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C OV E N A N T U N I V E R S I T Y
T U T O R I A L K I T
P R O G R A M M E : A C C O U N T I N G
O M E G A S E M E S T E R
3 0 0 L E V E L
LIST OF CONTENTS
ACC 321: : FINANCIAL ACCOUNTING IV
ACC323: AUDITING PRINCIPLE AND PRACTICE
ACC325: : NIGERIAN TAXATION 1
ACC329: ACCOUNTING LABORATORY III
COVENANTUNIVERSITY CANAANLAND, KM 10, IDIROKO ROAD
P.M.B 1023, OTA, OGUN STATE, NIGERIA.
TITLE OF EXAMINATION: OMEGA SEMESTER EXAMINATION
COLLEGE: BUSINESS AND SOCIAL SCIENCES
DEPARTMENT: ACCOUNTING
SESSION: 2015/2016 SEMESTER: OMEGA
COURSE CODE: ACC 321 CREDIT UNIT: 3
COURSE TITLE: FINANCIAL ACCOUNTING IV
INSTRUCTION: ANSWER ALL QUESTIONS IN SECTION A AND B TIME: 3 HOURS
SECTION A - MULTIPLE CHOICE QUESTIONS (Total=20 marks)
Which of the following ledgers is opened in the books of the Head Office when branch sells goods on credit to the Head office?
Branch debtors b. Branch stock c. Branch cash and bank d. Branch expense account
The total long term debt of a business is N37,650. The Shareholders’ funds is N120,000. Which of the following options correctly
shows the long-term debt to shareholders’ fund ratio?
1:0.31 b. 1.31:1 c. 31.37 percent d. 131 percent
Which of the following options best describes current ratio?
Current Assets Less Current Liabilities
Current Assets plus Current Liabilities
Current Assets divided by Current Liabilities
Current Assets multiplied by Current Liabilities
Use the information below to answer question 4.
The following information has been extracted from the books of Fabulous Construction Ltd. For the year ended 31st
December
2010 in respect of an office block commissioned by the Imagine Development Corporation.
The following expenses were incurred during the year 2010: Plant N150; Wages N260; Materials N330; Subcontract work N200;
Sundries N30; Contract overheads 240
Balances at 31st
December 2010 were: Plant N100; Materials N50.
Work awaiting certification at 31st
December 2010 is N20.
The amount of work certified is ………………..
N1,210 b. N1,040 c. N1,060 d. N1,100
Use the following information to answer questions 5 and 6.
Lacruise commenced a voyage on 1st
May 2009 from Lagos to Nairobi and back. The voyage was completed on 30th
June 2009.
Lacruise carried 200 persons to Nairobi and 180 persons from Nairobi to Lagos. The ship was yet to be insured. Other information
are:
Salaries and wages of two (2) ship maintenance officers and five (5) ship cleaners amount to N800,000.
Port dues amounts to N400,000.
The passage money amounted to N20,000 each.
Depreciation amounts to N450,000.
Consumables utilized for the purpose of the voyage amounted to N300,000.
The total passage money for the voyage is……………………..
N4 million b. N3.2 million c. N3.6 million d. N7.6 million
The profit on the voyage is ………………………..
N3.35 million b. N7.6 million c. N5.65 million d. N5.75 million
Which one of the following options is not an agricultural activity?
Raising livestock b. Stud farms c. Forestry d. Managing game parks
According to IAS 41 there are two instances where the standard permits departure from current fair value. What are these two
instances?
When the asset is still in use beyond the fifth year of its estimated useful life and fair value cannot be measured reliably
When the asset’s estimated useful life cannot be ascertained correctly and fair value cannot be measured reliably
When the asset’s life is at the early stage and fair value cannot be measured reliably
When the asset is at an early stage, the asset falls under the category of endangered species and fair value cannot be measured
reliably
According to IAS 41, which of the following options best describes fair value?
Price for the asset in an active market
Recent transaction price for the asset if there is an active market
Market prices for similar assets
Present value of the future cash flows expected to be generated from the asset
i, ii and iv b. i, iii and iv c. ii, iii and iv d. All of the above
Use the information below to answer questions 10 and 11.
As at 31st
December, 2014 the following information was extracted from the books of Banana Gardens Nigeria Plc:
N’000
Authorized share capital 50,000
Issued and fully paid:
Ordinary shares @ N1 per share 54,000
Creditors 3,000
Investment (market value) 6,900
Freehold land for sale (at cost) 9,600
The opening bank balance as at 1st
January, 2014 was N4,520,000.
Additional information:
Proceeds from the sale of Arena amounted to N3 million.
Proceeds from the sale of Land amounted to N6million.
Investment income N300,000.
Dividend paid to shareholders amounted to N2.7 million.
Payments to trade creditors amounted to N250,000.
Profit for the year stands at N10.37million
Property, plant and equipment of the business is valued at N40 million.
What is the amount of balance carried down on the bank account of Banana Gardens Plc as at 31st
December 2014?
N10.87 million b. N13.57 million c. N13.82 million d. N 10.57 million
The total non-current assets of Banana Gardens Plc as at 31st
December 2014 are …….
N67.37 million b. N46.9 million c. N56.5 million d. N65.9 million
Which one of the following is a proprietary ratio?
Shareholders fund divided by Total Tangible Assets
Shareholders fund divided by Total Long-Term Liabilities
Shareholders fund divided by Profit for the Year
Shareholders fund divided by Retained Earnings
Which of the following options is the advance payment by an employer to the contractor to enable the commencement of the
contract work?
Starting Fee
Initial Fee
Mobilization Fee
Prepaid Fee
Which of the following options shows the correct accounting treatment of the advance payment by an employer to the contractor
to enable the commencement of the contract work in the books of the contractor?
The advance payment is treated as an asset and when the contract is fully executed, the payment is treated as revenue.
The advance payment is treated as a liability until the money is fully recovered.
The advance payment is treated as a liability and when the contract is fully executed, the payment is treated as profit.
The advance payment is treated as an asset until the money is fully recovered.
Pacific Ltd undertook a contract for building a factory for N150million. The contract cost of N30million was incurred up to 31
December 2009 and expects that further cost to completed the construction will be N150million. How much should be recognized
in the profit or loss account in 2009?
N30 million should be recognized as expense at the end of year 2009.
N180 million should be recognized as an expense at the end of year 2009.
N150 million should be recognized as an expense at the end of year 2009.
N120 million should be recognized as an expense at the end of year 2009.
Use the following information to answer questions 16 and 17.
Complete Turnaround Construction Company has signed a fixed price contract at N600million for the construction of a housing
estate in Ibadan.
The details of the cost incurred to the end of the first accounting period are: Material costs delivered to site N150 million; Labour
cost N50 million; Depreciation of plant & equipment used N25 million; Selling and promotion of awareness for the estate N50
million.
The estimated cost of the contract to completion was N275 million.
What is the percentage of completion?
45 percent b. 55 percent c. 73 percent d. 27 percent
What is the profit taken?
