All practice questions

Question 381Question →

At the end of an accounting period, a trading enterprise holds two categories of unsold inventory with the following details:

- Product Alpha: Cost price of $\text{N}28,000$ , estimated selling price of $\text{N}32,000$ , and estimated selling expenses of $\text{N}5,000$ .
- Product Beta: Cost price of $\text{N}42,000$ , estimated selling price of $\text{N}50,000$ , and estimated selling expenses of $\text{N}3,000$ .

In accordance with the prudence concept, what is the total valuation of closing stock to be credited to the Trading Account in Naira?

Show answer & explanation

Answer: 69000

Answer

69,000 Naira

Closing inventory must be valued at the lower of cost and net realizable value for each item. For Product Alpha, the NRV of

\text{N}27,000

(

32,000 - 5,000

) is lower than its cost of

\text{N}28,000

. For Product Beta, the cost of

\text{N}42,000

is lower than its NRV of

\text{N}47,000

(

50,000 - 3,000

). Summing these lower values (

27,000 + 42,000

) gives a total closing stock valuation of 69,000 Naira.

Step-by-Step Solution

1

Calculate Net Realizable Value (NRV) for Product Alpha and Product Beta.

Product Alpha NRV =

\text{N}27,000

; Product Beta NRV =

\text{N}47,000

.

Net Realizable Value is determined by subtracting estimated completion and selling costs from the estimated selling price.

2

Compare cost and NRV for each category to select the lower value.

Product Alpha valuation =

\text{N}27,000

; Product Beta valuation =

\text{N}42,000

.

The prudence concept mandates that closing stock is valued at the lower of cost and net realizable value on an item-by-item basis to avoid overstating assets and profit.

3

Sum the selected valuation figures for all inventory categories.

Total Closing Stock =

27,000 + 42,000 = \text{N}69,000

.

Total inventory valuation is the combined value of all individual stock categories.

Key Concept

Valuation of closing stock at the lower of cost and net realizable value (Prudence Concept)

Question 382Question →

A topographical map with a scale of $1 : 100,000$ depicts a reservoir that covers an area of $16\text{ cm}^2$ on the map. If the map is reduced to a new scale of $1 : 250,000$ , what is the area of the reservoir on the new reduced map in square centimeters ( $\text{cm}^2$ )?

Show answer & explanation

Answer: 2.56

Answer

The area of the reservoir on the new map is

2.56\text{ cm}^2

.

To calculate the new map area after reduction, first find the linear scale factor

k = \frac{100,000}{250,000} = 0.4

. Because area changes in proportion to the square of linear dimensions, the area scale factor is

(0.4)^2 = 0.16

. Multiplying the original map area (

16\text{ cm}^2

) by

0.16

gives the correct new area of

2.56\text{ cm}^2

.

Step-by-Step Solution

1

Determine the linear scale factor (

k

)

k = \frac{\text{Original Scale Denominator}}{\text{New Scale Denominator}} = \frac{100,000}{250,000} = 0.4

Map reduction changes linear dimensions proportionally to the ratio of original scale denominator to new scale denominator.

2

Calculate the area scale factor (

k^2

)

k^2 = (0.4)^2 = 0.16

Map area varies with the square of the linear scale factor.

3

Compute the new map area

\text{New Area} = \text{Original Area} \times k^2 = 16\text{ cm}^2 \times 0.16 = 2.56\text{ cm}^2

Applying the area scale factor to the original map area gives the reduced surface area on the new map.

Key Concept

Map Reduction and Area Scale Transformation

Question 383Question →

Apex Recreation Club received $\text{N}50,000$ in cash as total subscriptions from its members during the year. Subscriptions in arrears at the start of the year were $\text{N}5,000$ , while subscriptions paid in advance at the start of the year were $\text{N}4,000$ . At the end of the year, subscriptions in arrears were $\text{N}6,000$ , and subscriptions paid in advance were $\text{N}3,000$ . What amount in Naira will be credited to the Income and Expenditure Account as subscription income for the year?

Show answer & explanation

Answer: 52000

Answer

52000

According to the accrual concept of accounting, subscription income credited to the Income and Expenditure Account reflects income earned for the current financial period regardless of cash receipt timing: Subscription Income = Cash Received (N50,000) + Opening Advance (N4,000) + Closing Arrears (N6,000) - Opening Arrears (N5,000) - Closing Advance (N3,000) = N52,000.

Step-by-Step Solution

1

Start with cash subscriptions received during the period

N50,000

This is the actual cash collected and recorded in the Receipts and Payments account.

2

Add subscriptions received in advance at the beginning of the period and accrued subscriptions at the end of the period

N50,000 + N4,000 + N6,000 = N60,000

Advance subscriptions from the start belong to the current year, and accrued subscriptions at year-end represent current year income earned but not yet collected.

