Series: MAR/JULY 2020

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FR – March 2020 – L2 – Q4b – Financial Statement Presentation of Government Grants

Prepare financial statement extracts using two methods of presenting government grants under IAS 20

Question

b. During the year ended June 30, 2019, Gbogbonise Enterprises having qualified for the 25% local equity participation, received the following grants from Central Bank of Nigeria (CBN).

(i) On September 1, 2018, a grant of N1 million was received from CBN. The grant was in respect of training casual workers. The training cost incurred by Gbogbonise Enterprises in this respect, was N1.75 million.

(ii) On November 1, 2018, Gbogbonise Enterprises acquired plant and equipment costing N8.75 million and received a grant of N2.5 million from Central Bank of Nigeria (CBN) in respect of the purchase. The plant and equipment which has a residual value of N1.25 million is depreciated on straight-line basis over its useful life of 5 years.

(iii) On June 1, 2019, a grant of N2.5 million was made by CBN. The grant was in respect of relocation costs that Gbogbonise Enterprises had incurred for movement of its business to a free trade zone allocated to Medium, Small and Micro Enterprises (MSME). The grant is repayable in full unless Gbogbonise Enterprises recruits at least one hundred (100) employees from the free trade zone local area by the end of the month of June 2019. Gbogbonise is finding it difficult to recruit this number of employees in the local area.

Required:
Prepare extracts of the statement of financial position and statement of profit or loss of Gbogbonise Enterprises for the year ended June 30, 2019 using the two methods of presenting grants in the financial statement of business entities. (12 Marks)

Answer

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Level: Level 2

Topic: Accounting for Government Grants
Series: MAR/JULY 2020

FR – March 2020 – L2 – Q6b – Financial Reporting

Discuss objectives of FRCON and ethical issues in reporting.

Question

b. The regulatory body responsible for issuing accounting standards in accordance with local and international regulations in Nigeria is the Financial Reporting Council of Nigeria (FRCON).
Required:
Explain briefly THREE main objectives of setting up the Financial Reporting Council of Nigeria (FRCON) and identify TWO ethical issues in financial reporting which companies may be sanctioned for by this body.
(10 Marks)

Answer

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Tags: Conceptual Framework, Economic Decisions, Financial Reporting
Level: Level 2

Topic: Conceptual Framework for Financial Reporting
Series: MAR/JULY 2020

CSME – Mar/Jul 2020 – L2 – Q4b – Board Diversity Categories and Benefits

Explain six categories of board diversity and evaluate its benefits.

Question

b. i. What is Board Diversity and explain SIX categories of Board Diversity? (5 Marks)
ii. Evaluate the benefits of Board Diversity. (5 Marks)

Answer

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Tags: Board Diversity, Corporate Governance, Decision Making, Ethical Business Practices
Level: Level 2

Topic: Board Diversity, Corporate Governance
Series: MAR/JULY 2020

CSME – Mar/July 2020 – L2 – Q2b – Ethical Absolutism vs Relativism in Accounting

Distinguish between ethical absolutism and ethical relativism and identify types of ethical relativism.

Question

b. An adequate understanding of basic concepts and theories of ethics is a prerequisite for the evolution of the skills needed to address ethical issues that could arise while carrying out your duty as a professional accountant. Distinguish between ethical absolutism and ethical relativism. Also, identify THREE types of ethical relativism. (10 Marks)

Answer

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Tags: Business Ethics, Ethical Absolutism, Ethical Relativism, Professional Ethics
Level: Level 2

Topic: Ethics in Business, Professional Ethics
Series: MAR/JULY 2020

AA – Mar/July 2020 – L2 – Q5 – Assurance Services and Due Diligence for Hallmark Ltd

List control objectives and activities for cash sales and bank lodgments.

