Series: NOV 2015

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  • 15 Marks

CSME – Nov 2015 – L2 – Q7 – Corporate Strategy Formulation

Analyzes reasons for slow growth in DAB phone sales, uses the S-shaped growth curve to evaluate market stages, and suggests sales improvement strategies.

Ade John is a graduate of XYZ University. For his final project work in the Department of
Electronics and Electrical Engineering, he designed a cell-phone that is rugged, cheap,
handy and not sophisticated.
During his national service year, he kept toying with the idea of manufacturing the cellphone. To ascertain that there is a market for the phone, he carried out a series of market surveys among rural farmers, artisans, market women, etc. Each time, he was convinced that a market actually exists for his design. He also made contact with some manufacturers of cell-phone components. He entered
into an agreement with CKT Japan to import cell-phone accessories to enable him
assemble them in Nigeria. DAB phone is the first of its kind in the Nigerian market and
production and assembly commenced in a small room in his uncle‟s house at Ikare.
The first batch of phones manufactured by DAB Company was supplied to cell-phone
vendors in cities on „sale or return‟ basis. To encourage distributors to accept the
phones, a 15% margin was allowed. In addition, independent sales persons (hawkers)
were given between 10 -12% margin to sell the product. In spite of the low price of DAB
phones, demand was disappointing at the end of the first year. Nevertheless, Ade John is
still optimistic about the commercial viability of the phone if only he could develop an
effective strategy to market the DAB phones

Required:
a. Identify and explain TWO reasons for the slow growth of sales of DAB phones. (4 Marks)
b. With the aid of an S-shaped growth curve, evaluate market development of DAB phones. (6 Marks)
c. Recommend the strategies that Ade John can use to improve sales. (5 Marks)

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  • 15 Marks

CSME – Nov 2015 – L2 – Q6 – Corporate Governance

Evaluates how specific corporate governance issues impact the effectiveness of a company's governance.

Explain briefly how the following key issues in corporate governance establish how well or badly a company is governed:

a. The role and responsibilities of the board of directors
b. The composition and balance of the board of directors
c. Financial reporting, narrative reporting, and auditing
d. Directors’ remuneration
e. Risk management and internal control

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  • 15 Marks

CSME – Nov 2015 – L2 – Q5 – Corporate Governance

Outlines key responsibilities and duties of the board in corporate governance, relevant for improving corporate structure and performance.

The owner of ABC Company learned from a conference and a professional magazine that weak corporate governance accounted for recent corporate failures in Nigeria. Many board members were found lacking a clear understanding of board responsibilities and duties.

Required:
The Managing Director will soon address the board and has requested a paper detailing the board’s responsibilities and duties.

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  • 20 Marks

CSME – Nov 2015 – L2 – Q4 – Risk Management and Corporate Strategy

Analyzes strengths and weaknesses of Toyin Trust Insurance Plc pre- and post-2000 ownership changes, and suggests strategies for sustaining the company.

Toyin Trust Insurance Company is one of the duly registered insurance companies in Nigeria. Ten years after it started operations in 1990, the company had become a household name in the market. Its strengths included timely payment of claims and introduction of quality products that captured changing customers’ needs.

At inception, the company was 100% foreign-owned, with five of the seven directors being experienced expatriate insurance practitioners. However, by 2000, over 90% of the equity had been transferred to Nigerian investors. In 2009, following reorganization, many experienced senior managers resigned, and inexperienced staff took over key positions, leading to a decline in service quality and a 40% drop in premium collection.

Required:

a. Analyze the strengths of Toyin Trust Insurance Plc before 2000. (5 Marks)
b. Analyze the strengths and weaknesses of Toyin Trust Insurance Plc after 2000. (5 Marks)
c. Suggest essential strategies to sustain Toyin Trust Insurance Plc. (10 Marks)

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  • 20 Marks

CSME – Nov 2015 – L2 – Q3 – Ethics in Business

Describes the nature of business and professional ethics, Kohlberg’s theory of moral development, and criticisms of the theory.

Kalu, a competent consultant and accountant, works in Bosun and Company Limited. The company realized that almost all of its newly employed entry-level staff are deficient in business and professional ethics. Consequently, the Human Resources Manager recommended to the CEO that a training program on business and professional ethics should be organized. Kalu is nominated as a resource person to speak at the training program.