3

Deduct subscriptions accrued at the beginning of the period and subscriptions received in advance at the end of the period

N60,000 - N5,000 - N3,000 = N52,000

Opening accrued subscriptions were earned in the previous period, and closing advance subscriptions belong to the subsequent accounting period.

Key Concept

Subscription Account Accrual Adjustments

Question 384Question →

A retail store operates two departments, Department X and Department Y. For the year ended 31 December 2025, the following financial details are provided:

- Department X Gross Profit: ₦150,000
- Direct administrative expenses for Department X: ₦25,000
- Total Rent and Rates: ₦60,000 (apportioned based on floor space: Department X occupies $1,200\text{ m}^2$ and Department Y occupies $800\text{ m}^2$ )
- Total Staff Salaries: ₦40,000 (apportioned based on staff headcount: Department X has 6 employees and Department Y has 4 employees)

What is the Net Profit of Department X in Naira (₦)?

Show answer & explanation

Answer: 65000

Answer

The Net Profit of Department X is ₦65,000.

To find the Net Profit of Department X, calculate the apportioned share of shared expenses and add direct expenses. Rent apportioned to Department X based on floor space is

\frac{1,200}{2,000} \times ₦60,000 = ₦36,000

. Salaries apportioned based on headcount are

\frac{6}{10} \times ₦40,000 = ₦24,000

. Adding direct administrative expenses of

₦25,000

yields total expenses of

₦36,000 + ₦24,000 + ₦25,000 = ₦85,000

. Subtracting total expenses from the Gross Profit (

₦150,000 - ₦85,000

) gives a Net Profit of

₦65,000

.

Step-by-Step Solution

1

Apportion Rent and Rates to Department X

Rent for Dept X =

\frac{1,200}{1,200 + 800} \times ₦60,000 = ₦36,000

Rent expense is apportioned in proportion to floor space occupied.

2

Apportion Staff Salaries to Department X

Salaries for Dept X =

\frac{6}{6 + 4} \times ₦40,000 = ₦24,000

Salaries are apportioned in proportion to the number of staff in each department.

3

Compute Total Expenses for Department X

Total Expenses =

₦36,000 + ₦24,000 + ₦25,000 = ₦85,000

Combine the apportioned rent, apportioned salaries, and direct administrative expenses.

4

Determine Department X Net Profit

Net Profit =

₦150,000 - ₦85,000 = ₦65,000

Deduct total departmental expenses from the departmental gross profit.

Key Concept

Apportionment of indirect expenses and computation of departmental net profit.

Estimated Time:1m 30s

Question 385Question →

Koko Plc offered $100,000$ ordinary shares of $\text{₦}1.00$ each at a premium of $20\%$ . Payment terms per share were as follows:
- On application: $\text{₦}0.30$
- On allotment: $\text{₦}0.40$ (including the full premium)
- On first and final call: $\text{₦}0.50$

Applications were received for $120,000$ shares. The company allotted shares on a pro-rata basis to all applicants, with surplus application money applied towards the amount due on allotment. If all monies due on allotment were paid, what is the net cash amount (in Naira) received on allotment?

Show answer & explanation

Answer: 34000

Answer

The net cash amount received on allotment is 34,000 Naira.

The gross amount due on allotment for 100,000 shares at ₦0.40 per share (inclusive of premium) is ₦40,000. Because 120,000 shares were applied for at ₦0.30 per share, the company received ₦36,000 initially. Since only ₦30,000 was needed for the 100,000 allotted shares, a surplus of ₦6,000 was transferred to the allotment account. Consequently, the net cash collected on allotment is ₦40,000 - ₦6,000 = ₦34,000.

Step-by-Step Solution

1

Calculate total cash received on application

₦36,000

120,000 shares were applied for at ₦0.30 per share.

2

Calculate application money required for allotted shares

₦30,000

Only 100,000 shares were offered and allotted (100,000 × ₦0.30).

3

Determine surplus application money

₦6,000

Subtract required application money from cash received: ₦36,000 - ₦30,000.

4

Calculate total amount due on allotment

₦40,000

100,000 shares at ₦0.40 per share on allotment (including premium).

5

Calculate net cash received on allotment

₦34,000

Deduct surplus application money credited towards allotment: ₦40,000 - ₦6,000.

Key Concept

Issue of shares at a premium with oversubscription and pro-rata allotment set-off

Estimated Time:2m 0s

Question 386Question →

On a topographical map drawn to a scale of $1:100,000$ , a hill summit is marked with a spot height of $520\text{ m}$ . The terrain features uniform contour intervals of $20\text{ m}$ . Point $X$ is located on the fifth contour line directly below the summit. Point $Y$ is situated at a lower elevation such that the vertical difference in height between Point $X$ and Point $Y$ is $240\text{ m}$ . If the straight-line distance measured between Point $X$ and Point $Y$ on the map is $6\text{ cm}$ , calculate the average gradient between Point $X$ and Point $Y$ expressed in the ratio $1 : n$ . What is the value of $n$ ?