Question

List TWO control objectives and THREE control activities that should be put in place for each of the following:
i. Cash sales. (5 Marks)
ii. Lodgments into bank. (5 Marks)

Answer

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Tags: Bank Lodgments, Cash Sales, Control Activities, Control Objectives, Internal Control
Level: Level 2

Topic: Internal Control Systems
Series: MAR/JULY 2020

PSAF – Mar/July 2020 – L2 – Q4 – Responsibilities of EFCC and Debt Burden Transfer

This question requires the preparation of financial statements for Amotekun State University of Education, Ode, for 2018.

Question

b. Amotekun State University of Education, Ode, was the second university established by the Amotekun State of Nigeria. The government, as a mark of its commitment towards the survival of this young institution, has continued to support the University Senate in all its efforts. At the last meeting of the stakeholders, held at the state hotel, Igbo, on June 30, 2019, the Bursar presented the following financial statements for discussion and approval:
Amotekun State University of Education
Statement of Financial Position as at December 31, 2018

The following notes form an integral part of these accounts.
Amotekun State University of Education
Statement of financial performance for the year ended December 31, 2018

The following notes which form an integral part of the accounts, were also provided

2.
The Oke-Mosan Microfinance Bank balance in 2018 represents the „short term
loan

The Chairman of the Governing Council, who incidentally is a chartered accountant, observed that the financial statements appeared incomplete because no statement of cash flows was prepared.
Required:
Prepare, a statement of cash flows for Amotekun State University of Education for the year ended December 31, 2018, using the direct method in accordance with IPSAS 2

Answer

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Tags: Financial Statements, Government Accounting, Public sector financial reporting
Level: Level 2

Topic: Public Sector Financial Statements
Series: MAR/JULY 2020

PSAF – Mar/July 2020 – L2 – Q2 – IPSAS 3 Changes and Expenditure Assignment Challenges

Explanation of changes in accounting policies and challenges in expenditure assignment according to IPSAS 3.

Question

IPSAS 3 – Accounting policies, changes in accounting estimates and errors, outlines criteria for selecting and changing accounting policies among other purposes.

a. Explain what constitutes changes in accounting policies under the standard.
(4 Marks)

b. Outline THREE disclosure requirements in the standard:

(i) When initial application of IPSAS 3 is made and has effects on current, prior, or future period.
(ii) When voluntary changes in accounting policy are made and have effects on current, prior, or future period.
(6 Marks)

c. Expenditure assignment refers to division or sharing of expenditure, regulatory, and tax functions or responsibilities among multi-levels of governments in a federation. Identify and explain FIVE challenges prevalent on expenditure assignment.
(10 Marks)

Answer

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Tags: Accounting Changes, Accounting Policies, Expenditure assignment, IPSAS 3
Level: Level 2

Topic: International public sector accounting standards
Series: MAR/JULY 2020

PSAF – Mar/July 2020 – L2 – Q3 – National Chart of Accounts Characteristics and Structures

Characteristics of National Chart of Accounts, its structures for budgeting, and problems with debt conversion programmes.

Question

National Chart of Accounts (NCOA) shows the complete list of budget and Accounting items for General Purpose Financial Reporting System (GPFS) and budgeting.
Required:
a. Identify FOUR characteristics of National Chart of Accounts. (4 Marks)

b. Discuss the SIX structures of the National Chart of Accounts for budgeting. (6 Marks)

c. Discuss FIVE problems associated with debt conversion programmes in a country. (10 Marks)

Answer

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Tags: Budgeting, Debt Conversion, National Chart of Accounts, Public Finance
Level: Level 2

Topic: Debt Management, National Chart of Accounts
Series: MAR/JULY 2020

PSAF – Mar/July 2020 – L2 – Q5 – Matanmi Local Government Council 2019 Budget Preparation

This question focuses on budgeting for overheads and road repairs by local governments and the characteristics of public goods.

Question

Major towns and cities in Ibadan State, which is one of the states in the South West of the country, are maintained by local government councils, which are funded through allocations from the federation account, state accounts, and internally generated revenue. The local government councils submit budgets each year, which forms the basis of the funds received.

