NATIONAL OPEN UNIVERSITY OF NIGERIA

UNIVERSITY VILLAGE, PLOT 91, CASDASTRAL ZONE, NNAMDI AZIKIWE EXPRESS WAY, JABI, ABUJA.
FACULTY OF MANAGEMENT SCIENCES
JANUARY 2021 EXAMINATION

COURSE CODE: ACC 311

CREDIT UNIT: 3

COURSE TITLE: FINANCIAL ACCOUNTING

TIME ALLOWED: TWO AND HALF HOURS

Instructions: Attempt question number one (1) and any other Three (3). Question number 1 is compulsory and carries 25 marks while the other 3 questions carry 15 marks each. Present all your points in coherent and orderly manner.

1(a) Okon and Joe share profit in the ratio of 3:2. Before admitting Johnson to the partnership, the goodwill was value at N25,000. Each partner had contributed N9000 as his fixed capital. The statement of Financial Position of the firm before goodwill was introduced as follows:

Prepare the necessary entries to record the goodwill and the amended statement of financial position. (15 marks)

1(b) List and explain five types of partners (5 marks)

1(c) Outline the Differences between Private and Public Companies (5 marks)

₦2000 preference shares were redeemed at par by partly issuing ₦1200 from ordinary share at par and partly using retained profit.

i. Show the journal entry of the above transaction. (3 marks)

ii. Show the ledger entry (3 marks)

iii. Show the balance sheet after the transaction happened (4 marks)

2(b) Outline items that must be shown either on the face of the Balance sheet or by additional notes attached to it. (5 marks)

3(a) Sunday, Kojo and Dora are in partnership sharing profit and loss in a proportion 3: 2: 1. By the terms of the partnership agreement, interest on capital is 5% per anum and Dora entitles to a salary of N300 per annum. On 31 st Dec 1970, the following credit balances appear in partnership books.

You are required to show the entry in the appropriation account and balance up the current Account of the partners. (10 marks)

3(b) Outline Reasons for Goodwill (5 marks)

4(a) Casmir, Amanda and Chizzy were in partnership sharing profit and loss in ratio: Casmir ½, Amanda 1/3, and Chizzy 1/6. The draft statement of financial position as at 31 st December, 2020 was as follows:

Casmir retired on 31st December, 2020 and Amanda and Chizzy continued in partnership, sharing profits in the same ratio as before. It was agreed that Casmir should take over one of the firm’s cars at the book value of N20,000 and should leave the balance due to him on loan. It was further agreed that, for the purpose of both the dissolution and the controlling partnership, the following adjustments should be made in the statement of financial position as at 31st December 2020.

i. Freehold land & Building should be revalued at N75,000 and Plant & Machinery at N50,000.

ii. The provision for deferred repairs was no longer required and the staff pensions provision should be increased by N20,000. The partnership agreement provided that on the retirement of a partner, goodwill should be revalued at an amount equal to the average annual profit of the three years expiring on the date of retirement. The relevant profits were:

Year ended 31st December 2018 N42,000 Year ended 31st December 2019 N45,000 Year ended 31st December 2020 N35,000

It was agreed that, for the purpose of valuing goodwill, the revaluation of the Non-current assets, the adjustments to the provision for deferred repairs and staff pensions should not be regarded as affecting the profit. Amanda and Chizzy decided that goodwill should not be carried in the books as an asset. Required:

i. Prepare the revaluation Account (5 marks)

ii. Prepare capital accounts showing the balance due to Casmir on retirement ( 5 marks)

4(b) List and explain characteristics of limited company (5marks)

5(a) On 31st December, 2020, the outline statement of Financial Position of John, Shehu and Garba in partnership sharing profit and losses equally was

On that date, the partnership was converted into a limited company, Ibeku Ltd. The agreed consideration was N232,500 to be discharged by a payment to the partners of N70,000 and by the issue of 125,000 Ordinary shares of N1 per share at a premium of 30k fully paid. The shares were taken on by John 50,000 shares, Shehu 50,000 shares and Garba 25,000 shares. Required Prepare the Realisation, Ibeku Ltd and Capital Account of the partnership to record the Conversion (10 marks)

5(b) Outline five (5) contents of Articles of Association. (5 marks)