Show answer & explanation

Answer: 25

Answer

The value of

n

is 25, corresponding to an average gradient of

1 : 25

(or 1 in 25).

To find the denominator

n

of the gradient ratio

1:n

, the vertical interval (VI =

240\text{ m}

) is compared to the horizontal equivalent (HE =

6,000\text{ m}

). Dividing

6,000\text{ m}

by

240\text{ m}

yields

25

, meaning the slope rises 1 meter vertically for every 25 meters horizontally.

Step-by-Step Solution

1

Determine the elevation of Point X from the contour interval and spot height.

Elevation of Point X =

520\text{ m} - (5 \times 20\text{ m}) = 420\text{ m}

.

Point X lies on the fifth contour line below the

520\text{ m}

summit with a

20\text{ m}

interval.

2

Identify the Vertical Interval (VI) between Point X and Point Y.

\text{VI} = 240\text{ m}

.

The vertical elevation difference is directly specified in the problem statement.

3

Convert map distance to actual ground horizontal distance (Horizontal Equivalent, HE) using the map scale.

\text{HE} = 6\text{ cm} \times 100,000 = 600,000\text{ cm} = 6,000\text{ m}

.

Unit conversions must align VI and HE in meters before computing the ratio.

4

Express the gradient as a ratio

1 : n

by dividing HE by VI.

n = \frac{\text{HE}}{\text{VI}} = \frac{6,000\text{ m}}{240\text{ m}} = 25

.

Gradient ratio is defined as

\frac{\text{Vertical Interval}}{\text{Horizontal Equivalent}} = \frac{1}{n}

.

Key Concept

Gradient Calculation and Unit Alignment from Topographical Maps

Estimated Time:2m 30s

Question 387Question →

A topographic cross-section is constructed from a map with a horizontal scale of $1 : 50{}000$ . If the vertical scale of the cross-section is set at $1\text{ cm}$ to represent $100\text{ m}$ , what is the vertical exaggeration of the cross-section?

Show answer & explanation

Answer: 5

Answer

The vertical exaggeration of the cross-section is 5.

To find vertical exaggeration, both scales must be in representative fraction (R.F.) form. A vertical scale of

1\text{ cm}

to

100\text{ m}

equals

1 : 10{}000

. Dividing the horizontal scale denominator (

50{}000

) by the vertical scale denominator (

10{}000

) gives a vertical exaggeration of

5

.

Step-by-Step Solution

1

Convert the vertical scale to a representative fraction

Vertical Scale = 1 : 10,000

Units must be consistent (centimetres to centimetres) to obtain a non-dimensional ratio.

2

Divide the horizontal scale denominator by the vertical scale denominator

50,000 / 10,000 = 5

Vertical exaggeration measures how many times greater the vertical scale is than the horizontal scale.

Key Concept

Vertical Exaggeration of Cross-Sections

Question 388Question →

During October 2026, Emeka Enterprises completed the following transactions:
- Oct 4: Purchased goods for resale on credit from Chidi Ltd valued at $\text{₦}180,000$ , subject to a $10\%$ trade discount.
- Oct 12: Purchased office equipment on credit from Prime Tech Ltd for $\text{₦}120,000$ .
- Oct 20: Purchased goods for resale on credit from Bola & Sons valued at $\text{₦}240,000$ , subject to a $15\%$ trade discount.
- Oct 22: Purchased goods for resale for cash amounting to $\text{₦}45,000$ .

What is the total amount (in $\text{₦}$ ) to be recorded in the Purchases Journal for October 2026?

Show answer & explanation

Answer: 366000

Answer

The total amount to be recorded in the Purchases Journal for October 2026 is ₦366,000.

The Purchases Journal only records credit purchases of goods intended for resale. The net amounts after trade discounts are ₦162,000 for the Oct 4 transaction and ₦204,000 for the Oct 20 transaction. Office equipment is a non-current asset (General Journal) and cash purchases belong in the Cash Book. Thus, the total balance of the Purchases Journal is ₦162,000 + ₦204,000 = ₦366,000.

Step-by-Step Solution

1

Calculate the net price of goods purchased on credit from Chidi Ltd on Oct 4

₦162,000

Trade discounts are deducted immediately from the gross price when entering invoices into books of original entry:

\text{₦}180,000 - (10\% \times \text{₦}180,000) = \text{₦}162,000

.

2

Evaluate the transaction on Oct 12 for office equipment

Excluded (₦0)

The Purchases Journal strictly records credit purchases of goods intended for resale (trading inventory). Non-current asset purchases on credit are entered in the General Journal (Journal Proper).

