TUTORIAL QUESTIONS ON ACC 121

QUESTIONS AND SUGGESTED SOLUTIONS

PATRIOT ODUNARO B.J. (08038454008)

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ILLUSTRATION 1

.     The following balances were extracted from the books of Aiyegbami Enterprises on

      31st December, 2018.

                                                                                    N

Sales ledger, debit balance 1/1/2018                           98,260

Sales ledger, credit balance 1/1/2018                            2,370

Bought ledger, credit balance 1/1/2018                      72,190

Bought ledger, debit balance 1/1/2018                         4,210

Cash purchases                                                            27,380

Cash sales                                                                     19,360

Accounts settled by contra                                            6,220

Bills dishonoured                                                           7,500

Bills debts written off                                                    5,260

Bills of exchange drawn on customers                        34,730

Returns Inward                                                              7,450

Returns Outwards                                                          8,920

Cash received from debtors                                       689,230

Cash paid to suppliers                                                495,140

Discount Received                                                       19,320

Discount Allowed                                                       24,750

Cash refunded to customers                                          1,270

Sales ledger, debit balance 31/12/2018                      120,570

Sales ledger, credit balance 31/12/2018                         2,010

Bought ledger, debit balance 31/12/2018                      3,340

Bought ledger, credit balance 31/12/2018                  55,340

Show all necessary workings.

You are required to prepare:

(a)    Credit Sales

(b)   Credit Purchases

(c)    Total Sales

(d)   Total Purchases

SUGGESTED SOLUTIONS:

(a)  Credit Sales  = N781,540  see working 1

(b) Credit Purchases = N513,620 see working 2

(c) Total Sales = Credit Sales + Cash Sales

Total Sales  = N781,540 + N19,360 = N 800,900

(d) Total Purchases = Credit Purchases + Cash Purchases

Total Purchases = N513,620 + N 27,380 = N 541,000

Workings:

i.	AIYEGBAMI  ENTERPRISES
SALES LEDGER CONTROL ACCOUNT
Date		Particular	Folio	Amount	Date	Particular	Folio	Amount
				N				N
01/01/2018		Balance	b/f	98,260	01/01/2018	Balance	b/d	2,370
		Sales		781,540		Set-Off		6,220
		Dishonoured Bills		7,500		Bad debts		5,260
		Cash		1,270		Bills Receivable		34,730
						Return Inwards		7,450
						Cash		689,230
						Discount Allowed		24,750
31/12/2018		Balance	c/d	2,010	31/12/2018	Balance	c/d	120,570
				890,580				890580
01/01/2019		Balance	b/d	120,570	01/01/2019	Balance	b/d	2,010

ii.	AIYEGBAMI  ENTERPRISES
PURCHASES LEDGER CONTROL ACCOUNT
Date		Particular		Folio	Amount	Date	Particular	Folio	Amount
					N				N
01/01/2018		Balance		b/f	4,210	01/01/2018	Balance	b/f	72,190
		Set-Off			6,220		Purchases		513,620
		Return Outwards			8,920
		Cash			495,140
		Discount Received			19,320
31/12/2018		Balance	c/d		55,340	31/12/2018	Balance	c/d	3,340
					589,150				589,150
01/01/2019		Balance	b/d		3,340	01/01/2019	Balance	b/d	55,340

ILLUSTRATION 2

The following balances were extracted from the books of Feyisola Enterprises on

 31st December, 2018.

                                                                                    N

Sales ledger, debit balance 1/1/2018                           98,260

Sales ledger, credit balance 1/1/2018                            2,370

Bought ledger, credit balance 1/1/2018                      72,190

Bought ledger, debit balance 1/1/2018                         4,210

Cash purchases                                                            27,380

Cash sales                                                                     19,360

Accounts settled by contra                                            6,220

Bills dishonoured                                                           7,500

Bills debts written off                                                    5,260

Bills of exchange drawn on customers                        34,730

Returns Inward                                                              7,450

Returns Outwards                                                          8,920

Cash received from debtors                                       689,230

Cash paid to suppliers                                                495,140

Discount Received                                                       19,320

Discount Allowed                                                       24,750

Cash refunded to customers                                          1,270

Sales ledger, debit balance 31/12/2018                      120,570

Sales ledger, credit balance 31/12/2018                         2,010

Bought ledger, debit balance 31/12/2018                      3,340

Bought ledger, credit balance 31/12/2018                   55,340

Show all necessary workings.