N270 million b. N330 million c. N438 million d. N162 million
Which of the following options best describes the meaning of underwriting commission?
It is the commission an insurer receives on the value of shares he or she insures.
It is the commission the principal underwriter pays on the value of shares he or she underwrites.
It is the commission the principal underwriter receives on the value of shares he or she insures.
It is the commission an underwriter receives on the value of shares he or she underwrites.
Which of the following options correctly shows the accounting entries for application and allotment proceed in respect of shares
taken over?
Debit Cash/Bank account, Credit Underwriting account
Debit Underwriting account, Credit Profit and Loss account
Debit Profit and Loss account, Credit Underwriting account
Debit Underwriting account, Credit Cash/Bank account
Which of the following options correctly shows the accounting entries for loss on underwriting contract?
Debit Profit and Loss account, Credit Underwriting account
Debit Underwriting account, Credit Cash/Bank account
Debit Cash/Bank account, Credit Underwriting account
Debit Underwriting account, Credit Profit and Loss account
SECTION B – THEORY (TOTAL=50 marks)
1). a. International Traders Ltd, an English trading company, have a head office in London and a branch in Lille, France, which
submitted the following list of final balances to the head office in London on the 31st of December 2015. These balances are to
be converted at the fixed rate of 13. 72 French francs to the Pound. During the year the Lille remitted to Head office a sum of
money which was recorded in the head office books on 12 Pounds.
REQUIRED:
Show the Branch Account in the London Books after the necessary adjustments have been made.
The Head office current account in the books of the Lille branch.
(10 marks)
LILLE BRANCH- 31st DECEMBER
DR CR
Land and premises 30,744.00
Office Equipment 634.04
Stock, 31 December 1,250.75
Debtors 889.49
Creditors 952.45
Cash at Bank 112.59
Cash in hand 14.54
Remittance to head office 160.82
Head office account, 1st January 32,523.41
Profit and Loss Account
Profit for the year 330.37
33,806.23 3,806.23
b). The trial balance of a foreign branch is drawn up in local currency
Explain fully what rates of exchange are adopted for converting the various items into sterling to enable them to be combined with
the head office trial balance.
(3.5 marks)
If after conversion into sterling, the foreign branch trial balance fails to agree, explain how the differences are dealt with. (4
marks)
(Total = 17.5 marks)
2. Kunle and Kamoru are partners in an engineering company and on 1st
January 2002, they both agreed to purchase an established
mechanical business that belongs to Mr. Lawal who has decided to sell his business due to financial crises. The Statement of
Financial Position of Mr. Lawal is shown below:
LAWAL AND SONS (NIG.) ENTERPRISES
STATEMENT OF FINANCIAL POSITION AS AT 31-12-2002
Non-Current Assets N N
Land and Building 60,000
Plant and Machinery 40,000
Furniture and Fittings 20,000 120,000
Current Assets
Stock 20,000
Debtors 10,000
Cash in Bank 8,000 38,000
158,000
Equity Account 120,000
Add Net Profit 20,000 140,000
Loan- Ola 10,000
Current Liabilities
Creditor 5,000
Accruals 3,000 8,000
158,000
During the negotiation, the purchase price was agreed to be N180,000. For the payment of the money, Kunle and Kamoru agreed
to contribute the money equally through bank account which they opened with N5,000 each. It was also agreed that goodwill
account will be created in the company’s account. For the conclusion of this transaction, all the assets and liabilities of the business
were taken over, with the exception of the business cash account.
Required: Open up the necessary books of accounts to enter the above business transactions. (Total = 12.5 marks)
3). a. The following information was extracted from Pasture Farms for the months of January to February 2015.
N’000
January 3rd
Cash in hand 4,000
“ 10th
Cattle minerals purchased from ATK Ltd. by cash 32
“ 14th
Cheque received for milk sold 148
“ 25th
Heifer sold for cash 1,500
“ 26th
Payment for veterinary services by cash 120
“ 30th
Paid employee wages 1,500
“ 31st
Payment for fencing posts 260
“ 31st
Purchase of disinfectant 300
N’000
February 2nd
Bought maize seed 40
“ 2nd
Purchased Fencing wire with cash 175
“ 4th
Sold cow for cash 200
“ 15th
Cheque received for milk sold 150
“ 16th
Beans sold 1,250
“ 17th
Tractor repairs 475
“ 18th
Fuel 168
“ 19th
Bought Cattle feed and minerals 110
“ 21st
Bought Fertilizer for crops 65
“ 24th
Sold maize for cash 1,200
“ 28th
Wages 800
“ 28th
Cash received for milk sold 1,000
Required:
Prepare the Cash Book for Pasture Farms for the months of January and February, 2015. (4 marks)
Comment on the state of liquidity of Pasture Farms, with recommendations to the owners of the farm based on the farm’s state of
liquidity. (2 marks)
b. Mr. Success is a solicitor. The following transactions took place during the month of March
2011.
March 17: Payment (by cheque) of N10,000 to Tripple Ltd, at the request of a client Wilsons, on account of a debt due by Wilsons
to Tripple Ltd, the client having no money in the hand of the solicitor.
March 19: Wilsons pays N40,000 by cheque to the solicitor to meet the N10,000 and discharge the balance of the debt due to
Tripple Ltd.
March 20: The solicitor gave a cheque of N25,000 to Tripple Ltd, the balance of the debt due, charges Wilsons with N1,000 for
costs which are agreed by the client and remits the balance to Wilsons by cheque.
Required: Show the clients’ ledger as they will appear in the books of Mr. Success. (4 marks)
(Total =10 marks)
4). The following information was extracted from the books of Adebisi Enterprises.
Statement of Financial Position as at 31st
December, 2015
N N N
Non-current Asset Cost Dep NBV
Property, plant and equipment 2600 (1600) 1000
Current Asset
Inventory 700
Accounts receivable 100
Cash 700
1500
Current Liability
Notes payable 200
Accounts payable 200
(400)
Working capital 1100
Net Asset 2100
Financed By:
Long-term debt 1200
Equity:
Common Stock 600
Capital surplus 200
Retained earnings 100
2100
Adebisi
Income Statement for the year ended 31st
December, 2015
N N
Sales 5100
Cost of goods sold 2800
Gross Profit 2300
Administrative
expenses 500
Depreciation 522 1022
Earnings before
interest
1278
Interest expenses 40
Taxable income 1238
Taxes 470
Net Income 768
Dividends 364
Addition to retained
earnings
404
Additional Information
Number of shares outstanding 600
Price per share 1.4
The industry average for the following ratios are:
Current ratio 3.10 Net Profit Margin 15%
Quick ratio 2.0 Return on Assets (ROA) 7%
Receivables Turnover and
Days’ Receivables
30
days Return on Equity (ROE) 19%
Inventory Turnover and
Days’ Inventory
28
days
Dividend per share
14
Debt Ratio
45
% Dividend pay-out ratio 28%
Debt to Equity Ratio 82% Dividend yield 10%
Required: Compute the relative ratios of Adebisi enterprise and compare it with the industry averages. For each comparison, pass
a comment as to the way Adebisi enterprise is faring. (8 marks)
Adebola and Co. ltd is an architectural venture that is also involved in real estate development. They undertook a project for Lagos
state government and after completing it, an external architect assesses the value of work done to be N805, 000.The Lagos state
government has already paid N200, 000. The agreed retention percentage is 30%.
