CHARTERED INSTITUTE OF

PERSONNEL MANAGEMENT OF NIGERIA

PROFESSIONAL EXAMINATIONS

AUGUST 2018

CIPM/INT1/003: ACCOUNTING & FINANCE FOR MANAGERS (Resit)

Instruction: Answer all questions in Section A and any

four complete questions in Section B

Time Allowed: 3 hours

SECTION A

MULTIPLE CHOICE QUESTIONS (Compulsory)

Choose the correct answer from the list of options provided.

QUESTION 1

1. One of the following cannot be a reason for depreciation of an asset:

(A) Wear and tear

(B) Obsolescence
(C) Effluxion of time

(D) Inflation

When a public company issues a prospectus to offer its shares to the public. Upon
oversubscn'ption, the directors may do the following except:
(A) Accept an application in full
(B) Reject an application in full
(C) Accept it in part
(D) Reject it completely

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3. Work-in—progress is an example of .................
(A) Current assets
(B) Non current assets

(C) Fictitious assets.

(D) Long term assets

4. We can use .......... ratio to test the liquidity of a company.

(A) Gross profit

(B) Asset turnover
(C) Current
(D) Stock

5. Types of Internal Control in an organization include one of the following except:

(A) Physical control

(B) Authon'zation and approval
(C) Management control
(D) Organizational set up

6. One of the following is not a method of appraising capital project:

(A) Net present value

(B) Depreciation rate method
(C) Payback period method
(D) Internal rate of return

Use the following information to answer question 7 — 8.

Baba Ikeja Limited is consideiing to invest N400,000. The estimated cashflows of the project
are:
Year Cashflow
N
1 40,000
2 80,000
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 3 440,000
4 160,000

7. Using payback peIiod, the balance on the project at the end of year 2 is:
(A) £120,000
(B) £200,000
(C) N280,000
(D) Nil

8. The payback period for the project is:

(A) 2 years

(B) 3 years

(C) 2.67 years

(D) 2.80 years

9. Different situations of capital rationing include the following except:

(A) Where projects are divisible

(B) Where projects are not divisible
(C) Where projects are mutually dependent
(D) Where projects are mutually defensible

10. One of the following is not a measure of divisional performance:

(A) Relative divisional profit
(B) Absolute divisional profit
(C) Residual income
(D) Growth of sales

11. One of the following is a form of unsystematic risk:

(A) Market Iisk
(B) Interest rate risk
(C) Finance Iisk
(D) Political Iisk

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12. When a company capitalizes its reserve by the issues of additional shares to existing
shareholders, it is called:

(A) Stock split

(B) Scrip issue

(C) Right issue

(D) Dividend issue

13. A Iisk that misstatement could occur in an account balance or class of transactions and
may be mateiial is called:

(A) Control Iisk

(B) Inherent Iisk

(C) Detection Iisk

(D) Calculated Iisk

14. Prime cost of manufactuiing consists the following except:

(A) Direct mateiials

(B) Direct labour

(C) Direct expense

(D) Direct plant

15. Where goodwill is to be maintained in the books of the partnership, the following entry
will be passed to close the Goodwill Account:

(A) Debit Goodwill Account, Credit Partner’s Current Account

(B) Debit Partners Current Account, Credit Goodwill Account

(C) Debit Salaiies and Wages Account, Credit Goodwill Account

(D) Debit Capital Account, Credit Profit or Loss Account

16. Accounting entIies to be passed when there is gain on revaluation of assets are:

(A) Debit Revaluation Account, Credit Partners Capital Account

(B) Debit Partner’s Capital Account, Credit Revaluation Account

(C) Debit Capital Account of Outgoing Partner, Credit Cash Account

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 5

(D) Debit Goodwill Account, Credit Revaluation Account

17. Capital reserve includes all of the following except:

(A) Share premium

(B) Capital redemption reserve fund

(C) Retained profits

(D) Profit of forfeited share

18. Income and Expenditure Account of Non trading organization is equivalent to .........
of a trading organization

(A) Cashbook
(B) Receipt and payment book
(C) Profit or low account (statement)
(D) Statement of financial position

19. In preparation of control account, we prepare ......... account in order to arrive at

purchases

(A) Sales ledger control account

(B) Purchases ledger control account
(C) Purchases account
(D) Sales account

20. One of the following items cannot be used to prepare adjusted cashbook when about to
prepare a Bank Reconciliation Statement:

(A) Unpresented cheque

(B) Credit transfer

(C) Standing order

(D) Bank charges

[Total = 20 marks]

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 SECTION B

Answer anyfour complete questions ofyour ch 0icefrom this section

QUESTION 2

(a) Reviewing the accounting process at the 2017 year end of ODOZIAKWU NIG. PLC.
It was discovered that even with the introduction of a versatile accounting package
there still exist a difference between the cash book balance and the bank statement
balance received from its bank. State five reasons why this disagreement might have
occurred. [5 marks]

(b) The following is a summaiy from the Cash Book of ODOZIAKWU NIG. PLC for
December 2017.

ODOZIAKWU NIG. PLC

CASH BOOK
31ST DECEMBER 2017

N N-
Balance 01/12/17 2,814,000 Payment 31,040,000
Receipts 30,146,000 Balance c/fwd (31/12/17) 1,920,000
32,960,000 32,960,000

On investigation the following were discovered:

(i) Bank charges of £70,000 shown on the bank statement have not been entered in the
cash book.

(ii) A cheque drawn for N23 5,000 has been entered in error as a receipt.

(iii) A cheque for £36,000 has been returned by the bank marked “refer to drawer” but it
has not been w1itten back in the cash book.