Matanmi Local Government Council, one of the local government councils in Ibadan State, provides you with the following information as part of the 2019 budget preparation:

Overheads:
Overhead costs are budgeted on an incremental basis, taking the previous year’s actual expenditure and adding a set percentage to allow for inflation. Adjustments are also made for known changes. The details are:

Note 1: One new staff member will be added to the payroll, costing N300,000 in 2020.
Note 2: A move toward a paperless office is expected to reduce stationery costs by 20% in 2020.
Road Repairs:
In 2020, it is expected that 200 kilometers of road will require maintenance, but a contingency of an extra 10% has been agreed.
In 2019, the average cost of a road repair was N1,500,000 per kilometer, but this did not include any cost effects of extreme weather conditions. The following probability estimates have been made in respect of 2020:

Inflation on road maintenance costs is expected to be 10% between 2019 and 2020.

New roads are budgeted on a zero-based basis and will have to compete for funds along with other capital projects such as hospitals and schools.
Required:
a. Calculate the overheads and road repairs budgets for the year 2020.
(10 Marks)

b. The goods and services produced in every society can be classified into public and private goods.
Identify and explain TWO sub-divisions and THREE characteristics of public goods.
(10 Marks)

Answer

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Tags: Local Government Budget, Overheads, Public Goods, Road Repairs
Level: Level 2

Topic: Local Government Accounting, Public Goods
Series: MAR/JULY 2020

PSAF – Mar/Jul 2020 – L2 – Q1a – Accounting for Government Assets and Liabilities

Prepare a non-current assets schedule for a university and identify features of a finance lease in compliance with IPSAS.

Question

In the year 2000, Amotekun State of Nigeria established two State Universities University of Education (ASUE), to cater for the indigenes of the state. The following information relates to each of the universities:
a. The Bursar of Amotekun State University, Oke-Mosan, delegated the preparation of Non-current assets schedule to be included in the final accounts of the University for the year ended December 31, 2018, to one of the Deputy Bursars in the Bursary Department.
In the discharge of the assignment, the Deputy Bursar reviewed the following documents:

International Public Sector Accounting Standards (IPSAS).
Previous year’s financial report.

He was able to obtain the following information:

(i)

Non-current assets register.
Valuation reports, etc.

(i) It is the policy of the University to charge a full year’s depreciation on assets irrespective of the month of purchase or revaluation during the year, while no depreciation is charged on assets disposed of during the year.

(ii) Equipment on lease is depreciated equally over the period of the lease.

(iii) Land and buildings were professionally revalued during the year by Parisco & Associates, a firm of Chartered Surveyors and Valuers, and approved by the State Ministry of Works and Housing. The valuation, which was based on the open market value, produced a revaluation surplus of N150,000,000 over the carrying amount as at January 1, 2018.

(iv) The University purchased plant and machinery which was imported from the United Kingdom at a cost of N430,500,000. Installation and transportation costs to the University amounted to N20,500,000.

(v) The Deputy Bursar that prepared the non-current assets schedule last year classified some of the computer equipment purchased on May 15, 2017, costing N26,000,000 as office equipment. A reclassification is required in the current year.

(vi) Office furniture and fittings costing N12,250,000 were disposed of during the year for N11,500,000, which resulted in a profit of N750,000.

(vii) The University entered into an equipment lease agreement with Ode Finance Limited; the terms and conditions of the finance lease are as follows:
Principal sum: N45,000,000
Lease period: 5 years
Lease rentals: N10,000,000 p.a.
(viii) During the year, the University acquired a fleet of vehicles at the cost of N50,000,000. The State Government financed this acquisition.

Required: i. In accordance with IPSAS 13, identify FIVE features of a finance lease. (5 Marks) ii. Prepare the non-current assets schedule of Amotekun State University suitable for publication. (15 Marks)

Answer

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Tags: Asset Register Question, Depreciation, Finance leases, IPSAS, Non-current assets schedule, Revaluation
Level: Level 2

MI – Mar-Jul 2020 – L1 – SB – Q6b – Information Systems

State two features of deterministic, probabilistic, and cybernetic systems.