Required: Compute the amount of the current progress payment (2 marks)
(Total =10 marks)
COVENANTUNIVERSITY CANAANLAND, KM 10, IDIROKO ROAD
P.M.B 1023, OTA, OGUN STATE, NIGERIA.
TITLE OF EXAMINATION: OMEGA SEMESTER EXAMINATION
COLLEGE: BUSINESS AND SOCIAL SCIENCES
DEPARTMENT: ACCOUNTING
SESSION: 2015/2016 SEMESTER: OMEGA
COURSE CODE: ACC 321 CREDIT UNIT: 3
COURSE TITLE: FINANCIAL ACCOUNTING IV
INSTRUCTION: ANSWER ALL QUESTIONS IN SECTION A AND B TIME: 3 HOURS
C
B
A
B
A
C
B
A
A
A
D
D
A
SECTION B – THEORY (TOTAL=50 marks)
2. BOOKS OF KUNLE AND KAMORU
Purchase of Business
Vendor 180000 Land and Building 60000
Loan 10000 Plant and machinery 40000
Creditors 5000 Furniture 20000
Accrual 3000 Stock 20000
Debtor 10000
Goodwill 48000
198000 198000
Vendor Account
Kunle’s Capital 90000 Purchase of Business 180000
Kamoru’s Capital 90000
180000 180000
Kunle and Kamoru
Statement of Financial Position as at 31st Dec 2002
N N N
Non Current Assets
Goodwill 48000
Land and Building 60000
Plant and Machinery 40000
Furniture and Fittings 20000 120000
Current Assets
Stock 20000
Debtors 10000
Bank 10000 40000 160000
208000
Equity Account
Kunle 95000
Kamoru 95000 190000
Liabilities
Loan 10000
Creditor 5000
Accruals 3000 18000 208000
208000
3). a. i. Pasture Farms
Cash book for January 2015
N'000 N'000
3rd Jan Bal b/d 4,000
10th Jan Cattle minerals 32
14th Jan milk sold 148
26th Jan Veterinary services 120
25th Jan Heifer 1,500
30th Jan Wages 1,500
31st
Jan Fencing Post 260
31st
Jan Disinfectant 300
31st
Jan bal c/d 3,436
5,648 5,648
Cash book for February 2015
N'000 N'000
1st Feb Bal b/d 3,436
2nd Feb Maize seed 40
4th Feb Cow 200
2nd Feb Fencing wire 175
15th Feb Milk 150
17th Feb Tractor 475
16th Feb Beans 1,250
18th Feb Fuel 168
24th Feb Maize 1,200
19th Feb Cattle Feed and Min. 110
28th Feb Milk 1,000
21st Feb Fertilizer 65
28th
Feb Wages 800
28th
Feb Bal c/d 5,403
7,236 7,236 24 ticks * 0.17 = 4 marks
ii.
b.
Clients' Ledger (Wilson)
Da
te
Particul
ars
Offi
ce
(N)
Clie
nt
(N)
Da
te
Particul
ars
Offi
ce
(N)
Clie
nt
(N)
17t
h
M
ar Cash
advance
10,0
00
19t
h
M
ar Cash
40,0
00
19t
h Cash
transfer
10,0
00
19t
h Cash-
transfer
10,0
00
M
ar
M
ar
20t
h
M
ar Cash-
transfer
25,0
00
20t
h
M
ar Cash-Cost
1,00
0
20t
h
M
ar Cash-cost
1,00
0
20t
h
M
ar
Cash
balance
repaid
4,00
0
Bal c/d
1,00
0
11,0
00
40,0
00
11,0
00
40,0
00 10 ticks * 0.4 = 4 marks
4.
Current ratio: Total current asset/current liabilities = 1500/400= 3.75:1
Quick ratio = current asset – inventories/current liabilities = 2:1
Total Current Assets = 1500, Inventory = 700 and Total Current Liabilities = 400
Debtors turnover = Acct receivable/(sales on credit/365) = 100/(5100/365) = 7.16 days or 365/7.16 = 51 times
Stock turnover = inventory/ (cost of good sold)/365 = 700/ (2800/365) = 91.25 days of 365/91.25 = 4 times.
Debt ratio = total debt/ total asset = 1600/2500 * 100 = 64%
Debt to equity ratio = total debt / total owners equity = 1600/ 900 *100 = 177.8%
Net profit margin = net income / sales * 100 = 768/5100*100 = 15.06%
Return on assets = net income / total asset * 100 = 768 / 2500 = 30.72%
Return on equity = net income / total equity * 100 = 768/900 * 100 = 85.33%
Dividend per share = total dividend paid/ number of ord shares = 364/600 = N0.61
Dividend pay-out ratio = dividend/net income * 100 = 364/768 * 100 = 47.40
Dividend yield = dividend per share/share price * 100 = 0.61/1.4 = 0.44
(8 marks)
Current payment = –retention-payments already made.
= N805, 000 -15% (805,000) -200,000
=N484, 000
(2 marks)
(Total =10 marks)
COVENANTUNIVERSITY CANAANLAND, KM 10, IDIROKO ROAD
P.M.B 1023, OTA, OGUN STATE, NIGERIA. TITLE OF EXAMINATION: Omega Semester Examination
COLLEGE: Business and Social Science
SCHOOL: Business Studies
DEPARTMENT: Accounting
SESSION: 2013/2014 SEMESTER: Omega
COURSE CODE: ACC 322 CREDIT UNIT: 3 Units
COURSE TITLE: Advanced Cost Accounting
MARKING
GUIDE
SECTION A
C 16. OPPORTUNITY COST
E 17. A RELEVANT COST
D 18. OUT-OF-POCKET COST
C 19. TRUE
C 20. FALSE
C
C
C
A
B
B
B
C
C
C
SECTION B
1A). Cost accounting is concerned with recording, classifying and summarizing costs for determination of costs of products
or services, planning, controlling and reducing such costs and furnishing of information to management for decision making.
1B)
S/N Management
Accounting
Cost Accounting
1. Objective To provide information
for planning and
To ascertain and
control cost
decision making by the
management
2. Basic of recording Concerned with
transactions related to
the future
Based on both
present and future
transactions for
cost ascertainment
3. Coverage Covers a wider area:
financial accounts, cost
accounts, taxation, etc.
Covers matters
relating to
ascertainment and
control of cost of
product or service
4. Utility Only the needs of
internal management
The needs of both
internal and
external interested
groups
5. Types of
transactions
Deals with both
monetary any non-
monetary transactions,
covering both
quantitative and
qualitative aspects
Deals only with
monetary
transactions,
covering only
quantitative
aspect
C) Vc (b) = (Hc – Lc)/ (Ha –La)
b = (700,000 – 250,000) / (450 -150)
b = N 1,500
FC (a) = Y- bX
a = 700,000 – 1500 (450)
a = N25,000
D)
Calculate the contribution margin per unit.
