LAGOS STATE UNIVERSITY

FACULTY OF MANAGEMENT SCIENCES KILELEYI

DEPARTMENT OF ACCOUNTING
2013/2014 HARMATTAN SEMESTER EXAMINATION
Course Title: Financial Accounting 1 Course Code: ACC 201 Time Allowed: 2 hours

Instruction: Attempt ALL Questions

1) The following clauses are stated in Partnership Act 1890 EXCEPT (a) Pattern of sharing profits or
losses among the partners (b) Amount of capital to be contributed by the partners (c) Nature of
business to be engaged in by the partnership (d) The rate of interest to be charged on drawings (e)
Rights and duties of each partner
2) The trading result of a joint venture arrangement is determined in the (a) Co-ventures‟ Account
(b) Ventures‟ Personal Account (c) Income Statement (d) Memorandum Joint Venture Account
(e) Joint Venture Account
3) The accounting ratio that measures the level of confidence the lenders have in the ability of a
limited liability company to pay interest and repay loan granted to it is (a) Gearing ratio (b) Fixed
Interest Cover (c) Debt recovery ratio (d) Fixed interest ratio (e) Long term Debt ratio

Use the following information to answer questions 4 –5.

Fancy Plc offered to the public 500,000 ordinary shares of 50k each at ¢2.50 per share. The public
applied for 1,500,000 ordinary shares and the company decided to issue the shares on pro-rata
basis.

4) What is the basis of allotting the shares to the public? (a) 1/3 (b) 2/3 (c) ½ (d) 2/4 (e) 1/5
5) What will be the number of shares to be issued to a subscriber who applied for 30,000 shares? (a)
5,000 shares (b) 10,000 shares (c)15,000 shares (d) 20,000 shares (e) 25,000 shares
6) The membership of a professional partnership firm must be between (a) 2 and 7 (b) 2 and 10 (c) 2
and 50 (d) 2 and any number (e) 2 and 20
7) The principal Act regulating partnership business is the Partnership of ............ (a) 1830 (b) 1880
(c) 1890 (d) 1900 (e) 1905
8) The formal document regulating the conduct of a partnership business is .................... (a) Partner
Act (b) Partnership deed (c) Agreement deed (d) Bye law (e) Financial regulation
9) Where there is no agreement on how profits and losses will be shared in partnership business, profit
will be shared .................... (a) Based on capital contributions (b) discretionary (c) partner
involvement in the business (d) Equally (e) None of the above
10) Additional capital contribution by a partner in case of no partnership agreement will attract interest
at the rate of ................(a) 15% (b) 10% (c) 7% (d) 6% (e) 5%
11) Which of the following is not a credit entry in the capital account of a partner? (a) Interest on
capital (b) Salary of partners (c) Interest on partners loan (d) Share of profit (e) Interest on drawing

Use the information provided below to answer questions 12 – 16.

Taribo and West formed a partnership on 1st January 2013. The partnership agreement contains the
following:
i. the partners’ fixed capitals are Taribo N30,000 and West N24,000.
ii. West to receive a salary of N1,800 a year.
iii. Interest on capital is to be calculated at 5% per annum
iv. Interest is to be charged on drawings at the rate of 2%.
v. Taribo and West to share profits in ratio 3:2 respectively.
During the year to 31st December 2013, drawings were Taribo N2,250, West N1,750 and the Net profit
was N13,500. The partners decided to maintain fixed capital accounts.

