Series: MAY 2014

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BL – May 2014 – L1 – SB – Q6 – Negotiable Instruments

Discussing characteristics of negotiable instruments and banker duties.

Question

a. “A Negotiable Instrument must express clarity in the instruction on the instrument without any ambiguity”. Explain TWO characteristics of a Negotiable Instrument. (4 Marks)

b. The relationship between the banker and his customer is said to be the relationship between a debtor and a creditor. You are required to state FIVE duties of a banker to its customer. (5 Marks)

c. A testator that has made a Will can only revoke it under certain circumstances. Explain THREE ways by which a Will may be revoked. (6 Marks)

Answer

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Tags: Banking Law, Negotiable Instruments
Level: Level 1

Topic: Negotiable Instruments
Series: MAY 2014

BL – May 2014 – L1 – SB – Q5 – Corporate Governance

Discussing requirements for incorporation and the implications of proposed company names.

Question

a. Jossy is a cabinet maker based on Victoria Island, Lagos, where he has a lucrative business. Jossy is proposing to expand his business and wants to invite James to form a Limited Liability Company, using the name Jossy James Limited.

You are required to:
i. State FIVE documents that must be filed for the incorporation of the company; and (5 Marks)
ii. Advise the parties on whether the proposed name, Jossy James Limited is appropriate and, state FOUR prohibited or restricted company names. (5 Marks)

b. State FIVE advantages of a Limited Liability Company over a Partnership. (5 Marks)

Answer

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Tags: Company Law, Company Secretary, Incorporation
Level: Level 1

Topic: Corporate Governance
Series: MAY 2014

BL – May 2014 – L1 – SB – Q4 – Partnership Law

Discussing the duties of a Company Secretary and circumstances benefiting non-partners in a partnership.

Question

a. “Every company must, by law, have a Secretary. A company may also serve as a Secretary to another company. However, a sole director may not be the Secretary of a company. The Company Secretary is the Chief Administrative Officer of the company”.

Required: State FIVE duties of a Company Secretary. (5 Marks)

b. At common law, a Secretary was regarded as a mere servant who should do what he was told to do and could NOT bind the company in any way. This notion has since been corrected by the Companies and Allied Matters Act CAP C20 LFN 2004.

Required: State FIVE persons qualified to be appointed as Company Secretary of a public company under the Companies and Allied Matters Act. (5 Marks)

c. Partnership contract is based on confidence, good faith, and trust between the partners.

Required: Explain TWO circumstances in which a non-partner could benefit from the profits of a partnership. (5 Marks)

Answer

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Tags: Company Secretary, Partnership Law
Level: Level 1

Topic: Partnership Law
Series: MAY 2014

BL – May 2014 – L1 – SB – Q3 – Sale of Goods,

Discussing classes of goods under the Sale of Goods Act and characteristics of hire purchase transactions.

Question

a. In commercial transactions, goods and services are offered and sold. Explain briefly TWO classes of goods under the Sale of Goods Act. (5 Marks)

b. In hire purchase agreements, goods are delivered to the hirer who pays some money to the owner of goods as deposit. Explain briefly TWO characteristics of a hire purchase transaction. (5 Marks)

c. Steven insured his five-storey building with ABC Insurance Company Limited and paid the premium for the building. Steven had been told by his engineers that the building is weak and may collapse in no distant future, but Steven did not disclose this to his insurers, thinking it was immaterial. A year after the policy was issued, the building collapsed and the insurance company has refused to indemnify Steven on the ground of non-disclosure of a material fact. State the relevant law and advise the parties. (5 Marks)

Answer

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Tags: Contract Law, Hire Purchase, Sale of Goods
Level: Level 1

Topic: Sale of Goods
Series: MAY 2014

BL – May 2014 – L1 – SB – Q2B – Contract Law

Identifying five ways a contract can be discharged.

Question

Contractual obligations and rights arising from a contract can be discharged in various ways.
You are required to state FIVE ways by which a contract may be discharged.

