All practice questions

Question 5981Question →

Kofi was appointed by Bisi as a general agent to manage her textile distribution business. Without Bisi's express authority or trade custom justification, Kofi delegated the entire purchasing duty to a third party, Musa. Musa negligently purchased substandard textiles, causing severe financial losses for Bisi. Under the Law of Agency, which of the following statements correctly describes the legal position and liabilities of the parties?

Kofi breached the duty not to delegate authority ('delegatus non potest delegare'), making Kofi personally liable to Bisi while no privity of contract exists between Bisi and Musa.

Musa is directly liable to Bisi for negligence because appointing a sub-agent automatically transfers all legal obligations and rights of the principal to the sub-agent.

The agency agreement between Bisi and Kofi is automatically terminated by operation of law due to contract frustration caused by Musa's breach.

Kofi exercised a legitimate agent's right of indemnity, thereby relieving both Kofi and Musa from any financial liability to Bisi.

Show answer & explanation

Answer: Kofi breached the duty not to delegate authority ('delegatus non potest delegare'), making Kofi personally liable to Bisi while no privity of contract exists between Bisi and Musa.

Answer

Kofi breached the fundamental agent duty 'delegatus non potest delegare' (a delegated authority cannot be sub-delegated), making Kofi personally liable to Bisi for the resulting losses, with no direct privity of contract existing between Bisi and Musa.

Under the Law of Agency, the maxim 'delegatus non potest delegare' dictates that an agent cannot delegate authority to another person without express consent, implied consent, trade custom, or emergency necessity. Because Kofi sub-delegated his purchasing duties without authority, he committed a breach of duty. Consequently, Kofi is personally liable to Bisi for the losses incurred. Furthermore, since Bisi did not authorize Musa's appointment, no privity of contract exists between Bisi and Musa.

Step-by-Step Solution

1

Identify the core duty involved in the scenario.

The agent sub-delegated their assigned duty without permission or legal justification, invoking the legal principle 'delegatus non potest delegare'.

Agency is based on personal trust and confidence (fiduciary relationship), so agents must perform duties personally unless delegation is authorized.

2

Analyze privity of contract and liability between the principal, agent, and sub-agent.

Because the delegation was unauthorized, there is no privity of contract between the principal (Bisi) and the sub-agent (Musa).

Without privity, the principal cannot directly sue the unauthorized sub-agent in contract law.

3

Determine primary liability for the financial loss.

The appointed agent (Kofi) remains fully accountable and personally liable to the principal (Bisi) for breach of agency duty.

The agent remains responsible for fulfilling the terms of the agency contract and compensating for losses caused by breach of duty.

Key Concept

Delegatus non potest delegare (Duty of an Agent not to Delegate)

Estimated Time:2m 0s

Question 5982Question →

Zainab and Chidi are partners in a firm. For the year ended 31 December 2025, the firm reported a net profit of ₦450,000 before accounting for interest on Chidi's loan of ₦50,000 at 10% per annum.

According to their partnership agreement:
- Interest on capital: Zainab ₦20,000; Chidi ₦15,000
- Annual salary: Zainab ₦60,000
- Interest on drawings: Zainab ₦5,000; Chidi ₦4,000
- Profit-sharing ratio: 3:2

What is the net divisible profit to be shared between the partners?

Show answer & explanation

Answer: 359000

Answer

The net divisible profit to be shared between the partners is ₦359,000.

The correct net divisible profit is ₦359,000. Interest on a partner's loan is a charge against profit and must be deducted to find the true net profit (₦450,000 - ₦5,000 = ₦445,000). Adding total interest on drawings (₦9,000) yields ₦454,000. Deducting interest on capital (₦35,000) and partner salary (₦60,000) leaves ₦359,000 as net divisible profit.

Step-by-Step Solution

1

Calculate interest on partner's loan and adjust the Net Profit

Adjusted Net Profit = ₦445,000

Interest on a partner's loan (10% of ₦50,000 = ₦5,000) is a charge against profit (debited to Profit and Loss Account), not an appropriation.

2

Add Interest on Drawings to Adjusted Net Profit

Total available profit = ₦454,000

Interest on drawings (₦5,000 + ₦4,000 = ₦9,000) is an income to the partnership and increases divisible profit.