12) West interest on capital is ................(a) N2,000 (b) N1,200 (c) N1,500 (d) N500 (e) N2,400
13) The profit available profit for distribution is ...................(a) N8,080 (b) N9,080 (c) N10,080 (d)
N11,080 (e) N12,080
14) Taribo’s share of profit is ..............(a) N3,500 (b) N4,235 (c) N5,448 (d) N6,110 (e) N6,500
15) Taribo’s current balance is .................(a) N4,653 (b) N4,847 (c) N6,948 (d) N6,632 (e) 13,580
16) West’s current balance is ....................(a) N4,653 (b) N4,847 (c) N6,948 (d) N6,632 (e) 13,580
17) In Joint Venture A/C, Goods purchased for joint Venture Debited to ............. account where each
Venturer his own record on behalf of the venture. (a) Bank (b) Joint venture creditor (c) Expenses
(d) Profit and loss (e) Joint venture.
18) Transfer of trading stocks by venturer A to venturer B debited to ............ (a) Bank (b) Joint venture
creditor (c) Expenses (d) No accounting entry (e) Joint venture.
19) Preference shares in respect of which arrears of dividends are not carried forward if there are no
profits to pay the dividend in any year is called ..................(a) Redeemable preference shares (b)
Irredeemable preference shares (c) Cumulative preference shares (d) Non- Cumulative preference
shares (e) Founder’s preference shares
20) The document which normally set out such salient details regarding shares offer, past financial
statement of the company, projected future earning etc of a company is called ...............(a) Public
issue (b) Invitation to treat (c) Prospectus (d) Share certificate (e) Memorandum of association
21) Share issued at an amount below the nominal value is said to have been issued at ..............(a)
Premium (b) Par (c) Discount (d) Profit (e) None of the above
22) An ordinary share of N80 was issued at N96. The share was issued at (a) Premium (b) Par (c)
Discount (d) Loss (e) Profit
23) Which of the following is mostly used in treating partners current earnings? (a) Sundry debtors
account (b) Appropriation account (c) Profit and loss account (d) Sundry current account (e)
Balance sheet
24) The directors salaries paid are items of .....................(a) Current liabilities (b) Profit and loss
account (c) Trading account (d) Current assets (e) Current liabilities
25) Given 6,000,000 10% preference shares of N0.50 each, ordinary shares of N1 each, capital reserves
N2,700,000 and long term liabilities N4,000,000. Find the value of authorised share capital. (a)
N13,000,000 (b) N12,000,000 (c) N9,000,000 (d) N15,700,000 (e) N14,500,000
26) The financial instrument that entitles the holder to receive dividend and capital gains is a
...............(a) Share (b) Bond (c) Bill of exchange (d) Treasury bill (e) Debenture
27) The type of partnership in which all partners are jointly liable in bearing risks is .................(a)
Limited partnership (b) Partnership at-will (c) Ordinary partnership (d) Industrial partnership(e)
None of the above
28) Ordinary shareholders received dividend before ....................(a) Creditors (b) Debtors (c)
Preference shareholders (d) Deferred shareholders (e) None of the above
29) Cash received from the subscribed shares is recorded by debiting ...................(a) Application,
allotment and crediting cash (b) Allotment and crediting cash (c) Cash and crediting subscribed
shares (d) Cash, crediting application and allotment (e) Cash and crediting debtors
30) Given that (i) ascertainment of the particulars of the proposed company (ii) preparation of the
incorporation documents (iii) filling of the documents (iv) registration of the company. From the
above, the stages involved in the formation of a company are (a) I, II and III (b) I, II, III and IV
(c) I,II, and IV (d) II, III and IV (e) I and II only
31) The main reason for adopting a departmental account is to ..................(a) Record transactions for
each department for better documentation(b) Tackle any recording problem as a result of expansion
(c) Continuously evaluate the profitability of different departments (d) Ensure that departmental
managers are adequately monitored (e) None of the above
32) SOFT plc, whose nominal capital is made up 5,000,000 ordinary shares of 50k each, decided to
offer 80% of it to the public and realized only 50% of the amount due. Determine the company’s
reserve share capital. (a) N500,000 (b) N1,000,000 (c) N1,500,000 (d) N2,000,000 (e) N2,500,000

Given: Lighting N2,925, Rent N2,640 and Salary N4,050. Expenses are for three different
products: Zema, Zeta and Zera. They are apportioned on the basis of production. 4,500 units of the
products are produced, out of which 1260 and 2060 units are for Zema and Zeta respectively. Now
answer questions 33 and 34.

