Question Tag: Journal Entries

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  • 20 Marks

CR – May 2016 – L3 – Q3 – Income Taxes (IAS 12)

Discuss and account for deferred taxation arising from temporary differences using IAS 12 for Limelight Plc.

Limelight, a public limited company, is a major player in commodity brokerage and supplies. The following transactions relate to the year ended December 31, 2014.

Profit before taxation for the year was ₦487.5m. Taxable profit for the same period was ₦131.25m.

The balances of non-current assets of the company, at December 31, 2014:

N’000 Amount
Accounting carrying amount 937,500
Tax written down value 637,500

The balances above do not include a freehold building purchased in February 2014 for ₦750m. This building was revalued to ₦985m on December 31, 2014.

Accrued rental income on investment property at December 31, 2014, amounted to ₦9.75m. This income was credited to the statement of profit or loss as at year-end but was not received until three months after. Rental income is taxed by the Federal Inland Revenue Service on an actual basis when it is received.

No other temporary differences exist at December 31, 2014. Income tax and Withholding taxes on rental income are paid at 30% and 10% respectively, six months after the year.

Required:

a) Discuss the conceptual basis for the recognition of deferred taxation by Limelight Plc using the temporary difference approach in accordance with IAS 12, arising from the above transactions.

b (i) Outline how the above transactions should be accounted for using journal entries where appropriate.

b (ii) Calculate the provision for deferred tax after any necessary adjustments to the financial statements at December 31, 2014, and use journal entries.

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  • 10 Marks

CR – May 2021 – L3 – Q1c – Property, Plant and Equipment (IAS 16)

Record journal entries for PPE acquisition and related foreign exchange adjustments in the books of Ngono Plc.

c. Ngono Plc. has a financial year end of September 30. The Company buys property, plant and equipment for its office in Nigeria from foreign supplier Omaha Inc. in USA. On June 30, 2020, Ngono Plc. took delivery of PPE from Omaha Inc. with invoice value amounting to $100,000 and is due for settlement in equal instalments on August 30, 2020 and November 30, 2020. Clearing cost and import duty paid on the acquisition of the PPE amounted to N1,250,000. It is the policy of Ngono Plc to depreciate PPE at 20% on cost using the straight –line method. The depreciation is provided in full in the year of acquisition and none in the year of disposal.
Both Ngono Plc. and Omaha Inc. honoured their own part of the agreement in the transaction.
Movement recorded in the exchange rate were as follows:

Required:
Show the journal accounting entries to record the above transaction in the books of Ngono Plc. (10 Marks)

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  • 4 Marks

PSAF – Nov 2023 – L2 – Q3b – Public Procurement and Contract Management

Prepare journal entries to record revenue, expenses, and payments for a healthcare construction project.

Based on the budget of Azare Federal Ministry of Health and Wellbeing (AFMHW), a contract to construct 5 units of Primary Healthcare Centres (PHC) in each of the six (6) geo-political zones to address malaria, infant deaths, and years of neglect in prioritizing primary healthcare and well-being of the citizens was signed with Alaafia Construction Company. This contract was at the cost of N12,250,200 per unit, with a 2-year contract duration and no variation clause.

A valuation certificate was submitted at the end of year one, which showed that over 60% of the contract has been executed, while N294,004,800 has been estimated to have been spent on the project since inception. There were also indications that the office of AFMHW has paid the contractor a total sum of N244,100,000.

Required:

Prepare journal entries to record the above transactions. (4 Marks)

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  • 8 Marks

FR – Nov 2022 – L2 – Q4d – Amortisation Schedule for Bond

Prepare amortisation schedule for Lagos State Government Bond and record journal entries on maturity date.

On January 1, 2020, an entity bought Lagos State Government Bond in the capital market for N575,000,000. The principal amount of the bond is
N500,000,000 and it is redeemable at par on December 31, 2025. The bond has a stated interest rate of 15% payable annually and an effective interest rate of 12%. Draft an amortisation schedule to indicate the amortised cost at the end of each year and the journal entries at the end of December 31, 2025

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  • 40 Marks

PSAF – May 2021 – L2 – Q1 – Public Sector Financial Statements

Apply IPSAS standards to adjust and analyze financial information for Okuku State University.

