􀳦??

Q55 Which accounting concept does not agree with making allowance for discount receivable?


Q56 The fact that allowances are made against doubtful debts upholds the concept of


Q57 From the following information, calculate the cash paid by trade receivables during the year. Receivables at the beginning of the year 350,000; Receivables at close of the year 500,000; Credit sales for the year 510,000


Q58 When a debt thought to be irrecoverable and written off is subsequently recovered, which additional entry is required to complete the two entries given below? I. Debit Personal Account/Credit Irrecoverable Debts Recovered Account II. Debit Cash/Bank Account/Credit Personal Account

Debit irrecoverable debts recovered account/Credit Statemen t of Profit or Loss account

Q59 A trader had trade receivables of 50,000 at the end of his accounting period. Trade receivables at the beginning of the period was 60,000. His policy is to make allowance for doubtful debts at the rate of 5%. State the change in value of the allowance for doubtful debts at the end of the current accounting period.

500 decrease in allowance

Q60 At the end of the first year of trading, a trader􀳦??s receivables amounted to 5,000. This excludes 180 debts found to be irrecoverable. At the same date, it was estimated that 70 of the 5,000 would still turn out to be irrecoverable debts. Determine the net realisable value of receivables at the end of the first year of trading.


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