3

Calculate the net price of goods purchased on credit from Bola & Sons on Oct 20

₦204,000

Apply the

15\%

trade discount:

\text{₦}240,000 - (15\% \times \text{₦}240,000) = \text{₦}204,000

.

4

Evaluate the cash purchase on Oct 22

Excluded (₦0)

Cash transactions are recorded in the Cash Book, not in the Purchases Journal.

5

Calculate the monthly total for the Purchases Journal

₦366,000

Sum the net amounts of eligible credit purchases of inventory:

\text{₦}162,000 + \text{₦}204,000 = \text{₦}366,000

.

Key Concept

Purchases Journal Scope and Trade Discount Calculations

Question 389Question →

A morphometric quantitative analysis of a river basin using Strahler's stream ordering method yields the following stream segment counts:
- $N_1$ (1st-order streams) = $40$
- $N_2$ (2nd-order streams) = $10$
- $N_3$ (3rd-order streams) = $4$
- $N_4$ (4th-order streams) = $1$

Based on these morphometric data, what is the mean bifurcation ratio ( $R_b$ ) of this drainage basin?

Show answer & explanation

Answer: 3.5

Answer

The mean bifurcation ratio (

R_b

) of the drainage basin is 3.5.

The mean bifurcation ratio (

R_b

) is obtained by computing the ratio of stream segments between successive orders:

N_1/N_2 = 4.0

,

N_2/N_3 = 2.5

, and

N_3/N_4 = 4.0

. Averaging these three values gives

(4.0 + 2.5 + 4.0) / 3 = 3.5

.

Step-by-Step Solution

1

Calculate the individual bifurcation ratios (

R_b

) between consecutive stream orders using the formula

R_b = \frac{N_u}{N_{u+1}}

.

R_{b(1-2)} = \frac{40}{10} = 4.0

,

R_{b(2-3)} = \frac{10}{4} = 2.5

, and

R_{b(3-4)} = \frac{4}{1} = 4.0

.

Bifurcation ratio measures the ratio of the number of stream segments of a given order to the number of segments of the next higher order.

2

Sum the calculated individual bifurcation ratios.

Sum

= 4.0 + 2.5 + 4.0 = 10.5

.

To find the average across all order transitions, the sum of all calculated ratios must first be determined.

3

Divide the total sum by the number of order transitions (

k = 3

).

Mean

R_b = \frac{10.5}{3} = 3.5

.

There are 3 transitions between the 4 stream orders, so dividing the sum by 3 gives the arithmetic mean bifurcation ratio.

Key Concept

Bifurcation Ratio and Stream Order Analysis in River Basins

Question 390Question →

Zainab and Babatunde are partners in a haulage enterprise sharing profits and losses in the ratio of $3:2$ . Prior to the admission of Chijioke, their capital balances were $\text{₦}400,000$ and $\text{₦}300,000$ respectively. Upon admitting Chijioke to a $\frac{1}{5}$ share in the profits, the firm's assets were revalued, resulting in an appreciation of $\text{₦}80,000$ on machinery and a depreciation of $\text{₦}20,000$ on inventory. Additionally, goodwill was valued at $\text{₦}150,000$ , and Chijioke brought in his share of goodwill premium in cash to be distributed to the existing partners. What is the updated balance of Zainab's capital account immediately following these admission adjustments?

Show answer & explanation

Answer: 454000

Answer

The updated balance of Zainab's capital account immediately following the admission adjustments is ₦454,000.

Zainab's capital account begins with ₦400,000. The net gain on revaluation (₦80,000 appreciation minus ₦20,000 depreciation = ₦60,000) is split in the old ratio of 3:2, adding ₦36,000 to her account. The goodwill premium paid by Chijioke is 1/5 of ₦150,000, which equals ₦30,000; Zainab receives 3/5 of this premium (₦18,000). Adding these yields an updated capital balance of ₦454,000.

Step-by-Step Solution

1

Calculate the net gain or loss on revaluation of assets

Net Revaluation Gain = ₦80,000 - ₦20,000 = ₦60,000

Appreciation increases asset value while depreciation decreases it. The net figure represents total gain shared by existing partners.

2

Distribute the net revaluation gain to Zainab using the old profit sharing ratio

Zainab's Share of Revaluation Gain = 3/5 × ₦60,000 = ₦36,000

Revaluation gains belong to existing partners in their old profit sharing ratio.

3

Determine Chijioke's share of goodwill and allocate premium to Zainab

Goodwill Premium = 1/5 × ₦150,000 = ₦30,000; Zainab's Share = 3/5 × ₦30,000 = ₦18,000

The incoming partner pays premium for goodwill proportional to their profit share, which is credited to existing partners in their sacrificing ratio.