33) The lighting charge to be apportioned to Zema is (a) N891 (b) N819 (c) N927 (d) N975 (e) 1,000
34) Find the Salary charged to Zera product (a) N1,854 (b) N1,845 (c) N1,062 (d) N1,134 (e) N1,214
35) A share premium is an example of ...................(a) Issued capital (b) Equity capital (c) Capital
reserve (d) Capital stock (e) Revenue reserve
36) When Goodwill is not retained in the business, the entries in the new partners books will be to
debit ..........(a) Goodwill account and credit partner’s capital account (b) Partners capital account
and credit goodwill account (c) Cash account and credit goodwill account (d) Goodwill account
and credit cash account (e) None of the above
37) A company has departments S,T and U. The sales are N20,000, N40,000 and N60,000 respectively.
If the sales commission paid is N12,000, how much is T’s share? (a) N8,000 (b) N2,000 (c) N4,000
(d) N6,000 (e) N7,000
38) The major distinguishing element between the final accounts of a partnership and sole trader is the
...............(a) Drawings account (b) Appropriation account (c) Capital account (d) Creditors account
(e) Cash account
39) Share premium can be used to .............. (i) write off discount on shares (ii) give loan to directors
(iii) pay dividends (iv) pay company’s formation expenses.(a) I and IV only (b) I and III only (c)
II and III only (d) III and IV only (e) I, II and III only
40) Alabede (Nig) LTD issued 50,000 ordinary shares of N1 each at a market value of N2.50 each.
The share premium is ................(a) N125,000 (b) N100,000 (c) N75,000 (d) N50,000 (e) N45,000
41) Accounting for construction contract is captured by which accounting standards..................(a) IAS
5 (b) IAS 7 (c) IAS 9 (d) IAS 10 (e) IAS 11
42) Which of the following is not one of the problems associated with construction contract? (a) The
timing (b) Measurement of expenditure (c) Recognition of income (d) The assets created during
construction (e) None of the above

Use the following information to answer questions (43) to (49).

Construction Limited had undertaken to build another giant cola bunker for Nigeria Coal at a
contract price of ₦150,000, estimating the work will take 18 months to complete. At its financial
year end, the expenditure on the contract was: materials ₦30,000, direct wages ₦40,000, direct
expenses ₦5,000, plant at cost ₦35,000, plant hired ₦2,000 and sundry tools at cost ₦3,000. The
 written down value of the plant at the year-end was ₦25,000, while the value of the sundry tools
was estimated to be ₦500. Construction Limited estimates future costs to be: material ₦13,000,
wages ₦25,000, direct expenses ₦2,900, sundry tolls at cost ₦2,000. The company estimates that
the plant will have a written down value of ₦15,000 at the end of the contract, while the sundry
tools will be worth ₦1,900. At the end, the value of work certified is ₦100,000 while the cash
received from the customer amounts to ₦60,000

43) The amount of cost to date is (a) ₦89,500 (b) ₦150,000 (c) ₦115,000 (d) ₦100,000 (e) None of
the above
44) Estimated future cost amounts to (a) ₦51,500 (b) ₦40,900 (c) ₦89,500 (d) ₦115,000 (e) None of
the above
45) Estimated total cost is (a) ₦141,000 (b) ₦51,500 (c) ₦150,000 (d) ₦89,500 (e) None of the above
46) Estimated total profit is (a) ₦9,000 (b) ₦51,500 (c) ₦150,000 (d) ₦89,500 (e) None of the above
47) Attributable profit is (a) ₦5,713 (b) ₦7,315 (c) ₦3,173 (d) ₦60,000 (e) None of the above
48) The amount of work in progress carried forward is (a) ₦95,213 (b) ₦5,713 (c) ₦141,000 (d)
₦89,500(e) None of the above
49) The depreciation charged to date on the plant amounts to (a) ₦25,000 (b) ₦30,000 (c) ₦40,000 (d)
₦50,000 (e) None of the above
50) Accounting equation is referred to as (a) assets = liabilities + capital (b) assets + liabilities = capital
(c) capital = liabilities (d) assets + capital = liabilities (e) None of the above
51) Accounting concepts do not include one of the following (a) business entity (b) going concern (c)
realisation (d) historical cost (e) None of the above
52) ............................. concept provides that Ade Plc is separate and identifiable from Ade, who is he
owner of the business (a) business entity (b) going concern (c) realisation (d) historical cost (e)
matching