Required:
a. How should Kalu explain the nature and importance of business ethics and professional ethics? (6 Marks)
b. Advise Kalu on how he should analyze Kohlberg’s theory of moral development in an attempt to explain to the trainee participants how people generally develop a sense of morality both in personal and professional life. (10 Marks)
c. Discuss any TWO of the criticisms of Kohlberg’s theory. (4 Marks)

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  • 20 Marks

CSME – Nov 2015 – L2 – Q2 – Risk Management and Corporate Strategy

Develops a risk management program for theft, diversion, and safety issues; includes risk reduction and financing techniques.

Dolly Homes Plc is a real estate firm based in Abuja. The firm builds residential apartments and office blocks in five states of the federation. The objective of Dolly Homes Plc is to deliver high-quality, aesthetically designed, and professionally built homes/offices to its customers at competitive prices. It employs several skilled and casual workers, construction supervisors, construction engineers, architects, and quantity surveyors.

The company maintains a store at each of its building sites, each manned by a storekeeper and an assistant. Building materials are purchased centrally and delivered to sites per material schedules prepared by the quantity surveyor.

Patronage from middle and high-income brackets has been impressive; however, recently, the company has been receiving complaints about poor quality. The most alarming complaint involved a legal threat for injuries sustained when a kitchen cabinet collapsed in a client’s home.

Management’s investigation revealed theft of materials, diversion, and re-work waste due to poor finishing. There were also job site accidents, leading to employee injuries, lost hours, and increased medical claims.

Management decided to establish a risk management program to address theft, diversion, and health/safety issues.

Required:
a. As an Accountant, develop a risk management program to address Dolly Homes Plc’s problems. (8 Marks)
b. Advise management on techniques to reduce the frequency of risk exposures in the future. (6 Marks)
c. Suggest risk financing techniques to protect the company’s staff from injuries and accidents. (6 Marks)

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  • 5 Marks

CSME – Nov 2015 – L2 – Q1c – Corporate Governance

Discusses the difference between rules-based and principles-based professional ethics in accountancy.

What is the main difference between a rules-based and a principles-based code of professional ethics for accountants?

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  • 15 Marks

CSME – Nov 2015 – L2 – Q1b – Risk Management and Corporate Strategy

Discusses various methods for managing and controlling risks in an organization, illustrating different risk management techniques.

There are different methods of managing and controlling risks. Explain and illustrate any THREE of the following approaches to risk management:
i. Risk Diversification
ii. Risk Transfer
iii. Risk Sharing
iv. Risk Hedging (15 Marks)

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  • 10 Marks

CSME – Nov 2015 – L2 – Q1a – Risk Management and Corporate Strategy

Explains credit risk management concepts, including exposure, losses, residual risk, and appetite.

The finance director of Basket Company is preparing a proposal to present to the board of directors. He believes that the company is much too cautious in its policy of giving credit to customers. At the moment all customers are given 30 days’ credit. He believes that by increasing its exposure to credit risk, and increasing credit terms to 60 days, the company will achieve an increase in annual sales of up to 20%. He also thinks that some improvements in debt collection procedures will reduce the level of bad debts, although some bad debts cannot be avoided. He thinks that the value of sales where there is a default will fall each year from 2% of sales to 1.8% of sales. He proposes that in order to increase annual sales and profits, the company should be willing to increase its risk appetite and accept the risk of higher bad debts.

Required:

  1. Using this example of managing credit risk, explain and illustrate the meaning of:
    i. Exposure to risk
    ii. Risk of losses
    iii. Residual risk
    iv. Risk appetite

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  • 15 Marks

PSAF – Nov 2015 – L2 – Q7 – Public Sector Reforms

Distinguish between basic infrastructure and development projects with examples and identify funding sources and characteristics.

In order to achieve some development objectives, nations place emphasis on priority programmes like the provision of basic infrastructure and development projects, all of which require appropriate funding.

Required:

a. By means of specific relevant examples, distinguish between “basic infrastructure” and “development projects”. (3 Marks)

b. Discuss TWO development objectives which the priority programmes you refer to in (a) above are planned to achieve. (4 Marks)

c. Identify TWO sources of funding for these priority projects stating TWO distinct characteristics of each source identified and TWO factors that facilitate the commercial viability of the projects. (8 Marks)

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  • 1 Marks

MI – Nov 2015 – L1 – SA – Q6 – Costing Techniques

Determines the appropriate basis for apportioning joint security costs among shop owners.