4

Sum Zainab's initial capital and all admission credits

Updated Capital Balance = ₦400,000 + ₦36,000 + ₦18,000 = ₦454,000

Capital accounts increase with revaluation gains and goodwill premium credits.

Key Concept

Adjustment of Partner's Capital Account on Admission

Question 391Question →

The following ledger details were extracted from the single-entry records of Adebayo Traders for the year ended 31 December 2025:

- Opening balance of debtors (1 Jan 2025): ₦15,000
- Cash received from debtors during the year: ₦68,000
- Discount allowed to debtors: ₦2,000
- Bad debts written off: ₦1,500
- Returns inwards: ₦2,500
- Closing balance of debtors (31 Dec 2025): ₦18,000

What is the total amount of credit sales for the year?

Show answer & explanation

Answer: 77000

Answer

₦77,000

Reconstructing the Sales Ledger (Debtors) Control Account shows a total credit side of ₦92,000 (comprising cash received of ₦68,000, discount allowed of ₦2,000, bad debts of ₦1,500, returns inwards of ₦2,500, and closing debtors balance of ₦18,000). Deducting the opening balance of ₦15,000 gives the missing total credit sales figure of ₦77,000.

Step-by-Step Solution

1

Calculate the total of all credit entries in the Debtors Control Account including the closing balance.

₦68,000 + ₦2,000 + ₦1,500 + ₦2,500 + ₦18,000 = ₦92,000

Cash received, discount allowed, bad debts written off, returns inwards, and closing balance all reduce trade debtors and belong on the credit side of the Debtors Control Account.

2

Subtract the opening debtors balance from the credit side total to derive the missing credit sales figure.

₦92,000 - ₦15,000 = ₦77,000

Credit sales increase trade debtors and represent the debit balancing figure required to equate both sides of the account.

Key Concept

Debtors Control Account for Missing Figures

Question 392Question →

Bello and Kabir are partners in a trading firm sharing profits and losses in the ratio of $4:1$ . They admit Danladi into the partnership, giving him a $\frac{1}{6}$ share of future profits. The goodwill of the firm is valued at $\text{₦}120,000$ , and Danladi brings in his required share of goodwill in cash. What is the amount of goodwill premium (in Naira) to be credited to Kabir's capital account?

Show answer & explanation

Answer: 4000

Answer

The amount of goodwill premium credited to Kabir's capital account is ₦4,000.

The total goodwill of the firm is

\text{₦}120,000

. Danladi's

\frac{1}{6}

share of goodwill is

\frac{1}{6} \times \text{₦}120,000 = \text{₦}20,000

. This premium is shared between Bello and Kabir in their sacrificing ratio of

4:1

. Therefore, Kabir receives

\frac{1}{5} \times \text{₦}20,000 = \text{₦}4,000

.

Step-by-Step Solution

1

Determine the new partner's share of goodwill

Danladi's share of goodwill =

\frac{1}{6} \times \text{₦}120,000 = \text{₦}20,000

The incoming partner pays a premium for goodwill proportional to their share of future profits.

2

Apportion the goodwill premium to the existing partners

Kabir's share =

\frac{1}{5} \times \text{₦}20,000 = \text{₦}4,000

Goodwill premium brought in cash by a new partner is credited to existing partners in their sacrificing ratio (which equals their old profit-sharing ratio of

4:1

when no new ratio among old partners is specified).

Key Concept

Valuation and distribution of goodwill premium upon admission of a new partner

Question 393Question →

An administrative state in West Africa covers a total area of $120,000\text{ km}^2$ . Environmental surveys indicate that $65\%$ of the terrain is non-arable (comprising rocky highlands, water bodies, and urban infrastructure), while the remainder is arable land suitable for farming. The state has a total population of $16,800,000$ inhabitants, of which $75\%$ are actively engaged in rural agricultural production. What is the agricultural population density of this state in persons per square kilometer of arable land?

Show answer & explanation

Answer: 300

Answer

The agricultural population density of the state is

300\text{ persons/km}^2

.

Agricultural population density measures the ratio of the agricultural population to the area of arable land. First, determine the arable land area:

100\% - 65\% = 35\%

of

120,000\text{ km}^2

, which equals

42,000\text{ km}^2

. Next, determine the rural agricultural population:

75\%

of

16,800,000

, which gives

12,600,000

agricultural inhabitants. Finally, dividing the agricultural population by the arable land area (

12,600,000 / 42,000

) yields

300\text{ persons/km}^2

.

Step-by-Step Solution

1

Calculate Arable Land Area

Arable land area is

42,000\text{ km}^2

.

Agricultural density requires using arable land area rather than total surface area.

2

Calculate Agricultural Population

Agricultural population is

12,600,000

inhabitants.

