NATIONAL OPEN UNIVERSITY OF NIGERIA

UNIVERSITY VILLAGE, PLOT 91, CASDASTRAL ZONE, NNAMDI AZIKIWE EXPRESS WAY, JABI, ABUJA.
FACULTY OF MANAGEMENT SCIENCES
MARCH/APRIL 2015 EXAMINATION

COURSE CODE:                                                                              ACC 311                                                                              

COURSE TITLE:                                                                             Intermediate Financial Accounting I

DURATION:                                                                                     3 Hours

INSTRUCTIONS:                                                                            1. Attempt question 1 and any other 3 questions.

2. Question number 1 is compulsory and carries 25         marks, while other questions carry 15 marks each.

3. Present all your points in coherent and orderly manner.

 1.        NOUN Electricals Plc is an Electrical Components assembly out fit with authorized and issued share capital of N200million, made up of 400million ordinary shares of 50 kobo each. The following is the company's trial balance as at April 2008:

                                                                                                Dr                                Cr

Freehold land                                                                        25,000

Short-term deposits                                                  50,000

Sundry debtors                                                                     60,820

Cash and bank                                                                       100,862

Furniture and Fittings                                                            44,720

Accumulated depreciation                                                                           11,180

Machinery and equipment - cost                             164,000

Accumulated depreciation                                                                           32,800

Stock at 1 May 2003                                                 27,160

Sundry creditors                                                                                           39,420

Bank overdraft                                                                      25,000

Wages                                                                         97,280

Postages and telephone                                             2,100

General expenses                                                        6,060           

Bad debts written-off                                                                560

Auditor's remuneration                                                         2,000

Distribution expenses                                                            2,140

Insurance                                                                     2,060

Bank interest paid and received                                           4,100                        1,000

Electricity                                                                     3,800

Salaries (including directors renumeration N2m             76,850

Rates                                                                             1,580

Purchases                                                                   306,832

Sales                                                                                                   690,124

Dividends (interim)                                                  24,000

Profit and loss account                                                                                 2,400

Share capital                                                                                      200,000

                                                                                    1,001,924                   1,001,924                              

The following adjustments are necessary for the year ended 30/4/2008:

1. The directors recommended that 5% of the debtors of should be set aside for possible bad debts.
2. Stock was valued at 28,648,000 as at 30 April, 2008.
3. Wages outstanding at 30 April, 2008 amounted to 2,400,000 and electricity accrued was 280,000.
4. Depreciation is to be written off machinery and equipment at 10% per annum and furniture and fittings at 5% per annum.
5. The sales manager is entitled to sales commission 2% of gross profit. The commission is payable on 1 May 2008.
6. Insurance has been paid in advance amounting to 285,000
7. Machinery which is stood in the books at 1 May, 2007 at 8 million has been sold for 6 million in part exchange for a new machinery costing 12 million. A net invoice for 6 million has been posted into the purchases account. No other entry has been made in respect of this transaction. The original cost of the old machinery was 10 million. It is the company’s policy to charge a full year’s depreciation in the year of purchase and none in the year of sale.
8. The directors proposed a final dividend of 8%, making a total of 20% dividend in respect of the year to 30 April, 2008.
1. Provision for company income tax was 35million.
10. You are required to prepare the profit and loss account for the year ended 30 April, 2008 and balance sheet as at 30 April, 2008 in a form suitable for publication. Notes to the accounts are not required but you should show your workings.

2.         a. What are those issues that affect the information relating to financial position of an entity?

            b. Mention five (5) non-financial institutions you know.

3.         Outline the various users of financial statements and their information need.

4.         Exotic Furniture Nig. Ltd recorded the following transactions in the first week of January 2009:

1. Rented an office space in Port Harcourt for 1 million per annum and paid 5 million, being rent for five years demanded by the landlord.
2. Bought office equipment for 240,000 on credit from Modern Business machines Ltd. The expected useful life of the equipment is four years.
3. Received cheque of 1.3 million from Rivers State Polytechnic, Bori, being final payment for sales made to the institution in 2007.
4. Sold furniture items on credit to a local government in Rivers State for 4million. The Local government did not pay until the following year.

You are required to prepare extracts of the income statement and balance sheet of the company for the year ended 31 December, 2009, on the assumption that financial statements ar prepared under (a) the accrual basis and (b) the cash basis accounting.

5.         a. According to the International Accounting Standard Board framework, define qualitative characteristic and mention the principal qualitative characteristics.

            b. Define the term ‘accounting policies’.

            c. According to accounting policies, how is stock recognized in the financial statement.

6.         Outline the purposes the International Accounting Standard Board framework is expected to serve.