Question

State TWO features of each of the following systems.

i. Deterministic Systems
ii. Probabilistic Systems
iii. Cybernetic Systems

Answer

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Tags: Cybernetic Systems, Deterministic Systems, Information Systems, Probabilistic Systems, System Theory
Level: Level 1

Topic: Information Systems
Series: MAR/JULY 2020

MI – Mar-Jul 2020 – L1 – SB – Q6a – Information Systems

Define open system, closed system, feedback control, and feed-forward control.

Question

A system is a group of related elements or activities that are organised for a specific purpose or to achieve a common objective.

Required:

Define the terms:

i. Open System
ii. Closed System
iii. Feedback Control
iv. Feed-Forward Control

Answer

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Tags: Closed System, Feed-Forward Control, Feedback Control, Information Systems, Open System, System Theory
Level: Level 1

Topic: Information Systems
Series: MAR/JULY 2020

MI – Mar-Jul 2020 – L1 – SB – Q5b – Information Systems

Explain the main approaches to managing the risk of computer fraud and measures to provide protection against fraud and theft.

Question

“Computer systems are often at risk of fraud or theft.”

i. List and explain briefly the TWO main approaches to managing the risk. (5 Marks)

ii. State FOUR measures that can provide protection against fraud and theft. (5 Marks)

Answer

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Tags: Computer Fraud, Fraud Prevention, Information Systems, Risk Detection, Risk Management
Level: Level 1

Topic: Information Systems
Series: MAR/JULY 2020

MI – Mar-Jul 2020 – L1 – SB – Q5a – Information Systems

State the factors to consider and types of application packages available when selecting a software application

Question

Application packages are meant for specific processes, and every process that runs on the computer has at least an associated application.

i. State FIVE factors to be considered in selecting an application package. (5 Marks)

ii. State FIVE types of application packages available. (5 Marks)

Answer

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Tags: Application Packages, Information Systems, IT Management, Software Selection
Level: Level 1

Topic: Information Systems
Series: MAR/JULY 2020

MI – Mar-Jul 2020 – L1 – SB – Q4 – Business Process Technologies

Prepare a monthly cash budget for Wareroom Trading Limited for the first three months of 2020 using a columnar format.

Question

The following information relates to Wareroom Trading Limited:

Month	NOV 2019	DEC 2019	JAN 2020	FEB 2020	MAR 2020
Sales (N)	850,000	950,000	720,000	750,000	780,000
Purchases (N)	360,000	360,000	300,000	400,000	350,000

Additional information:

All sales are on credit, collectible 50% in 30 days, 25% in 60 days, 20% in 90 days, and balance regarded as bad debts.
All purchases are also on credit, payable 40% in 30 days and 30% each in 60 and 90 days respectively.
A new generator costing N455,000 will be acquired in February under a 30-day credit agreement.
An old car will be sold for N50,000 cash in February.
Monthly salaries are N80,000 payable as and when due.
Commission on sales is 5% payable to sales agents 2 months in arrears.
Company income tax of N235,000 is due and payable in January.
An investment is expected to bring in N60,000 gross in February, subject to 10% withholding tax.
The staff Christmas party in December is expected to cost the company a total of N90,000, though 60% of the expenses will be pushed for settlement the month following.
Assume an overdraft of N283,000 on 31 December 2019.

Required:

Prepare a monthly cash budget for Wareroom Trading Limited for the first three months of 2020 using a columnar format. (Total 20 Marks)

Answer

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Tags: Budgeting, Cash Budget, Credit Purchases, Credit Sales, Financial planning
Level: Level 1

Topic: Business Process Technologies
Series: MAR/JULY 2020

MI – Mar-Jul 2020 – L1 – SB – Q3 – Decision-Making Techniques

Determine the optimal production plan and prepare the income statement based on the given production constraints and sales data.

Question

ZUBEY LIMITED manufactures 4 homogeneous products A, B, C, and D with the following projections for the coming year:

The market can only absorb a maximum of 250,000 units of whatever mix in a year.