3

Subtract Appropriations (Interest on Capital and Partner Salary)

Net Divisible Profit = ₦359,000

Interest on capital (₦20,000 + ₦15,000 = ₦35,000) and partner salary (₦60,000) are appropriations of profit and reduce the total profit available for sharing.

Key Concept

Distinction between charges against profit (e.g., loan interest) and appropriations of profit (e.g., interest on capital, salaries, interest on drawings).

Question 5983Question →

The following details were extracted from the accounting records of Binta Manufacturing Ltd. for the year ended 31 December 2025:

Item	Amount (₦)
Stock of raw materials (1 January 2025)	45,000
Stock of raw materials (31 December 2025)	38,000
Purchases of raw materials	180,000
Carriage inwards on raw materials	12,000
Return outwards of raw materials	7,000
Direct factory labor paid	95,000
Direct factory labor accrued at year-end	5,000
Royalties paid on production	15,000
Factory power and lighting	34,000
Depreciation of factory machinery	22,000
Work-in-progress (1 January 2025)	28,000
Work-in-progress (31 December 2025)	31,000

What is the total Cost of Production for the year?

Show answer & explanation

Answer: 360000

Answer

The total Cost of Production for the year is ₦360,000.

The Cost of Production is correctly determined by summing Prime Cost (₦307,000) and Factory Overheads (₦56,000), giving a gross production cost of ₦363,000, and adjusting for work-in-progress by adding opening WIP (₦28,000) and deducting closing WIP (₦31,000) to arrive at ₦360,000.

Step-by-Step Solution

1

Calculate Cost of Raw Materials Consumed

₦192,000

Raw materials consumed equals opening stock of raw materials plus net purchases and carriage inwards, less closing stock of raw materials:

45,000 + 180,000 + 12,000 - 7,000 - 38,000 = 192,000

.

2

Calculate Total Direct Labor Cost

₦100,000

Direct labor must include accrued wages incurred during the accounting period:

95,000 + 5,000 = 100,000

.

3

Determine Prime Cost

₦307,000

Prime Cost is the sum of direct raw materials consumed, direct labor, and direct expenses (royalties):

192,000 + 100,000 + 15,000 = 307,000

.

4

Calculate Total Factory Overheads

₦56,000

Factory Overheads include all indirect manufacturing costs (factory power and lighting + machinery depreciation):

34,000 + 22,000 = 56,000

.

5

Compute Total Manufacturing Operations Cost before Work-in-Progress Adjustments

₦363,000

Add Factory Overheads to Prime Cost:

307,000 + 56,000 = 363,000

.

6

Adjust for Opening and Closing Work-in-Progress to derive Cost of Production

₦360,000

Add opening work-in-progress and subtract closing work-in-progress from total manufacturing operations cost:

363,000 + 28,000 - 31,000 = 360,000

.

Key Concept

Manufacturing Account Preparation and Calculation of Cost of Production

Question 5984Question →

On a topographical map drawn to a scale of $1 : 50,000$ , the straight-line distance between two settlements is measured as $14\text{ cm}$ . What is the actual ground distance between the two settlements in kilometers?

7.0\text{ km}

3.5\text{ km}

70.0\text{ km}

28.0\text{ km}

Show answer & explanation

Answer: $7.0\text{ km}$

Answer

The actual ground distance between the two settlements is

7.0\text{ km}

.

The scale

1 : 50,000

means that

1\text{ cm}

on the map represents

50,000\text{ cm}

(or

0.5\text{ km}

) on the ground. Therefore, a distance of

14\text{ cm}

on the map corresponds to

14 \times 0.5\text{ km} = 7.0\text{ km}

on the ground.

Step-by-Step Solution

1

Identify the scale ratio and map distance

Map scale

= 1 : 50,000

; Map distance

= 14\text{ cm}

.

Establishes the given measurements needed for calculation.

2

Convert the scale denominator from centimeters to kilometers

50,000\text{ cm} = \frac{50,000}{100,000}\text{ km} = 0.5\text{ km}

.

Since

1\text{ km} = 100,000\text{ cm}

,

1\text{ cm}

on the map represents

0.5\text{ km}

on the ground.

3

Calculate the ground distance

Ground distance

= 14\text{ cm} \times 0.5\text{ km/cm} = 7.0\text{ km}

.