Answer

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Tags: Contract Law, Discharge of Contracts
Level: Level 1

Topic: Contract Law
Series: MAY 2014

BL – May 2014 – L1 – SB – Q2A – Classification of Law

Advising Mrs. Devoted Hubby regarding property rights in the context of divorce.

Question

Mr. Loverboy Hubby and Mrs. Devoted Hubby were happily married until Mr. Hubby met Miss Girlie. The desire of Mr. Hubby to follow Miss Girlie led to separation between him and his wife, and Mr. Hubby moved out of the family house to Miss Girlie’s residence.
Mr. Hubby intends to divorce Mrs. Hubby. As part of arrangement for the divorce, they met and Mr. Hubby gave her a written statement that, in consideration of Mrs. Hubby paying the mortgage on the family house which was in the name of her husband, he would transfer the house into her sole ownership. Mrs. Hubby paid the mortgage and asked for the transfer of the house, but Mr. Hubby refused, claiming that the agreement is not binding on him.
Advise Mrs. Devoted Hubby.

Answer

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Tags: Divorce, Family Law, Property Rights
Level: Level 1

Topic: Classification of Law
Series: MAY 2014

BL – May 2014 – L1 – SB – Q1C – Law of Tort

Advising Olu on his legal rights following an incident involving Ojoge.

Question

Ojoge is a driver with Ozaro Bottling Company. At the close of work on Tuesday, while still putting on the branded overall jacket of Ozaro Bottling Company and walking down the street to his house, a motorcyclist, Olu, splashed rainwater on Ojoge.
Ojoge beat up Olu thoroughly and fractured his arm. While attempting to flee from the scene to avoid being lynched by an angry mob, his overall jacket dropped, and the mob used the jacket to locate Ojoge’s place of work.
Based on the fact that Ojoge works with Ozaro Bottling Company, Olu is, considering seeking legal redress against Ozaro Bottling Company for the act of Ojoge.

Required:
Advise Olu on his rights under the law

Answer

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Tags: Legal Rights, Personal Injury, Tort Law
Level: Level 1

Topic: Law of Tort
Series: MAY 2014

BL – May 2014 – L1 – SB – Q1B – Employment Law

Advising Mrs. Kabuki on her fundamental rights under Nigerian law.

Question

Jones Plastic Packaging Company Limited has its head office in Lagos. The company suspected that one of its accounting staff, Mrs. Kabuki, was responsible for the economic losses suffered by the company in recent months.
On Monday, when Mrs. Kabuki resumed at the factory, she was detained at the security gate for eight hours without questioning. Thereafter, she was summarily dismissed. She had protested that she had no information about what led to her dismissal. The only official communication from the company to her in the last six months was the letter of dismissal from employment.
Mrs. Kabuki is aggrieved and wants to seek legal redress.
Required:
Advise Mrs. Kabuki on her Fundamental rights under the 1999 Constitution of the Federal Republic of Nigeria

Answer

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Tags: Employment Law, Fundamental Rights, Legal Advice
Level: Level 1

Topic: Employment law
Series: MAY 2014

BL – May 2014 – L1 – SB – Q1A – Nigerian Legal System

Identify and explain four fundamental rights in the Nigerian Constitution.

Question

“Fundamental rights” are provided for in the 1999 Constitution of the Federal Republic of Nigeria. You are required to state any FOUR Fundamental rights contained in the Constitution.

Answer

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Tags: Fundamental Rights, Nigerian Constitution
Level: Level 1

Topic: Nigerian Legal System
Series: MAY 2014

BL – May 2014 – L1 – SA – Q20 – Law of Trusts

Identifying the term for a person holding legal title to property for another.

Question

A person who holds the legal title to a property for the benefit of another is a ____________.

Answer

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Tags: Beneficiary, Legal Title, Trusts
Level: Level 1

Topic: Law of Trusts
Series: MAY 2014

FA – May 2014 – L1 – SB – Q5 – Preparation of Financial Statements

Preparation of profit and loss statement and statement of financial position for Gowell Limited.