Agricultural density considers only the segment of the population engaged in farming rather than the total population.

3

Calculate Agricultural Density

Agricultural population density is

300\text{ persons/km}^2

.

Dividing the agricultural population by the arable land area yields the density of farmers per unit of cultivated land.

Key Concept

Agricultural Population Density

Estimated Time:3m 0s

Question 394Question →

Musa, Emeka, and Audu are partners in a firm sharing profits and losses equally. Upon Audu's death, his capital account balance stands at $\text{₦}45,000$ . The revaluation of assets resulted in a profit where Audu's share is $\text{₦}5,000$ , and his share of goodwill is valued at $\text{₦}10,000$ . What is the total amount payable to Audu's executor?

Show answer & explanation

Answer: 60000

Answer

The total amount payable to Audu's executor is

\text{₦}60,000

.

The total amount due to the deceased partner's executor is calculated by adding all credit adjustments (revaluation profit share and goodwill share) to the partner's opening capital balance:

\text{₦}45,000 + \text{₦}5,000 + \text{₦}10,000 = \text{₦}60,000

.

Step-by-Step Solution

1

Add the deceased partner's initial capital balance, share of revaluation profit, and share of goodwill.

\text{₦}45,000 + \text{₦}5,000 + \text{₦}10,000 = \text{₦}60,000

When a partner dies, their capital account is credited with their balance of capital, share of asset revaluation profits, and share of goodwill before transferring the total amount to the executor's account.

Key Concept

Deceased Partner Settlement

Question 395Question →

Ebonyi Processing Company operates two departments: Milling and Bakery. During the financial year ended 31 December 2025, the Milling Department transferred flour to the Bakery Department at cost plus a mark-up of $33\frac{1}{3}\%$ . At the close of the year, the Bakery Department held closing inventory valued at $\text{N}120,000$ , of which $75\%$ represented flour transferred from the Milling Department. Calculate the amount of provision for unrealized profit on closing inventory to be recognized in the general profit and loss account.

Show answer & explanation

Answer: 22500

Answer

The provision for unrealized profit to be recognized in the general profit and loss account is N22,500.

To calculate the provision for unrealized profit, first isolate the value of transferred stock in closing inventory:

75\% \times \text{N}120,000 = \text{N}90,000

. Next, convert the mark-up of

33\frac{1}{3}\%

(

\frac{1}{3}

) on cost to margin on transfer price:

\frac{1}{3+1} = \frac{1}{4}

(

25\%

). Multiplying the margin by the transferred stock value gives

25\% \times \text{N}90,000 = \text{N}22,500

.

Step-by-Step Solution

1

Determine the value of transferred goods included in closing inventory

Transferred inventory = 75% * N120,000 = N90,000

Only the portion of inventory transferred internally contains unrealized profit.

2

Convert mark-up percentage on cost to margin percentage on transfer price

Margin = Mark-up / (1 + Mark-up) = (1/3) / (1 + 1/3) = 1/4 or 25%

Closing inventory is valued at transfer price (selling price), requiring margin to extract the profit element.

3

Calculate the provision for unrealized profit

Provision = 25% * N90,000 = N22,500

Unrealized profit is the profit margin embedded in unsold transferred inventory remaining at year-end.

Key Concept

Provision for Unrealized Profit on Inter-departmental Transfers

Question 396Question →

A topographical map extract drawn at a scale of $1:50,000$ delineates a drainage basin. The total area of the basin measured on the map is $160\text{ cm}^2$ . Morphometric analysis reveals the following total stream segment lengths measured directly from the map across all stream orders:
- 1st-order stream segments: $48\text{ cm}$
- 2nd-order stream segments: $20\text{ cm}$
- 3rd-order stream segments: $12\text{ cm}$
- 4th-order stream segments: $8\text{ cm}$

Calculate the drainage density of the river basin in $\text{km/km}^2$ .

Show answer & explanation

Answer: 1.1

Answer

The drainage density of the river basin is

1.1\text{ km/km}^2

.

Drainage density (

D

) measures the ratio of total stream channel length to the total drainage basin area (

D = \frac{\sum L}{A}

). Converting map measurements using the scale

1:50,000

(

1\text{ cm} = 0.5\text{ km}

), the total ground stream length is

88\text{ cm} \times 0.5\text{ km/cm} = 44\text{ km}

, and the actual ground area is

160\text{ cm}^2 \times (0.5)^2 = 40\text{ km}^2

. Dividing ground length by area produces

1.1\text{ km/km}^2

.

Step-by-Step Solution

1

Determine linear ground scale from map scale

1\text{ cm on map} = 0.5\text{ km on ground}

Scale

1:50,000

means

1\text{ cm} = 50,000\text{ cm} = 500\text{ m} = 0.5\text{ km}

.