You are required to prepare:

(a)    Total Debtors Accounts

(b)   Total Creditors Accounts

(c)    Total Sales

(d)   Total Purchases

SUGGESTED SOLUTIONS:

(a)	FEYISOLA ENTERPRISES
TOTAL DEBTORS ACCOUNT
Date		Particular	Folio	Amount	Date	Particular	Folio	Amount
				N				N
01/01/2018		Balance	b/f	98,260	01/01/2018	Balance	b/d	2,370
		Sales		781,540		Set-Off		6,220
		Dishonoured Bills		7,500		Bad debts		5,260
		Cash		1,270		Bills Receivable		34,730
						Return Inwards		7,450
						Cash		689,230
						Discount Allowed		24,750
31/12/2018		Balance	c/d	2,010	31/12/2018	Balance	c/d	120,570
				890,580				890580
01/01/2019		Balance	b/d	120,570	01/01/2019	Balance	b/d	2,010

(b)	FEYISOLA ENTERPRISES
TOTAL CREDITORS ACCOUNT
Date		Particular		Folio	Amount	Date	Particular	Folio	Amount
					N				N
01/01/2018		Balance		b/f	4,210	01/01/2018	Balance	b/f	72,190
		Set-Off			6,220		Purchases		513,620
		Return Outwards			8,920
		Cash			495,140
		Discount Received			19,320
31/12/2018		Balance	c/d		55,340	31/12/2018	Balance	c/d	3,340
					589,150				589,150
01/01/2019		Balance	b/d		3,340	01/01/2019	Balance	b/d	55,340

(c) Total Sales = Credit Sales + Cash Sales

Total Sales  = N781,540 + N19,360 = N 800,900

(d) Total Purchases = Credit Purchases + Cash Purchases

Total Purchases = N513,620 + N 27,380 = N 541,000

ILLUSTRATION 3

Pin and Sim formed a partnership on 1st January, 2018. The partnership agreement contains the following:

i. The partners fixed capital are Pin N30,000  and  Sim  N24,000.

ii. Sim to receive a salary of N1,800 per year.

iii. Interest on capital to be calculated at 5% per annum.

iv. Interest is to be charged on drawing at the rate of 2%.

v.  Pin and Sim to share profit in ratio 3:2 respectively.

During the year to 31st December 2018, drawings were Pin N2,250 , Sim N1,750 and the net profit was N13,500. The partners decided to maintain fixed capital account.

You are required to show:

(a)     The Profit and Loss Appropriation Account for the year ended 31st December 2018.

(b)    The partners Current Account

(c)     Statement of Financial Position ( Extract ) as at 31st December 2018

SUGGESTED SOLUTIONS:

PIN AND SIM

(a)  THE PROFIT AND LOSS APPROPRIATION
FOR THE YEAR ENDED 31ST DECEMBER, 2018
	N	N		N	N
Interest on Capital:			Net Profit		13,500
Pin (30,000 X 5%)	1,500		Interest on Drawings:
Sim (24,000 X 5%)	1,200		Pin (2,250 X 2%)	45
		2,700	Sim  ( 1,750 X 2%)	35
Salary-Sim		1,800			80
Share of Profit:
Pin (3/5 X 9,080)	5,448
Sim ( 2/5 X 9,080)	3,632
		9,080
		13,580			13,580

(b)  PIN AND SIM

THE PARTNERS CURRENT ACCOUNT
	Pin	Sim		Pin	Sim
	N	N		N	N
Drawings	2,250	1,750	Salary		1,800
Interest on drawings	45	35	Interest on Capital	1,500	1,200
Balance c/d	4,653	4,847	Share of Profit	5,448	3,632
	6,948	6,632		6,948	6,632
			Balance b/d	4,653	4,847

(c )    PIN AND SIM

STATEMENT OF FINANCIAL POSITION (EXTRACT)
AS AT 31ST DECEMBER, 2018
	N	N
Capital Accounts:
Pin	30,000
Sim	24,000
		54,000
Current Accounts:
Pin	4,653
Sim	4,847
		9,500
		63,500

ILLUSTRATION 4

The following list of balances was extracted from the records of Alasela Textile Mills on 31st December, 2018.

                                                                                        N

Stock of raw cotton: 1st January 2018                       22,100

Stock of raw cotton: 31st December 2018                 23,400

Purchase of raw cotton                                             234,500

Carriage on raw cotton brought                                  67,900

Direct wages                                                             111,300

Factory Expenses:

Depreciation on plant and machinery                         45,300

Salaries                                                                        71,200

Power and heat                                                           66,100

Insurance and maintenance                                         17,500

Required:

Prepare manufacturing account for the year ended 31st December, 2018.