N20 - N4 - N1.60 - N0.40 - N2 = $12
Calculate the number of units must sell each year to break even.
20X - 8X - 96,000 = 0; X = 8,000 units
Calculate the number of units ISM’s must sell to yield a profit of N144,000.
20X – 8X – 96,000 = N144,000; X = 20,000 units
2 a. Marginal costing is a costing technique that considers contribution in its decision making process. In marginal costing,
only variable costs are charged as a cost of sales and a contribution is calculated. Closing stocks of work in progress or
finished goods are valued at marginal (variable) cost of production.
Absorption costing is that costing method which charges a share of all overheads (variable and fixed) to products.
CIMA terminology defines it as ‘a principle whereby fixed as well as variable costs are alloted to cost units and total
overheads are absorbed according to activity level.
Under this method, total cost of production (fixed and variable) is used in calculating the unit cost of production.
The following are the differences between marginal and absorption costing techniques:
In absorption costing, items of stock are costed to include a ‘fair share’ of fixed production overhead, whereas in marginal
costing, stocks are valued at variable production cost only. The value of closing stock will be higher in absorption costing than
in marginal costing.
As a consequence of carrying forward an element of fixed production overheads in closing stock values, the cost of sales used
to determine profit in absorption costing will:
include some fixed production overhead costs incurred in a previous period but carried forward into opening stock values of
the current period;
exclude some fixed production overhead costs incurred in the current period by including them in closing stock values.
In contrast marginal costing charges the actual fixed costs of a period in full into the profit and loss account of the period.
(Marginal costing is therefore sometimes known as period costing.)
In absorption costing, ‘actual’ fully absorbed unit costs are reduced by producing in greater quantities, whereas in marginal
costing, unit variable costs are unaffected by the volume of production (that is, provided that variable costs per unit remain
unaltered at the changed level of production activity). Profit per unit in any period can be affected by the actual volume of
production in absorption costing; this is not the case in marginal costing.
In marginal costing, the identification of variable costs and of contribution enables management to use cost information more
easily for decision-making purposes (such as in budget decision making). It is easy to decide by how much contribution (and
therefore profit) will be affected by changes in sales volume. (Profit would be unaffected by changes in production volume).
In absorption costing, however, the effect on profit in a period of changes in both:
production volume; and
sales volume; is not easily seen, because behaviour is not analysed and incremental costs are not used in the calculation of
actual profit.
(Award 1 mark each for correct definition of the two concepts and award ½ mark each for every 4 correct diference identified).
2b.
Glory to Glory Ltd
Absorption Method
N N
Sales (45,000 x N20) 900,000
Less Cost of Production:
Opening stock ---
Variable costs (N12 x 50,000) 600,000
Fixed cost of production (N2 x 50,000) 100,000
700,000
Closing stock (N14 x 5,000) (70,000) Cost of Goods Sold
630,000 Gross Profit
270,000
Less Non-production expenses
Variable selling & Admin (N3 x 45,000) (135,000)
Fixed selling & Admin (15,000)
NET INCOME 120,000
Glory to glory Ltd
Marginal Method
N N
Sales (45,000 x N20) 900,000
Variable cost of goods sold:
Opening stock ----
Variable manufacturing costs (50,000xN12) 600,000
Closing stock (5,000 x N12) (60,000) (540,000)
Variable selling costs (45,000 x N3) (135,000)
Contribution 225,000
Fixed expenses:
Manufacturing (100,000)
Administrative (15,000)
Net income 110,000 .
3. Pricing Decision under Marginal Costing Techniques
Costs that need to be taken into account in any particular decision making process under marginal costing technique are the
relevant costs.
Replacement price: this represents the current market price of an item of raw material in the stock. In decision making,
replacement price will be used in valuing raw material, if it can be established that the raw material is frequently used in the
company or that the raw material is in continuous demand.
Net Realizable value: this is the current disposable value of an item of raw material held in stock. In decision making, net
realizable value will be used in valuing stock, if it can be established that certain materials purchased sometimes ago can no longer
be utilized for the initial objective.
Historical Value: In decision making, historical value represents irrelevant cost.
d) Full –time worker: this represents a fixed cost to the organization; it is therefore irrelevant in decision making. However, where
a full-time worker engages in over- time for the purpose of decision, the over-time cost will be considered, not the entire labour
cost.
New employees and casual workers for the project. Their costs are relevant under marginal costing technique.
f) Incremental Fixed Cost: If fixed cost will increase as a result of a decision it will be considered as relevant.
g) Common Cost: Common costs to alternative decisions may be ignored, because they will not affect the financial result in any
way.
4)
SOLUTION TO QUESTION 3
WONDERS DOUBLE LIMITED
CASH BUDGET FOR 2ND QUOTA OF 2016
Note April May June
N N N
Opening Cash Balance 14000 60400 32400
RECEIPTS:
Cash Sales (i) 42000 51,000 57,000
Collection from debtors (ii) 107800 100,800 110,600
TOTAL RECEIPTS 163,800 212,200 200,000
PAYMENTS:
Cos of goods sold (iii) 67200 98400 111600
Operating Expenses (iv) 11200 16400 18600
Tax - 40,000 -
Dividend - - 16000
Capital Expenditure 25000 25000 -
TOTAL EXPENDITURE 103400 179,800 146200
Closing Cash Balance: 60400 32,400 53800
WORKINGS
COLLECTION SCHEDULE
Feb March April May June
Cash sales: (30%) of sales 42000 51000 57000
Collection for debtors:
Credit sales: 112,000 105,000 98,000 119,000 133,000
One month after sales (60%) - 67200 63000 58800 71400
Two months after sale (40%) - - 44800 42000 39200
107800 100800 110,600
PAYMENT SCHEDULE
Cost of goods sold 96000 114000 126000
Less Fixed COS 12000 12000 12000
Variable COGS 84000 102000 114000
Actual Disbursements of VCOS: Month incurred 67200 81600 91200
One month after - 16800 20400
Total 67200 98400 111600
Operating Exp 22000 25000 27000
Less Fixed Operating Expenses 8000 8000 8000
Variable Operating Expenses 14000 17000 19000
Actual Disbursements of VOE: Month incurred 11200 13600 15200
One month after - 2800 3400
Total 11200 16400 18600
COVENANT UNIVERSITY
CANAANLAND, KM 10, IDIROKO ROAD
P.M.B 1023, OTA, OGUN STATE, NIGERIA
TITLE OF EXAMINATION: B.Sc. Degree
COLLEGE: BUSINESS AND SOCIAL SCIENCE
SCHOOL: BUSINESS
DEPARTMENT: ACCOUNTING
SESSION: 2015/2016 SEMESTER: OMEGA
COURSE CODE: ACC 323 CREDIT UNIT: 2
COURSE TITLE: AUDITING PRINCIPLE AND PRACTICE
INSTRUCTIONS: ANSWER ALL QUESTIONS TIME ALLOWED: 2HRS
Part A
Short answer and Objective questions
A modern internal audit staff should preferably include individuals:
a. with an earned degree in accounting
b. who have had previous experience with the organization
c. with a business administration degree and an understanding of the tool of mordern
management
d. with a spend background, such as system personnel
e. who collectively provide a reasonable balance of all the above background
Orientation for a staff auditor includes:
a. explaining the work paper for audit established by the auditor's organization
b. providing the auditor with an overview of the company organization
c. assigning the auditor to complete a research project
d. both a and b
e. none of the above
Which of the following items would be the best criterion for evaluating a staff auditors work performance?
a. number of definer by findings reported
b. ability to get along with auditees
c. neatness of work paper
d. fulfillment of requirements set forth in the approved audit programmes
e. completion of audit assignment on schedule
Practical training for internal auditing in computer system environment should include instruction in:
a. fortran programming
b. computer system, security standards
c. reading object code
d. computer logic
e. all of the above.