2

Calculate ground area of the basin

Basin Area

A = 40\text{ km}^2

Area conversion requires squaring the linear scale factor:

160\text{ cm}^2 \times (0.5\text{ km/cm})^2 = 160 \times 0.25 = 40\text{ km}^2

.

3

Calculate total actual stream length in the basin

Total Stream Length

\sum L = 44\text{ km}

Total map stream length

= 48 + 20 + 12 + 8 = 88\text{ cm}

. Ground length

= 88\text{ cm} \times 0.5\text{ km/cm} = 44\text{ km}

.

4

Compute Drainage Density (

D

)

D = 1.1\text{ km/km}^2

Drainage density is the total channel length divided by total basin area:

D = \frac{\sum L}{A} = \frac{44\text{ km}}{40\text{ km}^2} = 1.1\text{ km/km}^2

.

Key Concept

Drainage Density Calculation from Topographical Maps

Question 397Question →

At the end of the financial year, a sole trader's trial balance extracted showed Trade Debtors of $₦80,000$ and an existing Provision for Doubtful Debts of $₦3,000$ . It was decided to write off an additional bad debt of $₦5,000$ and maintain a provision for doubtful debts at $5\%$ of the remaining trade debtors. What is the net amount of trade debtors to be presented in the Statement of Financial Position (Balance Sheet)?

Show answer & explanation

Answer: 71250

Answer

The net trade debtors figure to be presented in the Balance Sheet is

₦71,250

.

To determine the net trade debtors figure in the Balance Sheet, unrecorded bad debts of

₦5,000

are first written off from gross debtors of

₦80,000

, resulting in adjusted debtors of

₦75,000

. The required closing provision for doubtful debts is

5\%

of

₦75,000

, which equals

₦3,750

. Subtracting this closing provision from adjusted debtors gives

₦75,000 - ₦3,750 = ₦71,250

.

Step-by-Step Solution

1

Calculate Adjusted Trade Debtors

₦75,000

Additional bad debts identified at year-end must be written off from gross trade debtors before calculating the percentage provision for doubtful debts.

2

Calculate Closing Provision for Doubtful Debts

₦3,750

The required

5\%

provision applies to the adjusted trade debtors (

5\% \times ₦75,000

).

3

Compute Net Trade Debtors for Financial Statement Presentation

₦71,250

Net trade debtors in the Balance Sheet represents adjusted debtors less the closing provision for doubtful debts (

₦75,000 - ₦3,750

).

Key Concept

Adjustments for Bad Debts and Provision for Doubtful Debts in Final Accounts

Question 398Question →

A wildlife sanctuary occupies an area of $48\text{ cm}^2$ on a topographical map drawn at a scale of $1 : 100,000$ . If the map is reduced to a new scale of $1 : 400,000$ , what is the area of the sanctuary on the new map in $\text{cm}^2$ ?

Show answer & explanation

Answer: 3

Answer

The area of the sanctuary on the reduced map is

3\text{ cm}^2

.

When a map scale is reduced from

1 : 100,000

to

1 : 400,000

, the linear dimension reduces by a factor of

4

(since

\frac{100,000}{400,000} = \frac{1}{4}

). Because area is two-dimensional, the area changes by the square of the linear reduction factor, which is

\left(\frac{1}{4}\right)^2 = \frac{1}{16}

. Therefore, the area on the new map is

48\text{ cm}^2 \times \frac{1}{16} = 3\text{ cm}^2

.

Step-by-Step Solution

1

Determine the linear scale factor between the original and new scales

Linear scale factor =

\frac{\text{Original Scale Denominator}}{\text{New Scale Denominator}} = \frac{100,000}{400,000} = \frac{1}{4}

When a map scale changes from

1 : 100,000

to

1 : 400,000

, every linear dimension on the map is reduced to

\frac{1}{4}

of its original length.

2

Calculate the area reduction factor

Area scale factor =

\left(\frac{1}{4}\right)^2 = \frac{1}{16}

Map area scales as the square of the linear scale factor (

n^2

).

3

Calculate the new area on the reduced map

New Area =

48\text{ cm}^2 \times \frac{1}{16} = 3\text{ cm}^2

Multiplying the original area by the area scale factor gives the area representation on the new map.

Key Concept

Map Reduction and Area Scale Factor Relationship

Question 399Question →

Vanguard Enterprise Plc had an issued share capital of $1,000,000$ ordinary shares of $\text{₦}0.50$ each and a Share Premium account balance of $\text{₦}120,000$ . The company declared a bonus issue of $1$ new ordinary share for every $5$ shares held, utilizing the Share Premium account to fund the bonus shares. Immediately following the bonus issue, the company made a rights issue of $1$ new ordinary share for every $4$ shares held at an issue price of $\text{₦}0.80$ per share. What is the final balance of the Share Premium account (in $\text{₦}$ ) after both transactions are completed?