Question

The following balances were extracted from the books of Gowell Limited as at 31 December 2012 after the preparation of the Trading account:

Item	N’000
Share capital: Authorised, issued, and fully paid: 300 million ordinary shares of N1 each	300,000
Cash at bank and in hand	750
Inventories as at 31 December 2012	91,800
Trade receivables	28,657
Trade payables	22,513
Gross profit from trading account	193,413
Revenue reserve as at 1/1/2012	50,000
Salaries and wages	42,645
Prepayments	900
Bad debts	750
Accrued expenses	789
Directors’ current account	3,750
Finance cost	900
Rents and insurance	2,280
Sundry expenses	6,150
6% Loan notes	30,000
Electricity	1,965
Postages and telephones	1,200
Motor vehicle (cost N37.5 million)	22,500
Office fittings and equipment (cost N98.25 million)	63,525
Retained earnings as at 1 January 2012	33,450
Land and buildings	369,893

Additional Information:
(i) Office fittings and equipment to be depreciated at 15% per annum on cost and motor vehicles at 20% on cost.
(ii) Provisions are to be made for:

Directors’ fees N12,000,000
Audit fees N5,000,000
(iii) N822,000 in respect of electricity consumed up to 31 December 2012 has not been posted to the ledger.
(iv) The Directors have recommended that N30,000,000 be transferred to revenue reserves.

You are required to prepare:
a. The Statements of Profit and Loss of Gowell Limited for the year ended 31 December 2012.
b. The statement of financial position as at 31 December 2012.

Answer

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Tags: Depreciation, Financial Position, Profit and Loss Statement
Level: Level 1

Topic: Preparation of Financial Statements
Series: MAY 2014

FA – May 2014 – L1 – SB – Q4 – Partnership Accounts

Admission of a new partner, profit sharing, and preparation of capital and current accounts.

Question

Biggy and Smallie were in partnership, sharing profits and losses in the ratio 2:1. They agreed to admit Fanny into the partnership from 1 January 2012. Fanny is to introduce N140,000, out of which N130,000 is to be his fixed capital. He is to receive a commission of N30,000 per annum in addition to a share of profit. The new profit-sharing ratio is 2:2:1 to Biggy, Smallie, and Fanny, respectively. Other provisions of the Partnership Deed are:

(i) Debit balance in current accounts at the beginning of the year is to attract 5% interest.
(ii) Goodwill is valued at N150,000. No account for goodwill is to be retained in the partnership books.
(iii) Details of the existing partners’ fixed capital and current accounts for the purpose of the agreement are:

Partner	Fixed Capital (N)	Current Account (N)
Biggy	360,000	100,000
Smallie	240,000	(60,000) DR

(iv) The draft final accounts for the year ended 31 December 2012, before taking into account Fanny’s commission and interest on partners’ current accounts, revealed a profit of N347,000.
(v) The drawings made by the partners are:

Partner	Drawings (N)
Biggy	95,000
Smallie	45,000
Fanny	73,900 (including commission)

You are required to prepare:

a. A statement showing the sharing of profit for the year ended 31 December 2012. (5 Marks)
b. The Partners’ capital and current accounts for the year ended 31 December 2012. (10 Marks)

Answer

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Tags: Capital Accounts, Current Accounts, Partnership Admission, Profit Sharing
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2014

FA – May 2014 – L1 – SA – Q3 – Accounts of Not-for-Profit Entities

Preparation of the income and expenditure statement for a football club.