Multiplying map distance by the ground distance per centimeter yields total real-world distance.

Key Concept

Map Scale and Distance Calculation

Question 5985Question →

Prior to reconciliation, the Purchases Ledger Control Account of Kalu Traders showed a credit balance of $₦248,500$ on 31 December 2025. Upon auditing the accounting records, the following errors were discovered:

1. A credit purchase invoice for $₦14,200$ was completely omitted from the Purchases Journal.
2. Returns outwards of $₦6,800$ were posted to the credit side of the Purchases Ledger Control Account instead of the debit side.
3. Discount received amounting to $₦3,500$ was recorded correctly in the cash book but omitted from the control account.
4. The total of the Purchases Day Book was overcast by $₦5,000$ .

What is the correct adjusted balance of the Purchases Ledger Control Account?

Show answer & explanation

Answer: 240600

Answer

The adjusted balance of the Purchases Ledger Control Account is ₦240,600.

To calculate the adjusted credit balance of the Purchases Ledger Control Account, start with the unadjusted figure of

₦248,500

. Add

₦14,200

for omitted credit purchases. Subtract

₦13,600

to correct returns outwards wrongly credited (

2 \times ₦6,800

). Subtract

₦3,500

for omitted discount received and

₦5,000

for the overcast purchases day book. The resulting corrected credit balance is

₦240,600

.

Step-by-Step Solution

1

Identify the unadjusted credit balance

Unadjusted credit balance = ₦248,500

This serves as the starting figure prior to adjustments.

2

Adjust for omitted purchase invoice

Credit Purchases Ledger Control Account by ₦14,200

Credit purchases increase creditors, so omitting the invoice requires a credit entry.

3

Correct returns outwards wrongly credited

Debit Purchases Ledger Control Account by ₦13,600

Posting returns outwards to the credit side requires debiting double the amount (₦6,800 to reverse wrong credit + ₦6,800 to post correct debit).

4

Adjust for omitted discount received and overcast day book total

Debit control account by ₦3,500 and ₦5,000 respectively

Discount received reduces total liability to creditors. Overcasting the day book resulted in an excessive credit entry that must be reduced with a debit.

5

Compute final adjusted credit balance

Adjusted balance = ₦240,600

₦248,500 + ₦14,200 - ₦13,600 - ₦3,500 - ₦5,000 = ₦240,600.

Key Concept

Purchases Ledger Control Account Error Correction

Question 5986Question →

The following balances were extracted from the ledger of Babatunde, a sole trader, as at 31st December 2025:

Account Title	Amount (₦)
Motor Vehicles (at cost)	120,000
Accumulated Depreciation on Vehicles	30,000
Closing Inventory	45,000
Trade Debtors	50,000
Provision for Bad Debts	3,000
Cash at Bank	8,000
Prepaid Rent	6,000
Trade Creditors	32,000
Bank Overdraft	15,000
Accrued Electricity Bill	4,000
5-Year Bank Loan	60,000

What is the value of the Working Capital of the business in Naira as at 31st December 2025?

Show answer & explanation

Answer: 55000

Answer

The Working Capital of the business as at 31st December 2025 is ₦55,000.

Working Capital is determined by subtracting Total Current Liabilities from Total Current Assets. Total Current Assets = ₦45,000 (Inventory) + (₦50,000 - ₦3,000) (Net Debtors) + ₦8,000 (Bank) + ₦6,000 (Prepaid Rent) = ₦106,000. Total Current Liabilities = ₦32,000 (Creditors) + ₦15,000 (Bank Overdraft) + ₦4,000 (Accrued Electricity) = ₦51,000. Working Capital = ₦106,000 - ₦51,000 = ₦55,000.

Step-by-Step Solution

1

Calculate Total Current Assets

₦106,000

Current assets consist of short-term resources expected to be realized within one accounting period: Closing Inventory (₦45,000), Net Trade Debtors (₦50,000 less ₦3,000 provision = ₦47,000), Cash at Bank (₦8,000), and Prepaid Rent (₦6,000).

2

Calculate Total Current Liabilities

₦51,000

Current liabilities are short-term obligations due within one year: Trade Creditors (₦32,000), Bank Overdraft (₦15,000), and Accrued Electricity Bill (₦4,000). The 5-year bank loan is excluded as it is a long-term liability.