The Management of Tejuosho Shopping Mall incurred a certain amount of money as joint security cost for the month of October 2014. What will be the most appropriate basis of apportioning this cost amongst the individual shop owners in the mall?
A. Value of inventory held in each store/shop
B. Cost of equipment in each shop
C. Number of workers in each shop
D. Floor area occupied by each shop
E. Turnover recorded by each shop

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  • 1 Marks

MI – Nov 2015 – L1 – SA – Q5 – Costing Techniques

Calculates the budgeted contribution using marginal costing principles.

A company manufactures and sells a single product. During the month of November 2014, the budgeted total production cost was N210,000 including budgeted fixed production overheads of N55,000. Budgeted sales was 8,750 units at N30.
If the company applies marginal costing principles, what would be the budgeted contribution for the month?
A. N 52,500
B. N 77,500
C. N 97,500
D. N107,500
E. N117,500

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  • 1 Marks

MI – Nov 2015 – L1 – SA – Q4 – Accounting for Cost Elements

Identifies a reason why an organization may not hold inventory.

An organisation may NOT hold inventory in order to:
A. Meet regular demands
B. Even out seasonal variation in demand
C. Act as buffer when higher demand is expected
D. Meet technical requirements of a production system
E. Take advantage of bulk purchase discounts

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  • 1 Marks

MI – Nov 2015 – L1 – SA – Q3 – Accounting for Cost Elements

Identifies the term related to compensation for employees beyond the regular wage.

Which of the following terms is known as compensation beyond the regular wage?
A. Overtime
B. Incentive
C. Bonus
D. Salaries
E. Leave allowance

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  • 1 Marks

MI – Nov 2015 – L1 – SA – Q2 – Decision-Making Techniques

Identifies information not typically found in an employee time sheet.

Which of the following information may NOT be found in an Employee Time Sheet?
A. Department
B. Employee name
C. Employee ID No
D. Supervisor’s signature
E. Contract agreement date

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  • 1 Marks

MI – Nov 2015 – L1 – SA – Q1 – Budgeting

Identifies the term for intentionally underestimating revenues or overestimating costs in budgeting.

A situation where budgeted revenues are intentionally under-estimated or budgeted costs are intentionally over-estimated is known as:
A. Participatory budget
B. Surplus budget
C. Budget slack
D. Deficit budget
E. Imposed budget

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  • 8 Marks

FA – Nov 2015 – L1 – SB – Q6c – Bases of Accounting: Accrual vs. Cash

Prepare the Rental Income Account to recognize rent in the profit or loss.

D’favour owns several properties in Lagos that are let out to tenants. The summary of transactions at December 31, 2014, is given below:

Item N’000
Accrued rent at December 31, 2013 440
Prepaid rent at December 31, 2013 250
Rent received during 2014 2,550
Accrued rent at December 31, 2014 350
Prepaid rent at December 31, 2014 480
Uncollectable rent to be written-off 35
Agreement fee received 50

Required:
Prepare the Rental Income Account to determine the amount of rent to be recognized in the Statement of Profit or Loss. (8 Marks)

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  • 4 Marks

FA – Nov 2015 – L1 – SB – Q6b – Bases of Accounting: Accrual vs. Cash

Calculate rent recognized for profit or loss and financial position as of March 31, 2014.

Oluyemi Ventures prepares its financial statements to March 31 each year. The business pays rent quarterly in advance on January 1, April 1, July 1, and October 1 each year. The annual rent is N600,000. On June 30, 2013, the rent was increased to N900,000 per annum.

Required:
i. Calculate the amount of rent that will be recognized in the Statement of Profit or Loss for the year ended March 31, 2014. (3 Marks)
ii. Calculate the amount to be recognized in the Statement of Financial Position as at March 31, 2014. (1 Mark)

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  • 8 Marks

FA – Nov 2015 – L1 – SB – Q6a – Bases of Accounting: Accrual vs. Cash

Differentiate accounting bases and discuss a setback of the cash basis.

i. Differences between Accounting Bases

  • Cash Basis: Recognizes revenue and expenses only when cash is received or paid. It does not match income with expenses incurred in the same period.
  • Accrual Basis: Recognizes revenue when earned and expenses when incurred, regardless of when cash transactions occur. It provides a more accurate picture of a company’s financial position.
  • Break-up Basis: Assumes that a business will not continue as a going concern, and assets are valued at their realizable amounts rather than their carrying amounts.

ii. Setback of Cash Basis

  • It does not provide a true picture of financial performance, as income and expenses may not be recorded in the period to which they relate.

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