Question

The information below relates to ABC Football Club in respect of the year ended 31 October 2013:

Item	N’000
Rent and rates	2,500
Stadium repairs and maintenance	4,500
Match takings	20,000
State government grant and aid	25,000
Wages and salaries	15,000
Payment of match bonus	5,000
Transfer fees of players who left the club	12,000
Match expenses	3,500
Transfer fees of new players bought	8,000
Fines and penalties paid to NFF	3,000
Cash and bank balances at the beginning of the period	8,700
Sales proceeds of memorabilia	900
Prize money for winning FA cup	3,500
Motor running expenses	500
Donations received	9,500
Administration expenses	2,000
Printing and stationery	400
Communication	600
Honorarium	200

The following information is also relevant:
(i) Insurance premium owing N500,000.
(ii) The club is currently facing NFF disciplinary committee investigation for players’ and fans’ misconduct in respect of week 25 match between ABC and Kwara United. The club lawyers have stated in their last letter that it was highly probable that the club will be found liable, and based on past experience, the club could be fined up to N2,000,000 among other punishments.
(iii) Depreciation has been accurately calculated at N150,000 in respect of the accounting period.
(iv) Other match takings not yet remitted by the club’s agent amounted to N2,600,000.

You are required to:
Prepare the Club’s Statement of Income and Expenditure in vertical format for the year ended 31 October 2013.

Answer

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Tags: Income and Expenditure Statement, Not-for-Profit Accounts
Level: Level 1

Topic: Accounts of Not-for-Profit Entities
Series: MAY 2014

FA – May 2014 – L1 – SA – Q2 – Correction of Errors

Suspense account entries and explanation of the effects of errors on accounts and profit.

Question

The bookkeeper of Jafola Ltd, having been unable to agree the trial balance as at 31 January 2013, raised a Suspense Account in which he entered the difference. Consequently, he prepared a draft Statement of Financial Position to reflect the amount in the Suspense Account.

On investigation, the following errors were discovered:

i. The addition of the analysis column in the tabular purchase journal posted to goods purchased for resale account was found to be under-cast by N15,000, though the addition of the total column was correct.
ii. Goods bought from a supplier amounting to N5,250 had been posted to the credit of his account as N55,000.
iii. A dishonoured bill of exchange receivable for N200,000 returned by the Company’s bank had been credited to the bank account and debited to bills receivable account.
iv. An item of N10,500 entered in the sales returns book was posted to the debit of the customer who returned the goods.
v. Sundry items of plant sold amounting to N300,000 were posted to the sales day book, the total of which had been posted to the credit of the sales account.
vi. A sum of N60,000 owed by a customer was omitted from the schedule of sundry receivables.
vii. Discounts amounting to N2,250 allowed to a customer were duly entered in his account but not posted to the discounts allowed account.
viii. An amount of N45,000 being tenement rates paid in advance in the previous year was not brought forward as a balance on the tenement rates account.

You are required to:

a. Show the Suspense Account as raised by the bookkeeper with the adjusting entries. (5 Marks)

b. Explain the effect the above errors would have on the profit shown in the accounts (if not rectified) and on the total accounts. Assume the purchase and sales ledgers to be self-balancing. (10 Marks)

Answer

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Tags: Accounting Adjustments, Correction of Errors, Suspense account
Level: Level 1

Topic: Correction of errors
Series: MAY 2014

FA – May 2014 – L1 – SA – Q1c – Accounting for Inventories in Accordance with IAS 2

why (IAS 2) on inventories is not applicable to construction contracts

Question

Explain why International Accounting Standard (IAS 2) on inventories is not applicable to construction contracts.

Answer

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Tags: Accounting Standards, Exclusions, IAS 2, Inventories
Level: Level 1

Topic: Accounting for Inventories (IAS 2)
Series: MAY 2014

FA – May 2014 – L1 – SA – Q1b – Accounting for Inventories in Accordance with IAS 2

costs to include and exclude when measuring inventory cost under IAS 2.

Question

List the costs which should be included when measuring the cost of inventories and identify any cost which should be excluded.

Answer

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Tags: Accounting Standards, Exclusions, IAS 2, Inventories
Level: Level 1

Topic: Accounting for Inventories (IAS 2)
Series: MAY 2014

FA – May 2014 – L1 – SA – Q1a – Accounting for Inventories in Accordance with IAS 2

Definition of inventories

Question

Explain the term “inventories” as defined by International Accounting Standard (IAS 2).