Assume no opening or closing stocks.

Required:

a. Compute the optimal production plan. (9 Marks)

b. Prepare the income statement arising from (a) above. (11 Marks)

Answer

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Tags: Cost Management, Decision Making, Production planning, Profit Optimization
Level: Level 1

Topic: Decision making techniques
Series: MAR/JULY 2020

MI – Mar-Jul 2020 – L1 – SB – Q2b – Costing Techniques

Prepare ledger accounts for a backflush accounting system based on the given data for production and sales.

Question

XYZ operates a backflush accounting system with the following standard costs:

Raw materials (5Kg per unit) @ N230 per Kg
Personnel cost @ N300 per unit
Overheads @ N750 per unit

During a period, the following was achieved:

Raw materials purchased: 24,500 Kg
Production: 4,800 units
Sales: 4,600 units

There was no opening stock, and the triggers used for initiating accounting entries are:

Purchase of raw materials;
Sale of finished goods.

Required:

Prepare the following ledger accounts:

i. Combined raw materials and work-in-progress (WIP)
ii. Conversion cost
iii. Cost of goods sold
iv. Period expenses

Answer

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Tags: Backflush Accounting, Cost Management, Costing Techniques, Ledger Preparation
Level: Level 1

Topic: Costing Techniques
Series: MAR/JULY 2020

MI – Mar-Jul 2020 – L1 – SB – Q2a – Costing Techniques

List the characteristics of a Just-In-Time (JIT) environment in manufacturing.

Question

The aim of the just-in-time system is to produce the required items with high quality and at the exact time required.

i. List FIVE characteristics of the just-in-time environment. (5 Marks)
ii. List FIVE benefits from the just-in-time system. (5 Marks)

Answer

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Tags: Cost Management, Costing Techniques, Inventory Management, Just-in-Time, Lean Production
Level: Level 1

Topic: Costing Techniques
Series: MAR/JULY 2020

MI – Mar-Jul 2020 – L1 – SB – Q1 – Costing Methods

Prepare a contract account, statement of financial position, and calculate the expected profit on a construction project.

Question

Piano Construction Company Limited has been in operation for many years. The following relates to Contract AO50 on the Akure-Owo site as at 31st Dec., 2017.

Item	Amount (N’000)
Wages	42,156
Materials delivered directly to site	54,203
Materials from main stores	657
Materials transferred to Akure-Ibadan Site	1,590
Plant purchased at cost	12,500
Plant transferred to Akure-Owo Site	5,250
Sub-contractor’s charges	19,580
Site expenses	5,086
Materials on site at 31st Dec.	18,300
Plant on site at 31st Dec.	14,750
Accrued wages at 31st Dec.	921
Prepayments at 31st Dec.	507
Value of work certified	117,500
Cost of work certified	102,300
Progress payments received from client	115,000

Head office charges are 10% of wages.

The contract value is N550,000,000 and it is anticipated that there will be further costs of N375,000,000 (including rectification claims). As this is the 1st year of the contract, no profit has been taken previously.

Required:

Prepare the Contract Account for project AO50 for the year ended 31st December, 2017. (15 Marks)
Prepare the Statement of financial position extracts as at 31st December, 2017. (3 Marks)
What is the expected profit on the contract on completion? (2 Marks)

Answer

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Tags: Construction Project, Contract Costing, Cost Management, Financial Reporting, Profit Calculation
Level: Level 1

Topic: Costing Methods
Series: MAR/JULY 2020

MI – Mar-Jul 2020 – L1 – SA – Q20 – Information Systems

Identify the feature that is not associated with a batch processing system.

Question

Which of the following is NOT a feature of Batch Processing System?

A. It is used for data processing that needs no frequent processing
B. It uses the process of queuing method
C. It requires many users at remote locations
D. Processing time is predetermined
E. Every transaction is processed together at once

Answer

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Tags: Batch Processing, Information Systems, System Features
Level: Level 1