Okuku State University is a parastatal under Okuku State, not classified as a Government Business Enterprise (GBE). The following is the statement of financial position for the University as of December 31, 2018:

Statement of Financial Position (as at Dec 31, 2018)

Item Cost (₦’million) Accumulated Depreciation (₦’million) Carrying Amount (₦’million)
Land and Buildings 15,000 250 14,750
Equipment 1,000 100 900
Furniture 800 80 720
Plant & Machinery 550 50 500
Motor Vehicles 450 45 405
Total Non-Current Assets 17,800 525 17,275
Inventories 11,000 – –
Receivables 15,000 – –
Bank 3,000 – –
Total Current Assets – – 29,000
Total Assets – – 46,275
Non-Current Liabilities – – 30,000
Current Liabilities – – 8,000
Total Liabilities – – 38,000
Net Assets – – 8,275
Reserves – – 8,275

Additional Information:

  1. Office equipment was purchased for ₦150,000,000 from Joko Nigeria Limited, with installation and transportation costing ₦3,000,000. Half was paid during the year, with the remainder in January 2019. The University also acquired a building valued at ₦500,000,000 from a defunct State College.
  2. The University Teaching Hospital received motor vehicles and laboratory equipment donations worth ₦20,000,000 and ₦50,000,000, respectively, from a UK-based research institute.
  3. A motor vehicle bought on January 1, 2017, for ₦8,000,000 with a five-year life was sold for ₦4,000,000 at year-end.
  4. Computers bought in 2017 for ₦1,000,000, with an expected five-year lifespan, were damaged in a fire and written off.
  5. Land was bought for ₦50,000,000 for constructing a plaza valued at ₦250,000,000, with an estimated 25-year life.
  6. One building, valued at ₦160,000,000, was damaged by fire, with a post-fire valuation of ₦130,000,000.
  7. A motor vehicle was acquired on January 1, 2018, for ₦150,000,000.
  8. The University’s depreciation policy includes full-year depreciation with rates: Motor Vehicle 20%, Building 4%, Furniture 10%, Equipment (including Lab and Computers) 20%, and Plant and Machinery 15%.

Required:
a. Identify FOUR characteristics of Government Business Enterprises (GBEs) as
stated in IPSAS 1 on presentation of financial statements. (2 Marks)
b. Prepare the necessary journal entries to record the above transactions for
the year ended December 31, 2018. (10 Marks)
c. Prepare the adjusted statement of financial position as at December 31,
2018. (20 Marks)
d. Identify and explain FOUR qualitative characteristics of financial reporting as
required by appendix 2 of IPSAS 1 on presentation of financial statements.
(8 Marks)

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  • 15 Marks

FA – May 2012 – L1 – SB – Q5 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

Recording journal entries for three trade-in options for machinery and selecting the most viable option.

Fancy Enterprises has machinery that cost N750,000 with an accumulated depreciation of N510,000. The firm is contemplating acquiring new machinery to replace the old one. The new machinery has a catalog price of N1,290,000 and attracts a 12% trade discount. The following options are available:

(i) Trade in the old machinery and add cash of N895,200.
(ii) Trade in the old machinery and add cash of N600,000.
(iii) Trade in the old machinery and add cash of N1,080,000.

You are required to:

(a) Record journal entries for each of the options, considering the information provided above.
(b) Which of the options is economically viable for the firm to acquire the new machinery?
(14 Marks)

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  • 1 Marks

FA – May 2012 – L1 – SA – Q3 – Trial Balance

Identifying how a trial balance helps disclose errors.

In which of the following circumstances will the preparation of a Trial Balance assist in disclosing an error?