SUGGESTED SOLUTIONS:

ALASELA TEXTILE MILLS
MANUFACTURING ACCOUNT
FOR THE YEAR ENDED 31ST DECEMBER, 2018
	N	N		N
Opening Stock of Raw Cotton		22,100	Cost of finished goods produced	612,500
Add: Purchases of Raw Cotton	234,500
Add: Carriage on Raw Cotton bought	67,900
		302,400
Cost of Raw Cotton available for use		324,500
Less: Closing Stock of Raw Cotton		23,400
Cost of Raw Cotton used		301,100
Direct Wages		111,300
Prime Cost		412,400
Factory Expenses:
Depreciation on plant and machinery	45,300
Salaries	71,200
Power and heat	66,100
Insurance and maintenance	17,500
		200,100
		612,500		612,500

ILLUSTRATION 5

On 1st September 2018, Alatise purchased a business for N5,770 and paid for it the same day. The assets and liabilities of the business on that day were as follows with the one on 31st October 2019.

                                                            1st September, 2018               31st October, 2019

                                                                        N                                             N

Freehold Premises                                      3,000                                        3,000

Equipment                                                     300                                           450

Shop Fittings                                                 900                                        1,100

Stock-In-Trade                                           1,400                                        1,600

Debtors                                                         320                                           640

Creditors                                                       150                                            90

Cash at Bank                                                   -                                              390

On 1st September, 2018, Alatise opened a business account into which he paid N350. During the year his drawings were:

Cash                N1,100

Goods             N140

He also brought in additional cash capital of N700.

You are required to prepare a statement showing the profit or loss of the business for the year ended 31st October 2019 after taking into consideration the following:

(i)                 Depreciation of: Shop Fittings      N100   and  Equipment           N30

(ii)               N80 was written off as bad debts.

SUGGESTED SOLUTIONS:

ALATISE
STATEMENT OF AFFAIRS
AS AT SEPTEMBER 1, 2018
		DR	CR
		N	N
Freehold Premises		3,000
Equipment		300
Shop Fittings		900
Stock in trade		1,400
Debtors		320
Bank		350
Creditors			150
Capital (Difference)			6,120
		6,270	6,270
ADJUSTMENTS
AS AT 31ST OCTOBER, 2019
	DR		CR
	N		N
i. Depreciation Account	130
Shop Fittings			100
Equipment			30
ii. Bad Debt Account	80
Debtors			80
ALATISE
STATEMENT OF AFFAIRS
AS AT OCTOBER 31, 2019
	DR		CR
	N		N
Freehold Premises	3,000
Equipment	420
Shop Fittings	1,000
Stock in trade	1,600
Debtors	560
Cash at Bank	390
Creditors			90
Capital (Difference)			6,880
	6,970		6,970
ALATISE
STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 31ST OCTOBER, 2019
	N		N
Closing Capital			6,880
Add: Drawing			1,140
			8,020
Less:
Additional Capital	700
Opening Stock	6,120
			6,820
Net Profit			1,200

ILLUSTRATION 6

Ayefele Nigeria Limited issued 200,000 ordinary shares of N1.00 each atN1.20 per

           share payable as follows:

i.                    25k per share on application.

ii.                  40k per share on allotment (including the premium)

iii.                35k per share on first call

iv.                20k per share on second and final call

           Required: Show the ledger accounts to record the above transactions.

SUGGESTED SOLUTIONS:

AIYEFELE  NIGERIA LIMITED
ORDINARY SHARE APPLICATION ACCOUNT
			N		N
Ordinary Share Capital			50,000	Cash	50,000
(200,000 X 0.25)
			50,000		50,000
ORDINARY SHARE ALLOTMENT ACCOUNT
			N		N
Ordinary Share Capital			40,000	Cash	80,000
[200,000 X (0.40-0.20)]
Share Premium			40,000
[200,000 X (1.20-1.00)]
			80,000		80,000
ORDINARY SHARE FIRST CALL ACCOUNT
			N		N
Ordinary Share Capital			70,000	Cash	70,000
[200,000 X 0.35]
			70,000		70,000
ORDINARY SHARE SECOND AND FINAL CALL  ACCOUNT
			N			N
Ordinary Share Capital			40,000	Cash		40,000
[200,000 X 0.20]
			40,000			40,000
ORDINARY SHARE CAPITAL ACCOUNT
	N							N
Balance c/d	200,000	Ordinary Share Application						50,000
		Ordinary Share Allotment						40,000
		Ordinary Share First Call						70,000
		Ordinary Share Second and Final Call						40,000
	200,000							200,000
		Balance b/d						200,000