Show answer & explanation

Answer: 110000

Answer

The final balance of the Share Premium account after both the bonus issue and rights issue is ₦110,000.

The correct final Share Premium balance is ₦110,000. Funding 200,000 bonus shares of ₦0.50 each requires ₦100,000 from the initial ₦120,000 premium, leaving ₦20,000. Subsequently, the 1-for-4 rights issue on the expanded 1,200,000 shares issues 300,000 shares at a premium of ₦0.30 per share (₦0.80 - ₦0.50), creating ₦90,000 of fresh premium. Summing the remaining ₦20,000 and ₦90,000 gives ₦110,000.

Step-by-Step Solution

1

Calculate the bonus issue share quantity and nominal capital value

200,000 bonus shares with a total nominal value of ₦100,000

A 1-for-5 bonus issue on 1,000,000 shares yields 1,000,000 / 5 = 200,000 shares. At a nominal value of ₦0.50 each, the capital required is 200,000 × ₦0.50 = ₦100,000.

2

Deduct the capitalized amount from the initial Share Premium balance

Remaining Share Premium balance of ₦20,000

Initial Share Premium balance of ₦120,000 minus ₦100,000 capitalized for bonus shares leaves ₦20,000.

3

Determine the expanded share base and calculate the number of rights shares issued

300,000 rights shares issued

Post-bonus issued shares total 1,000,000 + 200,000 = 1,200,000 shares. A 1-for-4 rights issue gives 1,200,000 / 4 = 300,000 shares.

4

Compute the total share premium generated from the rights issue

₦90,000 in new share premium

Rights issue price is ₦0.80 per share while nominal value is ₦0.50, giving a premium of ₦0.30 per share. Total new premium created = 300,000 × ₦0.30 = ₦90,000.

5

Add the new rights issue premium to the remaining Share Premium balance

Total final Share Premium balance of ₦110,000

Remaining balance of ₦20,000 + ₦90,000 new premium = ₦110,000.

Key Concept

Bonus issue capitalization and rights issue share premium calculation

Question 400Question →

The following details were extracted from the accounting records of Zainab Trading Store for the year ended 31st December 2025:

- Opening debtors balance (1st January 2025): $\text{₦}45,000$
- Credit sales for the year: $\text{₦}185,000$
- Cash and cheque received from debtors: $\text{₦}142,000$
- Dishonoured cheques from debtors: $\text{₦}3,500$
- Discount allowed to trade debtors: $\text{₦}4,800$
- Bad debts written off: $\text{₦}2,500$
- Returns inwards: $\text{₦}6,200$
- Set-off against purchases ledger (contra entry): $\text{₦}3,000$
- Cash refunded to debtors for overpayment: $\text{₦}1,500$

What is the closing debit balance of the Sales Ledger Control Account as at 31st December 2025?

Show answer & explanation

Answer: 76500

Answer

The closing debit balance of the Sales Ledger Control Account as at 31st December 2025 is

\text{₦}76,500

.

To find the closing debit balance of the Sales Ledger Control Account, sum all debit entries (Opening Balance

\text{₦}45,000

+ Credit Sales

\text{₦}185,000

+ Dishonoured Cheques

\text{₦}3,500

+ Cash Refunds

\text{₦}1,500

=

\text{₦}235,000

) and subtract all credit entries (Cash Received

\text{₦}142,000

+ Discount Allowed

\text{₦}4,800

+ Bad Debts

\text{₦}2,500

+ Returns Inwards

\text{₦}6,200

+ Contra Entry

\text{₦}3,000

=

\text{₦}158,500

). This gives

\text{₦}235,000 - \text{₦}158,500 = \text{₦}76,500

.

Step-by-Step Solution

1

Calculate the total of the debit side entries

Total Debits =

\text{₦}45,000 + \text{₦}185,000 + \text{₦}3,500 + \text{₦}1,500 = \text{��}235,000

Opening debtors balance, credit sales, dishonoured cheques, and refunds to debtors increase the total debt owed by debtors and are placed on the debit side.

2

Calculate the total of the credit side entries

Total Credits =

\text{₦}142,000 + \text{₦}4,800 + \text{₦}2,500 + \text{₦}6,200 + \text{₦}3,000 = \text{₦}158,500

Payments received, discounts allowed, bad debts, sales returns, and set-off entries reduce the total debt owed by debtors and are placed on the credit side.

3

Subtract total credit items from total debit items to find the closing balance

Closing Debtors Balance =

\text{₦}235,000 - \text{₦}158,500 = \text{₦}76,500

The balancing figure on the credit side represents the closing debit balance brought down for the next accounting period.

Key Concept

Sales Ledger Control Account Balancing

Answer

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