(iV) An error of transposition has occurred in that the opening balance in the cash book
should have been carried forward as N2,940,000 instead of N2,814,000 as shown in
the cash book.

(V) Three cheques paid to suppliers for N428,000, £740,000 and N60,000 have not yet
been presented to the bank.
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 (Vi) The last page of the pay in the book shows a deposit of ¥3,084,000 which has not yet
been credited to the account by the bank.

(Vii) The bank has debited a cheque for N144,000 in error to the company’s account

(Viii) The bank statement shows an overdrawn balance of £248,000

You are required to:

(a) Prepare the adjusted cash book of ODOZIAKWU NIG. PLC as at 315t December
20 17 , and [8
marks]

(b) Prepare the bank reconciliation statement as at 315t December 2017. [7

marks]
[Total = 20 marks]

QUESTION 3

The following balances were extracted from the books of DAN—AMARIA NIG. LTD for the
month of MAY 2018

g
Balances — 15t May 2018
Sales Ledger 640,000 DR
330,000 CR
Purchases Ledger 550,000 CR
330,000 DR
Transactions during May 2018:
Cheque received from customers 3,700,000
Discount allowed 150,000
Credit purchases 6,800,000
Credit sales 10,400,000
Discount received 256,000
Cash paid to suppliers 2,800,000
Cheques paid to payables 2,312,000
Cheques from credit customers dishonoured 500,000
Bills receivable 1,380,000
Bills payable 960,000
Returns outwards 230,000
Interest charge on outstanding receivable balance 240,000
Bad debts 720,000
Cash from credit customers 4,400,000

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 Refunds to customers for overpayments 200,000
Debit balances in respect of some suppliers set-off against their 800,000
balances in the sales ledger
Balances 0n 315t May 2018:
Purchases Ledger 284,000 DR
Sales Ledger 334,000 CR

You are required to prepare:

(a) The Total Receivables Control Account [10 marks]
(b) The Total Payables Control Account [10 marks]
[Total = 20 marks]

QUESTION 4
MBANO, KUDETI and JALINGO are partners sharing profits and losses 1/2, 1/3 and 1/6
respectively. They dissolved the partnership on 315t December, 2017, when the Statement of
Financial Position of the partnership was as follows:

N N

Capital A/C Property 3,000,000

Mbano 7,500,00 Motor Vehicles 1,500,000
Kudeti 4,500,000 Inventory 4,500,000
Jalingo (Deficit) (1,500,000) Receivables 12,000,000
Cash 4,200,000
Current Account
Mbano 3,000,000
Kudeti 1,500,000
Loan on Mortgage 1,200,000
Sundry Paybales 9,000,000
25,200,000 25,200,000

The property realized N3,900,000. Bad debt and discount allowed amounted to N1,500,000.
The inventory realized N3,600,000. Motor vehicles N900,000. The mortgage was paid off. The
sundry payables were paid less discount of N300,000. Cost of realization was N900,000.
Jalingo became bankrupt. A claim was made by the firm against his estate for the amount due,
a dividend of 33.3 per cent in the naira was received.

You are required to:

(a) Write up the Partnership Realization Account [5 marks]

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(b) The Cash Account; and [5 marks]

(c) The Partners Capital Account as at 315t December 2017 [10 marks]
[Total = 20 marks]

QUESTION 5
EKPOMA NIG. PLC. has an authorized share capital (equity capital) of 18,000,000 ordinary
shares of N100 each. 60% of the shares have already been issued to the public for
subscription.

The company wishes to finance an expansion programme and has decided to issue for public
subscription, 6,000,000 ordinary shares at a price of N4.00 payable as follows:

On application 0.25
On allotment including premium 3 .25
On 15t call 0.30
On 2nd and final call 0.20
4.00

The company received 8,000,000 applications of which 1,000,000 were rejected and the
money refunded to the unsuccessful applicants. The remaining was allotted pro-rata on the
basis of 5 to 6 and the surplus money on application was applied in the settlement of allotment
money. All the calls were made and the various sums received except for a holder of 10,000
ordinary shares paid the final call with the first call money, while a holder of 20,000 failed to
pay either calls, after which the calls were forfeited and subsequently re-issue at a price of
N150 per share.

You are required to:

Post the relevant ledger account in the books of EKPOMA to record the above transactions.
[20 marks]

QUESTION 6
INSIDER NIG. PLC has decided to raise additional capital by the issue of rights to existing
shareholders.

You are required to:

(a) State two advantages and one disadvantage to an existing shareholder of raising further
capital by the rights issue. [6 marks]
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 10

(b) INSIDER NIG. PLC with 20 million N1 shares has decided to raise further capital
through 1 for 4 rights issue. Just before the issue is announced the market price of the
ordinary shares was N280 and the cost of exercising a right in respects of one share is to
be N240

You are required to:

(i) Calculate the theoretical eX-rights value of a share and the theoretical nil paid value of
the rights. [12 marks]

(ii) Advise an existing shareholder of 10,000 shares of the possible courses of action
open to him in respect of his entitlement. [2
marks]
[Total = 20 marks]

QUESTION 7
At the last board meeting of PAKOTO NIG. LTD the members expressed their desire that
they wish that their company should be listed on the Stock Market (The Nigerian Stock
Exchange).

You are required to:

(i) Advise the board members on the functions of the Nigerian Stock Exchange (NSE)
[10 marks]

(ii) State for what reasons, other than the need to rise outside finance, might a private
company take the necessary steps to secure a stock exchange quotation.
[10 marks]
[Total = 20 marks]

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