SHARE PREMIUM ACCOUNT
	N		N
Balance c/d	40,000	Ordinary Share Allotment	40,000
	40,000		40,000
		Balance b/d	40,000

CASH ACCOUNT
	N		N
Ordinary Share Application	50,000	Balance c/d	240,000
Ordinary Share Allotment	80,000
Ordinary Share First Call	70,000
Ordinary Share Second and Final Call	40,000
	240,000		240,000
Balance b/d	240,000

STATEMENT OF FINANCIAL POSITION
	N		N
Share Capital:		Current Assets:
200,000 Ordinary Share		Cash	240,000
of N1.00 each	200,000
Share Premium	40,000
	240,000		240,000

ILLUSTRATION 7

Ajimatanraeje Nigeria Limited issued 500,000 ordinary shares of N1.00 each atN1.50

          per share payable as follows:

i.                    30k per share on application.

ii.                  75k per share on allotment (including the premium)

iii.                20k per share on first call

iv.                25k per share on second and final call

           Required: Show the ledger accounts to record the above transactions.

SUGGESTED SOLUTIONS:

AJIMATANRAEJE  NIGERIA LIMITED
ORDINARY SHARE APPLICATION ACCOUNT
			N		N
Ordinary Share Capital			150,000	Cash	150,000
(500,000 X 0.30)
			150,000		150,000
ORDINARY SHARE ALLOTMENT ACCOUNT
			N		N
Ordinary Share Capital			125,000	Cash	375,000
[500,000 X (0.75-0.50)]
Share Premium			250,000
[500,000 X (1.50-1.00)]
			375,000		375,000
ORDINARY SHARE FIRST CALL ACCOUNT
			N		N
Ordinary Share Capital			100,000	Cash	100,000
[500,000 X 0.20]
			100,000		100,000
ORDINARY SHARE SECOND AND FINAL CALL  ACCOUNT
			N			N
Ordinary Share Capital			125,000	Cash		125,000
[500,000 X 0.25]
			125,000			125,000
ORDINARY SHARE CAPITAL ACCOUNT
	N							N
Balance c/d	500,000	Ordinary Share Application						150,000
		Ordinary Share Allotment						125,000
		Ordinary Share First Call						100,000
		Ordinary Share Second and Final Call						125,000
	500,000							500,000
		Balance b/d						500,000

SHARE PREMIUM ACCOUNT
	N		N
Balance c/d	250,000	Ordinary Share Allotment	250,000
	250,000		250,000
		Balance b/d	250,000

CASH ACCOUNT
	N		N
Ordinary Share Application	150,000	Balance c/d	750,000
Ordinary Share Allotment	375,000
Ordinary Share First Call	100,000
Ordinary Share Second and Final Call	125,000
	750,000		750,000
Balance b/d	750,000

STATEMENT OF FINANCIAL POSITION
	N		N
Share Capital:		Current Assets:
500,000 Ordinary Share		Cash	750,000
of N1.00 each	500,000
Share Premium	250,000
	750,000		750,000

ILLUSTRATION 8

Differentiate between the following terms:

     a. Ordinary Shares and Preference Shares.

     b. Authorised Share Capital and Issued Share Capital

     c. Called Share Capital and  Paid Up Capital

SUGGESTED SOLUTIONS:

(a) Ordinary Shares entitle their holders to divisible profit of the company remaining after

prior interests have been satisfied whereas Preference Shares entitle to dividends at a predetermined rate before any other class of shareholders are paid.

(b)  Authorised Share Capital is the registered capital of the company as contained in the

      Memorandum of Association while Issued Share Capital is the portion of the authorised

      capital which is issued to the public for subscription.

(c)  Called Share Capital is the portion of the issued capital that has been called whereas Paid

Up Capital is the portion of the called capital to which favourable responses have been received. It represents the actual amount paid by the shareholders in respect of the calls made on them.

ILLUSTRATION 9

Write short note on the following:

 i. Prime Cost              ii. Direct Labour Cost          iii.  Cost of Raw Material Consumed

iv. Production Overhead Expenses                 v. Work-In-Progress

SUGGESTED SOLUTIONS:

i. Prime Cost: This is total direct costs which comprises of direct material cost, direct labour cost and direct expenses.                    

ii. Direct Labour Cost:  This will be given in form of manufacturing wages.         

iii.  Cost of Raw Material Consumed:  This is the direct material cost used as a component part of prime cost.

iv. Production Overhead Expenses: These are expenses relating to the factory such as Factory rent, factory rates, salary of production supervisor, factory lighting and heating, depreciation on plant and machinery, servicing and repairs of plant and machinery etc.    

v. Work-In-Progress:  The cost of production may be effected by the effect of goods which are not fully completed at the beginning and at the end of the accounting period. These are semi-finished or partly finished goods.