Which of the following would be included in establishing and maintaining a quality assurance programme for the internal audit
department?
establishing a programme for developing the personnel resources of internal audit department
supervision of internal audit work
review of internal audit work by a quality control group with the internal department
external reviews of internal audit department
all of the above
For Profit Corporation, the board is responsible to the -------------------------
In a Corporation, the duties of the Board of Directors are ------------------and --------------
In Not for Profit organisations, the board is particularly responsible to ---------------------
The guide line for drafting a report when drafting a report as a result of professional investigation is referred to as -------------------------
---------
--------------------- and ----------------- are the reasons for investigating fraud.
…………….. is the risk that an auditor expresses an inappropriate opinion on the financial statements.
The audit risk formula: Audit Risk = Inherent Risk x ………………….x Detection Risk.
The possibility of a material misstatement ignoring the client’s internal control is referred to as …………………………..
……………..is an integrated process of checks and balances established by management to provide reasonable assurance that
organization resources are protected, to prevent and detect intentional and unintentional errors, and to reduce risk.
Circumventing controls through collusion by individuals who oversee each other's work is one of the benefits in internal control.
True or False
At any ………….. a retiring auditor, however appointed, shall be re-appointed without any resolution being passed at the AGM unless
he is not qualified for re-appointment.
Auditors may be appointed by the directors of a company to fill a casual vacancy arising from the death, incapacity or sudden
resignation of an auditor.
A ………………….. may exist in the post of auditor, if the auditor dies before the expiration of his tenure of office.
Where a resolution removing an auditor is passed at a general meeting of a company, the company shall within………..give notice
of that fact in the prescribed form to the Commission.
A ……………………is an examination and review of internal procedures and records of an organization, in order to ascertain their
reliability as a basis for the compilation of the final accounts and balance sheet.
(20 Marks)
Part B
1a) Godfirst is a manufacturing company which has good structures, processes, cultures and systems that engender the
successful operation of the organization. Discuss the advantages of this practice to the company and its shareholders.
(8 marks)
b) In maximizing the profit of Godfirst, the management has agreed to partner with “In God we trust”. Identify the issues
which need to be considered on the proposed partnership by the investigator hired by Godfirst.
(4.5 marks)
(Total 12.5marks)
2a) Investigation is the act of detailed examination of activities of organization so as to achieve certain objectives. What are the
differences between investigation and auditing? (6marks)
b) Enumerate at least six areas where investigation can be conducted. (6marks)
c) Give another definition of investigation. (½ mark)
(Total 12.5marks)
3a) According to Idowu Freeron 2005, there are certain conditions that are favourable to corrupt practices in Nigeria.
Mention them and write full notes on each of them.
(4.5 marks)
b) What are the causes of corruption in Nigeria? Mention them and write full notes on them. (4 marks)
c) There are four requirements for fraud. Mention the four, with full notes on each. No diagram required. (4 marks)
(Total 12.5marks)
4a) Briefly describe your understanding of the following terms.
Statutory Audit
Interim audit
Private audit
Internal audit (8 marks)
b) Enumerate briefly, four (4) secondary objectives of an audit. (4 .5 marks)
(Total 12.5marks)
Total=70 marks
COVENANT UNIVERSITY
CANAANLAND, KM 10, IDIROKO ROAD
P.M.B 1023, OTA, OGUN STATE, NIGERIA
TITLE OF EXAMINATION: B.Sc. Degree
COLLEGE: BUSINESS AND SOCIAL SCIENCES
SCHOOL: BUSINESS
DEPARTMENT: ACCOUNTING
SESSION: 2015/2016 SEMESTER: OMEGA
COURSE CODE: ACC 323 CREDIT UNIT: 2
COURSE TITLE: AUDITING PRINCIPLE AND PRACTICE
INSTRUCTIONS: ANSWER ALL QUESTIONS TIME ALLOWED: 2HRS
MARKING GUIDE
Part A
SOLUTION TO OBJECTIVE QUESTIONS
E
D
D
B
E
Stockholders
Provides continuity for the organization and Represents the organization’s point of
view through its products and services and advocacy for them
The community of operation
Golden rule
To determine the extent of fraud committed and to establish the parties involved
Audit Risk
Control Risk
Inherent risk
Internal control
False
AGM
Directors
Casual Vacancy
14 Days
Procedural Audit
(20 Marks)
Part B
1a) Benefits of Good Corporate Governance:
To Companies
Improving access to capital and financial markets;
Helps to survive in an increasingly competitive environment through mergers, acquisitions, partnerships.
better system of internal control, thus leading to greater accountability and better profit margins
Good corporate governance practices can pave the way for possible future growth, diversification, or a sale, including the ability to
attract equity investors – nationally and from abroad
Benefits of Good Corporate Governance:
To Shareholders
Better corporate governance can also provide Shareholders with greater security on their investment.
Better corporate governance also ensures that shareholders are sufficiently informed on decisions concerning fundamental issues
like amendments of statutes or articles of incorporation, sale of assets, etc.
Improvement in wealth maximization
Gives shareholders the right to appoint auditors
(8 marks)
1b)
Collect and verify information obtained from the owners of the firm
Analyse the data into performance, position and prospects of the partnership business
Nature and background of the partnership business
Demand for the reason for admitting new partner(s)
Obtain the partnership deed to establish the rules and regulations guiding the business
Obtain information relating to profit sharing arrangement
Obtain audited account of the partnership business
Obtain information relating to the liability of the incoming partner(s) for existing debt of the partnership
(4.5 marks)
(Total 12.5)
2a) Following differences can be seen between auditing and investigation:
The approach to investigation is different from the approach to a normal audit. Unlike conventional audit investigation is not in
accordance with generally accepted auditing standards. On the one hand it is more comprehensive than an audit and it may exclude
many steps which would be considered necessary as part of an audit.
Unlike an audit , the scope of work involved in an investigation depends entirely on the client’s requirements, consequently avoid
any subsequent misunderstanding, it is prudent to obtain the clients instructions in writing in a letter of engagement.