A. Failure to post an entry journal
B. Posting rent expenses to motor running account
C. Failure to post part of a journal entry
D. Posting the debit of a journal entry as a credit and vice versa
E. Failure to record an entry in the journal

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  • 10 Marks

FR – Nov 2020 – L2 – Q5c – Impairment of Assets (IAS 36)

Explain disposal group and rules of recognition under IFRS 5, determine impairment loss, and allocate impairment on the assets.

The Board of directors of Adamu Limited has decided to dispose of a group of held-for-sale assets. The extracts of carrying amounts of the assets immediately before classification as held-for-sale were stated as follows:

Assets N’000
Goodwill 80,000
PPE at revalued amounts 208,000
PPE at cost 320,000
Inventory 84,000
Financial asset 68,000

Total: 760,000

The Board estimated that the fair value of the disposal group is N650,000,000 gross, with selling costs amounting to N10,000,000.

Required:
i. Explain what is meant by disposal group and the rules of recognition under IFRS 5 – Non-current assets held for sale and discontinued operations. (2 Marks)

ii. Determine and allocate the impairments on the disposed-off asset under IFRS 5. (4 Marks)

iii. Prepare necessary journal entries to record the transactions. (1 Mark)

iv. Identify THREE applicable criteria under IFRS 5 for classifying an asset or disposal group as held for sale in the financial statements. (3 Marks)

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  • 15 Marks

FA – Nov 2011 – L1 – SB – Q6 – Recording Financial Transactions

This question requires the journal entries to record consignment transactions.

The following transactions were recorded in the books of Fadep Enterprises:

(i) On 1 October 2010, Fadep Enterprises sent goods worth N160,000 on consignment to Associate Enterprises and incurred expenses on transportation and loading of N4,800 and N1,200 respectively.
(ii) On 7 October 2010, Associate Enterprises received the consignment and paid N80,000 into the bank account of Fadep Enterprises.
(iii) On 31 October 2010, Associate Enterprises prepared and sent an Account Sales to Fadep Enterprises having made sales of N180,000. The remaining goods on hand were valued at N16,000 at original cost.
(iv) Associate Enterprises deducted 2.5% as commission and off-loading expenses of N2,000.
(v) On 5 November 2010, Associate Enterprises sold the remaining goods for N20,000.

You are required to:
(a) Prepare the journal entries with narration to record the above transactions in the books of Fadep Enterprises. (13 marks)
(b) State TWO principal differences between goods on consignment and sale of goods. (2 marks)

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  • 15 Marks

FA – Nov 2020 – L1 – SB – Q3b – Correction of Errors

Provide journal entries to correct errors and prepare a suspense account.

Your subordinate in POP-Two Ventures, an inexperienced bookkeeper, has informed you that the trial balance failed to agree by a difference of N170,000, recorded on the credit side of a suspense account. After investigating, you discovered the following errors:

Errors Amount (N’000)
Cash payment debited to the bank cash book 360
Overcasting of sales 700
Overcasting of purchases 700
Returns inwards omitted from the books 380
Bank charges posted into the cash book without a corresponding entry elsewhere 370
Opening receivables balance brought down incorrectly 180
PPE sold, credited to sales account instead of the correct account 5,000

Required:

i. Effect the necessary corrections by means of journal entries (11 Marks)
ii. Prepare the suspense account (4 Marks)

(Total 15 Marks)

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  • 1 Marks

FA – Nov 2020 – L1 – SA – Q18 – Accounting for Property, Plant, and Equipment (IAS 16)

Determines the correct journal entry for the credit purchase of property, plant, and equipment (PPE).

Which of the following journal entries correctly records the credit purchase of property, plant, and equipment (PPE)?

Account to be Debited Account to be Credited
A. PPE register Purchases ledger control
B. Purchase ledger control PPE
C. Bank PPE
D. PPE Supplier of PPE
E. PPE PPE disposal

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  • 1 Marks

FA – Nov 2020 – L1 – SA – Q16 – Correction of Errors

Identifies the correct journal entry to fix a sales/purchase misposting.