ILLUSTRATION 10

State six types of non-profit oriented organisation.

SUGGESTED SOLUTIONS:

The six types of non-profit oriented organisation.

i.   Government Ministries, Departments, Agencies and Corporations at Federal, State and

      Local Government Levels.

ii.  Public Educational Institutions at all levels e.g. Nursery, Primary, secondary and

     Universities etc.

iii. Health and welfare-Public hospitals, Maternity, Red Cross, Herbal Homes etc.

iv. Religious-Churches, Mosques and other religious organisation.

v.  Charitable-Community development associations, United Funds and Appeals, Clubs and

     Societies.

vi. Foundation-Private trusts and incorporated organisations for educational religious or

     ideological purposes e.g. professional chairs in Universities.

ILLUSTRATION 11

Differentiate between non-profit oriented organisation and profit oriented organisation.

SUGGESTED SOLUTIONS:

The between non-profit oriented organisation and profit oriented organisation

(i) The main objective of a profit oriented organisation is to maximize profit while that of

non-profit oriented organisation is to provide adequate welfare to the people at reasonable costs.

(ii) non-profit oriented organisation revenue is derived from the public in the form of taxation, fines, fees etc., whereas profit oriented organisation obtain their income principally from the sales of goods and services.

(iii) In non-profit oriented organisation, financial transactions are recorded on cash basis while in profit oriented organisation, it is on accrual basis.

 (iv) In non-profit oriented organisation, tangible fixed assets such as land and building, plant and machinery are not shown in the balance sheet, whereas in profit oriented organisation these are reflected, showing the historical cost, accumulated depreciation and the net book

value of each.

 (v) In non-profit oriented organisation, current assets such as stocks and debtors are not shown in the balance sheet. Debtors and creditors are not reckoned with until money is received or paid. The current assets and current liabilities are shown in profit oriented organisation.

ILLUSTRATION 12

Enumerate three accounting records and financial statements of social clubs.

SUGGESTED SOLUTIONS:

The three accounting records and financial statements of social clubs consist of:

i. Receipts and Payments Account

ii. Income and Expenditure Account

iii. Statement of Affairs

ILLUSTRATION 13

Define partnership and state the contents of partnership deed.

SUGGESTED SOLUTIONS:

Partnership is defined in the Partnership Act 1890 as “the relation which subsists between persons carrying on a business in common with a view of profit”.

The partnership deed or agreement is a set of rules and/or procedures relating to the interests of partners in the property of the partnership and their respective rights and duties. Such rules govern the internal management of the firm and its financial affairs.

The contents of a partnership deed will include the followings:

i.                    The rights and duties of each partner.

ii.                  The amount of capital to be contributed by each partner.

iii.                The share of profits and losses.

iv.                The amount of drawings by each partner in anticipation of profit.

v.                  The salaries (if any) to be paid to the partners.

vi.                The rate of interest (if any) to be allowed on capital.

vii.              The rate of interest (if any) to be charged on drawings.

viii.            Rules on the recording of partnership transactions and preparation of financial statement.

ix.                Whether or not the accounts of the partnership should be audited.

x.                  The circumstance under which the partnership shall be dissolved.

xi.                Statements of the entitlement of a retiring or deceased partner.

xii.              The basis and policy in respect of goodwill.

ILLUSTRATION 14

In the absence of an agreement by the partners, Section 24 of the Partnership Act 1890 shall apply. State the provisions.

SUGGESTED SOLUTIONS:

In the absence of an agreement by the partners, Section 24 of the Partnership Act 1890 shall apply. It provides that:

i.                    Capital shall be contributed equally by the partners.

ii.                  Profit or Loss shall be shared equally among the partners.

iii.                A partner is entitled to be indemnified in respect of payments made and personal

     liabilities incurred in the course of the partnership business.

iv.                Interest shall be paid at 5% on monies provided by any partner in excess of his agreed

     capital contribution.

v.                  No interest shall be paid on capital.

vi.                No remuneration shall be paid to partners for running the partnership business.

vii.               Every partner may partake in the running of the affairs of the partnership.

viii. Introduction of a new partner shall be with the consent of all existing partners.

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