Use the following information to answer questions (53) to (56).Trade receivables as at 30th September
2011 were ₦24,800 and a year later ₦42,400. Identify the sales revenue during the year ended 30th
September 2012, taking in to account the following additional information provided in each of the
following independent scenarios

53) The amount received from credit customers was ₦59,500 (a) ₦77,100 (b) ₦78,100 (c) ₦79,100
(d) ₦24,800 (e) None of the above
54) Amount received ₦52,800, debts written off ₦400 and sales returns ₦500 (a) ₦71,300 (b)
₦72,300 (c) ₦73,300 (d) ₦74,300 (e) None of the above
55) Sales received ₦49,400, cheques dishonoured ₦200, discount allowed ₦100 (a) ₦66,900 (b)
₦67,900 (c) ₦68,900 (d) ₦49,400 (e) None of the above
56) ₦55,680 was received from customers availing of 4% cash discount (a) ₦75,600 (b) ₦55,680 (c)
₦66,900 (d) ₦67,900 (e) None of the above
57) Which one of these would not be considered as ‘incomplete records’? (a) A full double entry book
keeping system (b) cash book but no ledgers are kept (c) bank statements and invoices are kept
(d) cash book and personal ledgers are kept (e) None of the above
58) A ‘statement of affairs’ is similar in format to (a) a profit and loss account (b) a bank statement
(c) an income and expenditure account (d) a balance sheet (e) None of the above
59) Which one is correct? (a) Opening capital = opening total assets - closing total assets (b) Closing
capital = opening total liabilities + closing total liabilities (c) Opening capital = opening total assets
- opening total liabilities (d) Closing capital = opening total assets + closing total assets (e) None
of the above
60) The features of Double Entry System are : (i) It has two parties; Receiver and Giver (ii) Total
amount of Debit will be equal to total amount of Credit (iii) Receiver is Debit and Giver is Credit
(a) i & ii (b) ii & iii (c) i & iii (d) i, ii & iii (e) None of the above
61) Meaning of Net Assets is (a) Total Assets − External Liabilities (b) Fixed Assets + Current Assets
(c) Total Assets − Current Liabilities (d) Total Assets + External Liabilities (e) None of the above
62) One of the limitations of ratio analysis is (a) It facilitates comparison between or among companies
(b) It provides a veritable basis for effective decision making (c) It aids performance evaluation
(d) It uses historical data, hence, not futuristic (e) None of the above
63) LASU Plc has an 8 percent return on total assets of ₦300,000 and a net profit margin of 5 percent.
What are its sales? (a) ₦480,000 (b) ₦256,000 (c) ₦365,000 (d) ₦245,000 (e) ₦452,000
64) Given that the return on capital employed of ABC Limited is 20%, while its capital employed is
₦120,000. The Company’s profit before interest and tax is (a) ₦24,000 (b) ₦120,000 (c) ₦160,000
(d) ₦140,000 (e) None of the above
65) A company’s quick ratio is 0.80:1. The current asset and current liabilities of the company are
₦20,000 and ₦18,000 respectively. What is the company’s amount of stock (a) ₦5,600 (b) ₦
20,000 (c) ₦18,000 (d) ₦6,600 (e) ₦7,600

Use the following information to answer questions (66) to (70): Cash ₦29,000, Accounts
Receivable ₦114,000, Inventory ₦113,000, Prepaid Expenses ₦6,000, Total current liabilities
₦142,000, Long-term debt ₦289,000, Total shareholders' equity ₦356,000' Net sales ₦858,000,
Cost of goods sold ₦513,000, Gross profit ₦345,000, Net income ₦48,000.

66) The debt ratio is (a) 101% (b) 55% (c) 75% (d) 81.2% (e) 25%
67) The current ratio is (a) 1.85:1 (b) 1.95:1 (c) 1.20:1 (d) 1.45:1 (e) None of the above
68) Net profit margin is (a) 5.6% (b) 6.6% (c) 7.6% (d) 8.6% (e) 9.6%
69) Return of Equity is (a) 13.5% (b) 16.5% (c) 23.3% (d) 27.3% (e) None of the above
70) The difference between current ratio and acid test ratio is (a) 0.80 (b) 0.90 (c) 1.20 (d) 1.40 (e)
1.60