Answer

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Tags: Accounting Standards, Exclusions, IAS 2, Inventories
Level: Level 1

Topic: Accounting for Inventories (IAS 2)
Series: MAY 2014

FA – May 2014 – L1 – SA – Q20 – Control Accounts

This question tests knowledge of the document used by a consignee to report to a consignor in consignment transactions.

Question

What is the name of a periodic statement sent by a Consignee to a Consignor?

Answer

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Tags: Business Communication, Consignment Accounting, Financial Reporting
Level: Level 1

Topic: Control Accounts
Series: MAY 2014

FA – May 2014 – L1 – SA – Q19 – Bank reconciliations

This question tests knowledge of terminology for guaranteed minimum payments in royalty agreements.

Question

The guaranteed amount payable where the royalty calculated on the basis of actual production falls short of the estimated level is ………………………

Answer

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Tags: Minimum Payments, Revenue Recognition, Royalty Accounting
Level: Level 1

Topic: Bank reconciliations
Series: MAY 2014

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

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

Question

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

Answer

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Tags: Asset Disposal, Container Accounting, Journal Entries
Level: Level 1

Topic: Accounting Concepts
Series: MAY 2014

Series: MAY 2014

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BL – May 2014 – L1 – SB – Q6 – Negotiable Instruments

Discussing characteristics of negotiable instruments and banker duties.

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BL – May 2014 – L1 – SB – Q5 – Corporate Governance

Discussing requirements for incorporation and the implications of proposed company names.

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BL – May 2014 – L1 – SB – Q4 – Partnership Law

Discussing the duties of a Company Secretary and circumstances benefiting non-partners in a partnership.

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BL – May 2014 – L1 – SB – Q3 – Sale of Goods,

Discussing classes of goods under the Sale of Goods Act and characteristics of hire purchase transactions.

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BL – May 2014 – L1 – SB – Q2B – Contract Law

Identifying five ways a contract can be discharged.

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BL – May 2014 – L1 – SB – Q2A – Classification of Law

Advising Mrs. Devoted Hubby regarding property rights in the context of divorce.

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BL – May 2014 – L1 – SB – Q1C – Law of Tort

Advising Olu on his legal rights following an incident involving Ojoge.

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BL – May 2014 – L1 – SB – Q1B – Employment Law

Advising Mrs. Kabuki on her fundamental rights under Nigerian law.

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BL – May 2014 – L1 – SB – Q1A – Nigerian Legal System

Identify and explain four fundamental rights in the Nigerian Constitution.

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BL – May 2014 – L1 – SA – Q20 – Law of Trusts

Identifying the term for a person holding legal title to property for another.

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FA – May 2014 – L1 – SB – Q5 – Preparation of Financial Statements

Preparation of profit and loss statement and statement of financial position for Gowell Limited.

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FA – May 2014 – L1 – SB – Q4 – Partnership Accounts

Admission of a new partner, profit sharing, and preparation of capital and current accounts.

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FA – May 2014 – L1 – SA – Q3 – Accounts of Not-for-Profit Entities

Preparation of the income and expenditure statement for a football club.

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FA – May 2014 – L1 – SA – Q2 – Correction of Errors

Suspense account entries and explanation of the effects of errors on accounts and profit.

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FA – May 2014 – L1 – SA – Q1c – Accounting for Inventories in Accordance with IAS 2

why (IAS 2) on inventories is not applicable to construction contracts

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FA – May 2014 – L1 – SA – Q1b – Accounting for Inventories in Accordance with IAS 2

costs to include and exclude when measuring inventory cost under IAS 2.

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FA – May 2014 – L1 – SA – Q1a – Accounting for Inventories in Accordance with IAS 2

Definition of inventories

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FA – May 2014 – L1 – SA – Q20 – Control Accounts

This question tests knowledge of the document used by a consignee to report to a consignor in consignment transactions.

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FA – May 2014 – L1 – SA – Q19 – Bank reconciliations

This question tests knowledge of terminology for guaranteed minimum payments in royalty agreements.

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

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

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