The statutory audit however cannot be constrained by the letter of engagement in terms of focus.
The responsibility of the accountant in an investigation is to the management who has appointed him to carry out the
investigation but in a statutory audit, the auditor is responsible to the shareholders.
The investigating accountant will have a responsibility to obtain all information necessary for the report he has agreed to prepare.
He will not have the right to all information and explanation that he considers necessary as provided by the CAMA1990 in a
statutory audit situation.
Period: An audit is related to only a year or six months while investigation may cover several years.
7. Statutory Obligation: In the case of listed companies, audit is compulsory under law while there is no such statutory obligation
with regard to investigation.
Investigation is made in suspected places or to obtain/corroborate facts.
Auditing is the act of examining books of accounts so as to prove true and fairness of operating results and financial position of a
business.
(any 6 points=6marks)
2b) Areas where Investigation can be Conducted include the following:
Investment Decisions
Purchase of a business
Purchase of shares in a company (by way of mergers, acquisition)
Participation in a partnership
Loan decision.
2. Investigation of special issues such as:
Loss of profit, costing and financial investigation, e.g. the profitability of a special factory, product or shop
Investigations where fraud is known or suspected to have taken place
Investigations on behalf of a client for credit purposes
Investigations under CAMA ‘90
Investigation for taxation purposes
3. Prospectus Reports
Accountants report for prospectus purposes
Report on the profit forecast included in a prospectus
(any 6 points=6marks)
2c) Investigation is the act of detailed examination of activities of organization so as to
achieve certain objectives. (1/2 mark)
(Total 12.5)
SOLUTION QUESTION 3
SOLUTION TO QUESTION 3a
Conditions favourable to corrupt practices. Idowu-fearon (2005), identifies the following as conditions that make the
perpetration of corrupt practices easy:
Concentration of power in decision makers who are not directly accountable
Lack of government transparency in decision making
Costly political campaign
Large amount of public capital project
Self interest close cliques
Weak legal profession
Weak accounting profession
Poorly paid government officials
Apathetic, uninterested or gullible populace that fail to give adequate attention to political process.
Absence of adequate control to prevent bribery
SOLUTION TO QUESTION 3b
Causes of corruption in Nigeria:
Obsession with Materialism
The causes of corruption in Nigeria are mostly as a result of obsession with materialism, compulsion for a short cut to
affluence, glorification and approbation of ill gotten wealth by the general public, are among reasons for the persistence of
corruption in Nigeria, Ndiulor (1999). It has been noted that one of the popular, but unfortunate indices of good life in Nigeria
is flamboyant affluence and conspicuous consumption. Because of this, some people get into dubious activities, including
committing ritual murder for money making. Lack of ethical standards
The lack of ethical standards throughout the agencies of government and business organizations in Nigeria is a serious
drawback. According to Bowman (1991), Ethics is action, the way we practise our value, it is a guidance system to be used in
making decisions. The issue of ethics in public sector (and in private life) encompasses a broad range including a stress on
obedience to authority, on the necessity of logic in moral reasoning and on the necessity of putting moral judgement into
practice, Bowman (1991). Unfortunately, many office holders in Nigeria appointed or elected do not have clear conceptions of
the ethical demands of their position. Even as corrupt practices going off the roof, little attention, if any is given to this ideal. Greed
Other factors are poor reward system and greed. Nigeria's reward is perhaps, the poorest in the world. Nigeria is a society
where national priorities are turned upside down, hard work is not rewarded, but rogues are often glorified in Nigeria. As
author, Schlesinger said of America in the 60s, the trouble with Nigeria is not that on capabilities are inadequate. It is that our
priorities, which is our values, are wrong by Howard (1982). And peer community and extended family pressures and
polygamous households are other reasons. The influence of extended family system pressure to meet family obligations are
more in less developed societies. The extended family system is an effective institution for survival, but note that it poses a big
obstacle for development. According to Letterman (2002) bad rules and ineffective taxing system, which makes it difficult to
track down people's financial activities. Inneffective taxing system is a serious problem for Nigeria. The society should
institute appropriate and effective taxing system where everyone is made to explain his or her sources of income, through end
of the year income tax filing. The brazen display of wealth by public officials, which they are unable to explain the source,
points to how bad corruption has reached in the socieety. Many of these officials before being elected or appointed into offices,
had little or modest official income, but now, they are now for many properties around the world (this day, 2002).
QUESTION 3c
Necessary requirements for fraud
All these four must be present, they are in alternatives:
Opportunity: to carry out that particular fraud
Advantage: to be gained from it
Motivation: need, greed or grudge
Moral weakness: without which fraud would not be attempted.
NOTE:
Students are expected to write short notes on the above four alternatives.
Question 4(a) Solution
Statutory Audit; this is the most popular audit. It is prescribed by the law for the limited liability companies. The objectives &
mode of carrying out the audit is spelt out by the statute. In Nigeria, situation, the statutory audit is being regulated by CAMA 1990
as amended.
Interim Audit; This is an audit is conducted to a particular date within the accounting period. The auditor may attend to audit
the figures for a month or for a quarter, as the work may require. It would defer distinctly from the final audit in the extent of the
work carried out; certain aspects of final audit such as verification of assets may be left out until the final audit.
Private audit; this is an audit carried out at the instance of the owner of the biz. It is not required by law but they are carried out
for the personal benefit of the individual owner of the business.
Internal audit; an internal audit is an independent appraisal activity within an organization set for the review of operations & as a
service to management. It is a form of management control which functions by measuring & evaluating the effectiveness of other
controls.
(Two (2) marks per tick for any correct answer) total marks (2*4 = 8 marks)
Question 4(b) Solution
Secondary objectives of auditing:
To detect any form of irregularity.
To evaluate the effectiveness or otherwise, of the internal control system within the enterprise.
To assist the management in the establishment of effective auditing system.
To advise on financial matters for efficient decision making by the management.
To ascertain and ensure that an enterprise conforms to statutory and professional requirement.
To prevent fraud and errors.
(0.9 marks per tick for any five correct answer mentioned) total marks (0.9*5 = 4.5 marks)
(Total 12.5marks)
Total 70 Marks
COVENANTUNIVERSITY CANAANLAND, KM 10, IDIROKO ROAD
P.M.B 1023, OTA, OGUN STATE, NIGERIA. TITLE OF EXAMINATION: B.SC EXAMINATION
COLLEGE: COLLEGE OF DEVELOPMENT STUDIES
SCHOOL: SCHOOL OF BUSINESS
DEPARTMENT: ACCOUNTING
SESSION: 2015/2016 SEMESTER: OMEGA
COURSE CODE: ACC325 CREDIT UNIT: 3
COURSE TITLE: NIGERIAN TAXATION 1
INSTRUCTION: Answer All TIME: 3.00 HOURS
MULTIPLE-CHOICE QUESTIONS [20Marks]
The objectives of taxation are as follows EXCEPT
a]. To provide fiscal tool for stimulating economic growth and development
b]. To promote healthy competition among different tiers of government
c]. For revenue generation to meet the needs of the government
d]. To redistribute income wealth in order to reduce inequality
Listed below are the examples of indirect taxes EXCEPT
a]. Import duties b]. Value added tax c]. Excise duties d]. Withholding tax
The following are the cannons of taxation EXCEPT
a]. Accountability b]. Equity c]. Economy d]. Ability to pay
,
The following are the sources of tax EXCEPT
a]. Opinion of income tax experts b]. Court judgment until overruled
c]. Opinion of a member of House of Assembly of any State
d]. Constitution
Tax system includes the following:
a]. Tax law only b]. Tax administration only c]. Tax policy only
d]. Tax law, tax policy and tax administration
The following are the duties of the Joint Tax Board in Nigeria EXCEPT
a]. To enlighten members of the public generally on Federal and State government
revenue matters.
b] To settle disputes between the states as regards tax matters.
c]. To promote uniformity both in the application and incidence of the provision of
tax laws on individuals throughout the country.
d]. To advise the government on request in respect of double taxation arrangements,
rates of capital allowances and other tax matters.