Jone Bosco has credit facility with a local trade supplier. A purchase invoice was credited to the supplier’s account and debited to the sales account.

Which of the following journal entries will correct the error?

Account to be Debited Account to be Credited
A. Sales Supplier
B. Sales Purchases
C. Sales Payables
D. Purchases Sales
E. Supplier Sales

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  • 1 Marks

FA – May 2014 – L1 – SA – Q18 – Accounting Concepts

This question tests knowledge of the accounting entries for recording scrapped containers in container trading accounts.

In accounting for Containers using container trading account method, the necessary accounting entries to record scrapped containers are ………………….

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  • 15 Marks

FA – Nov 2013 – L1 – SB – Q5 – Partnership Accounts

Preparation of journal entries for share issue, forfeiture, and reissue transactions.

Mosafejo Plc issued 200,000 Ordinary Shares of N1.00 each at N1.40 per share, payable as follows:

(i) 35 kobo on application
(ii) 65 kobo on allotment (including premium)
(iii) 40 kobo on first and final call

All the monies were received on due dates except for 20,000 shares not paid on first call. The holders of these shares failed to pay up, and after some reminders, the shares were forfeited. The shares were re-issued at 75 kobo per share, and all the monies received.

You are required to:
(a) Draw up journal entries to record the above transactions.
(11 Marks)

(b) The Share Premium Account may be used in certain circumstances. List any TWO circumstances in which the Share Premium Account may be used.
(4 Marks)

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  • 1 Marks

FA – Nov 2013 – L1 – SA – Q40 – Recording Financial Transactions

Raising journal entries for the transfer of a personal asset to a business.

Okocha transferred his car for use to his business. Raise journal entries to record this transaction.

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  • 1 Marks

FA – Nov 2013 – L1 – SA – Q21 – Recording Financial Transactions

Identifying the accounting entries for recording container purchase.

What are the accounting entries to record the purchase of containers?

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  • 20 Marks

FA – Nov 2015 – L1 – SB – Q4 – Financial Statements Preparation

Determine total acquisition cost and prepare journals for share issue transactions.

a. The information below shows the analysis of costs of a newly purchased equipment by JONAK Nig. Ltd.

Description N
Cost of equipment 3,000,000
2% cash discount for payment within 30 days (enjoyed) 60,000
Transport cost 100,000
Hospitality cost for factory workers during installation 25,000
Installation cost 150,000
Repair cost prior to use 65,000
Salaries of operators 125,000

Determine the total acquisition cost of the equipment. (5 Marks)

b. MEMORY Nigeria Limited decided to issue 100,000,000 N1 ordinary shares. The terms of issue are stated below:

  • (i) 30k on application
  • (ii) 45k (including premium) on allotment
  • (iii) 20k to be called one month after allotment
  • (iv) 25k final call made four months later after allotment.

On December 29, applications were received for 120,000,000 shares. On January 1, the shares were allotted so that every applicant received two-thirds of the number of shares applied for. Excess application monies were held against the amount due on allotment. On January 4, the cash due on allotment was received. On February 1, the first call was made and on February 3, cash was received. On May 1, the second call was made and cash was received on May 3.

Required: b. Raise the necessary Journals to record these transactions. (11 Marks) c. State the difference between authorised share capital and called-up share capital (4 Marks)

(Total 20 Marks)

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  • 1 Marks

FA – Nov 2015 – L1 – SA – Q7 – Correction of Errors

This question asks for the correct journal entry to rectify an error in recording staff uniform expenses.

Abiao Company purchased security staff uniform for N250,000. The Accounts Officer felt that the amount was too high to be charged to expenses and consequently debited the amount to the office equipment account.
The journal entry to correct this error is:
A. Dr. Staff uniform account Cr. Office equipment account
B. Dr. Staff uniform account Cr. Suspense account
C. Dr. Office equipment account Cr. Suspense account
D. Dr. Office equipment account Cr. Staff uniform account
E. Dr. Purchases account Cr. Office equipment account

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