A forum is formed at any meeting of the State Internal Revenue Board where there is in attendance.
a. The chairman and three other members b. The chairman or a Director and two other members. c. The chairman or a
Director and four other members
The chairman and seven other members
Appeals can only be lodged later than 30 days if the delay in lodging the notice of appeal is
due to the following EXCEPT
a. The objector’s absence from the country b Sickness of objector c. Other reasonable clause
d. Wedding of objector
The Tax Clearance Certificate discloses in respect of the last three years of assessment of
the following EXCEPT
a Chargeable income b. Tax payable c. Tax paid d. Projected income
Tax is evaded through the following ways EXCEPT
a. Refusing to register with the relevant tax authority b. Failure to furnish returns
c. Incorporating tax payers sole proprietor into Limited Liability Company
d. Entering into artificial transactions
The person making a will is a/an …………………………………
Executor (b) Administrator (c) Trustee (d) Testator
12. An individual in receipt of an annuity or fixed annual amount paid out of the income of a settlement, trust, or estate
shall be assessable to tax on ………… of the annuity.
half (b) 200% (c) the full amount (d) 20%
Basis of assessment for an old established company is …………….
actual basis (b) preceding year basis (c) continuity basis (d) succeeding year basis
……… basis period occurs when a basis period is common to more than one year of assessment.
In a situation where there is a change of accounting date or cessation of business, there is always a ……… between the basis
periods of two assessment years.
Capital allowances unrelieved in the year of cessation can be carried backward and set-off against remainder of profits for:
2 years of assessment preceding year of cessation
5 years of assessment preceding year of cessation
3 years of assessment preceding year of cessation
4 years of assessment preceding year of cessation
Current year loss relief is only applicable to ………….
individuals (b) petroleum companies (c) limited liability companies (d) unincorporated companies
Unrelieved loss which can no longer be carried forward upon the cessation of a business is known as …………….
A company’s trading loss from one source can be relieved against assessable profits from other sources within the same year.
True or False?
Other than on commencement or cessation of a business or change of accounting date, adjusted profits is the same as
………… (a) Net profits (b) Total profits (c) Assessable profits (d) Accounting profits.
SECTION B
1a] Mr. Adewale, A chief Executive Officer in BAC Shipping Plc provided the Tax Authorities with the following information
which represented his income as agreed from all sources for 2014 Assessment Year.
Salary from employment #1,720,000
Commission on sale 350,000
Income from part-time business 1,120,000
Dividend (net) for 2013 100,000
Pension from previous employment 310,000
Rent received from property 2013 350,000
Annual Bonus 210,000
Interest on bank deposit 2013 70,000
Required:
Compute Mr. Adewale’s statutory total income and his personal allowance for 2014. (10Mks)
b] Nigerian tax law is purely statutory. The tax system thus features a wide and mixed range of statutes by which the various
governments in the country seek to charge and collect revenue for public expenditure. Discuss briefly five major sources of tax
revenue open to Federal Government of Nigeria (5Mks)
2] Write short notes on the following:
Itinerant worker
Earned and Unearned Income
Taxable Persons
Back Duty Audit
e) Principal Place of Residence (10Mks)
3] (a) Covenant White Limited is a company engaged in the entertainment business. It commenced business on 1st September
2001 and made up accounts as follows:
-9 months ended 30/06/02
-Year ended 30/06/03
Determine the basis period for assessment and for capital allowances for the first four years of assessment.
(10 Mks)
(b)A company sold a machine forming part of its fixed assets at N1.8million. The machinery which costs N1.5million on
acquisition had tax written down value of N880,000 on disposal. Compute the balancing adjustment on disposal.
(5 Mks)
4] Dr Glory to Glory runs a clinic and makes up accounts to 31st December each year. The results from the clinic for tax
purpose were: N
Year ended 31-12-03 18,000 Profits
Year ended 31-12-04 42,000 Loss
Year ended 31-12-05 12,000 Profits
He receives gross rental income of N21,600 per annum from his Ota house.
Required: Show his total income for 2004 and 2005 years of assessment, assuming all reliefs were claimed as soon as
possible. (10 Mks)
COVENANTUNIVERSITY CANAANLAND, KM 10, IDIROKO ROAD
P.M.B 1023, OTA, OGUN STATE, NIGERIA. TITLE OF EXAMINATION: B.SC EXAMINATION
COLLEGE: COLLEGE OF DEVELOPMENT STUDIES
SCHOOL: SCHOOL OF BUSINESS
DEPARTMENT: ACCOUNTING
SESSION: 2015/2016 SEMESTER: OMEGA
COURSE CODE: ACC325 CREDIT UNIT: 3
COURSE TITLE: NIGERIAN TAXATION 1
INSTRUCTION: Answer All TIME: 3.00 HOURS
MARKING
GUIDE
MULTIPLE-CHOICE SOLUTION [20Marks]
1] B
2] D
3] A
4] C
5] D
6] A
7] C
8] D
9] D
10] C
11]. D
12]. C
13]. B
14]. OVERLAPPING
15]. GAP
16]. B
17]. A
18]. TERMINAL LOSS
19]. FALSE
20]. C
SOLUTION: Q1
Mr. James
Computation of Total Income for 2012 Assessment Year.
Earned Income # #
Salary 1,720,000
Commission 350,000
Income from Part-time Business 1,120,000
Pension 310,000
Annual Bonus 210,000
Total Earned/Employment Income 3,710,000
Unearned Income
Dividend (Gross) 111,111
Rent 350,000
Interest on bank deposit 70,000
Statutory Total Income 4,241,111
Less: Consolidated Allowance (200,000)
Less Personal Allowance (848,222) 1,048,222
Taxable Income 3,192,889
1st #300,000 at 7% 21,000
Next #300,000 at 11% 33,000
Next #500,000 at 15% 75,000
Next #500,000 at 19% 95,000
Next #1,592,889 at 21% 334,507
Tax Due 558,507
Workings: Dividend Personal Allowance
Net Amount = #100,000 20% of Gross Income
Withholding Tax 10% #848,222
= Gross Amount 100/90 x 100,000
= 111,111
SOLUTION Q2
ITINERANT WORKER
This is an individual who carries out his working activities in more than one place in Nigeria, or who earns daily wages other
than members of the armed forces. Where an itinerant worker is treated as a question business entity, then the application of both
the commencement and cessation rules may be relevant for tax purpose. A tax authority may in fact assess him depending on his
place of work at the point when tax is being computed. In the course of doing this his gross income to date, the tax paid to date
and the fine pay to date in existence from any other tax authority shall be recognized and utilized. In addition unpaid tax before
leaving a tax jurisdiction shall be kept in abeyance until his return but he will be given credit for payments made in other tax
jurisdiction
Principal Place of Residence
Where an individual has more one place of residence on the relevant day, the principal place of residence for tax purpose shall
be:
Individual Holding Foreign employment: The territory in which the principal of the employer is resident
Individual Holding a Nigerian Employment:- The place where he normally resides
Where only source of income in Nigerian is Pension:- The place where he usually resides. Where he has no place of residence
i.e. he is not resident in Nigeria, the territory where the pension is wholly payable. In a similar manner, where the pension is
payable by more than one state government, then he is deemed to be resident in the federal capital territory.
Where pension is not a Nigerian Pensioner, The territory of the principal office of the pension fund.
Where there is unearned income:- The place where he usually reside or the place where the income is derived from. Where the
income is from more than one source, the federal capital territory.
Corporate sole or body of individuals, other than itinerant worker:- The territory where the principal office is situated or the
territory in which any part or whole of the income liable to tax arise from in a year of assessment.
Earned Income
Earned income in relation to an individual, means income derived by him from a trade, business, profession, vocation or
employment carried on or exercised by him and the pension derived by him in respect of a previous employment.
Unearned Income
Unearned income under the pension income tax decree 1993, is mostly limited to investment income such as dividends, rents,
and interest. they are received net of withholding tax. Unearned income are subject to tax on the preceding year basis.
[1ai] BACK DUTY AUDIT. The relevant tax authority may carry out a back duty audit on a taxpayer under
the provisions of companies’ income Tax Act 1990 or personal income tax decree of 1993. The law allows
the relevant tax authority to audit up to 6 years backward. The records of the taxpayer are audited to examine
the truth in the information that was earlier provided in the annual returns or tax computations. To confirm
that income has not been materially understated, and that expenses have not been overstated.
SOLUTION Q3
DETERMINATION OF BASIS PERIOD FOR ASSESSMENT YEARS AND CAPITAL ALLOWANCES
Assessment Year Basis Period for Ass. Basis Period for Capital Allowance
2001 1/9/01-31/12/01 1/9/01-31/12/01
2002 1/9/01-31/8/02 1/1/02-31/8/02
2003 1/9/01-31/8/02 -
2004 1/7/03-30/6/03 1/9/02-30/6/03
Computation of Balancing Adjustment N
Tax Written Down Value on Disposal 880,000
Less: Sales Proceeds (1,800,000)
Balancing charge 920,000
However, the balancing charge that can be clawed-back is restricted to capital allowances previously granted and it is
calculated as follows: N
Tax Written Down Value 880,000
Less: Cost of Acquisition (1,500,000)
Actual balancing charge 620,000
SOLUTION Q4
DR GLORY TO GLORY
STATEMENT OF TOTAL INCOME FOR 2004 AND 2005
2004 Year of Assessment
Earned Income N N
lncome from Clinic
Year ended 31-12-03 18,000
Unearn ed Income
Gross Rental Income 21,600
39,600
2004 loss from business 42,000
Relieved (39,600) (39,600)
Total Income Nil
2005 Year of Assessment
Earned Income
Income from clinic
Year ended 31-12-2004 (42,000)
Previously relieved 39,600
Loss c/f 2,400
Unearned Income
Gross rental income 21,600
Total Income 21,600
NOTES
The loss from the business has been relieved in 2004 applying the current year loss relief.
In 2005, the loss of N2,400 cannot be set-off against income from rent; hence, it is carried forward to 2006.
COVENANT UNIVERSITY
CANAANLAND, KM 10, IDIROKO ROAD
P.M.B 1023, OTA, OGUN STATE, NIGERIA.
TITLE OF EXAMINATION: B.Sc DEGREE EXAMINATION
COLLEGE: COLLEGE OF BUSINESS AND SOCIAL SCIENCES
SCHOOL: SCHOOL OF BUSINESS
DEPARTMENT: ACCOUNTING
SESSION: 2015/2016 SEMESTER: OMEGA
COURSE CODE: ACC 329 CREDIT UNIT: 1
COURSE TITLE: ACCOUNTING LABORATORY III
INSTRUCTION: WORK TO BE DONE IN SAGE ACCOUNT TIME: 1 HOUR
A Soft Drink dealer REWARD ENTERPRISES (Your Matric No) whose fiscal year runs from
January to December started operations on January, 2016 with a Capital of 8,000,000 which was
deposited into the following banks:
GT Bank Account - 4,500,000.00
ECO Bank Account - 3,000,000.00
Cash on Hand - 500,000.00
The Customers and Suppliers list are shown below:
Customers Suppliers
CUST (1) Dayo
Ent.
SUPP (1) Coca-
Cola
Company
CUST (2) Greg Nig.
Ltd.
SUPP (2) 7 up
Company
CUST (3) Brown
Nig. Ltd.
The Product List is shown below:
ID Description Cost Price Selling
Price
Unit
of
Sale
CK001 Coke N3,000.00 N4,500.00 Crate
FT001 Fanta N3,300.00 N4,200.00 Crate
MR001 Mirinda N3,200.00 N4,000.00 Crate
The following transactions took place during the month:
22/04/16: Purchased 200 crates of CK001 and 250 crates of FT001 from SUPP (1) and paid 80%
using GT Bank. In addition, 300 crates of MR 001 was also purchased from SUPP (2) and paid
60% of the amount using ECO Bank Cheque.
23/04/16: Sold 150 crates of FT001 and 100 crates of CK001 to CUST (2) and received 70%
into GT Bank. Also sold 100 crates of MR 001 to CUST (1) and received 80% of the cost which
was deposited into the ECO Bank account.
24/04/16: Sold 30 crates of MR001 and 50 crates of FT001 to CUST (3) and received 90% of
the cost which was deposited into the GT Bank Account.
25/04/16: Bought a Motor Vehicle at the Cost of N600, 000, 00 using a GT Bank Cheque with
a depreciation of 15% on cost. In addition, a Landed Property worth N700, 000.00 was bought
using ECO Bank Cheque with 5% depreciation on cost.
26/04/16: Paid the following overhead expenses from Cash in Hand: N
Salaries and Wages 350,000
Transportation 50,000
Electricity 50,000
Required:
Create a new company using the company name and your Matric no. Enter the transactions
above
Run your month end wizard
Print the Trial balance as at 30th April 2016
Print the Profit and Loss for the month of April 2016