3

Deduct Total Current Liabilities from Total Current Assets

₦55,000

Working Capital equals Net Current Assets (Current Assets minus Current Liabilities): ₦106,000 - ₦51,000 = ₦55,000.

Key Concept

Working Capital and Balance Sheet Item Classification

Question 5987Question →

On 31st December 2025, a business trial balance showed Trade Debtors of $\text{₦}52,000$ and an existing Provision for Doubtful Debts of $\text{₦}1,800$ . Before preparing final accounts, an additional bad debt of $\text{₦}2,000$ is written off, and the provision for doubtful debts is to be adjusted to $5\%$ of the remaining trade debtors. What amount will be charged to the Profit and Loss Account for the provision for doubtful debts?

₦700

₦2,500

₦800

₦2,600

Show answer & explanation

Answer: ₦700

Answer

₦700

The correct charge to the Profit and Loss Account is ₦700. First, the additional bad debt of ₦2,000 must be deducted from the gross trade debtors of ₦52,000 to leave net debtors of ₦50,000. Calculating 5% on ₦50,000 gives a new provision balance of ₦2,500. Since an existing provision of ₦1,800 is already in place, only the increase of ₦700 (₦2,500 - ₦1,800) is recognized as an expense in the Profit and Loss Account.

Step-by-Step Solution

1

Deduct additional bad debts from gross trade debtors to obtain net debtors.

\text{Net Debtors} = \text{₦}52,000 - \text{₦}2,000 = \text{₦}50,000

Provision for doubtful debts is calculated only on receivables after all bad debts have been written off.

2

Calculate the required new provision for doubtful debts.

\text{New Provision} = 5\% \times \text{₦}50,000 = \text{₦}2,500

The policy requires creating a 5% reserve on remaining collectable receivables.

3

Calculate the net increase in provision to be charged to Profit and Loss.

\text{Charge to P&L} = \text{₦}2,500 - \text{₦}1,800 = \text{₦}700

Only the incremental increase in provision represents an expense for the current accounting period.

Key Concept

Adjustment of Provision for Doubtful Debts

Estimated Time:1m 30s

Question 5988Question →

Match each company type or corporate document on the left with its correct legal characteristic or purpose on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Public Limited Company (Plc) matches with 'Business organization permitted to offer its shares to the general public.'; Certificate of Incorporation matches with 'Official document issued by the Registrar of Companies that establishes the company as a legal entity.'; Articles of Association matches with 'Document regulating the internal management and administrative rules of the company.'; Company Limited by Guarantee matches with 'Corporate entity created for non-profit purposes without issuing share capital.'

Each company type and formation document is correctly matched to its defined statutory function: Public Limited Companies invite public subscription for shares, the Certificate of Incorporation brings the legal entity into existence, the Articles of Association state internal governance rules, and a Company Limited by Guarantee exists for non-profit endeavors without share capital.

Step-by-Step Solution

1

Examine each item in the left column regarding company classification and incorporation documents.

Identified two legal business forms (Public Limited Company and Company Limited by Guarantee) and two essential incorporation documents (Certificate of Incorporation and Articles of Association).

Distinguishing between legal corporate entities and statutory documents is necessary for correct matching.

2

Pair each item with its unique statutory characteristic from the right column.

Public Limited Company pairs with public share offers; Certificate of Incorporation with legal establishment; Articles of Association with internal administration rules; Company Limited by Guarantee with non-profit purpose without shares.

Each item corresponds to a specific definition under company legal frameworks.

Key Concept

Formation and Types of Companies

Question 5989Question →

Apex Nigeria Plc issued ordinary shares of ₦1.00 each at a premium of ₦0.20 per share, payable as follows:
- On Application: ₦0.30
- On Allotment: ₦0.40 (including the premium of ₦0.20)
- On First Call: ₦0.30
- On Final Call: ₦0.20

A shareholder holding 1,000 shares paid the application and allotment monies but defaulted on both the first call and final call. The company forfeited these 1,000 shares and subsequently re-issued them to another investor as fully paid up at ₦0.70 per share. What is the net amount to be transferred to the Capital Reserve Account?

₦200

₦400

₦500

₦300

Show answer & explanation

Answer: ₦200

Answer

The amount to be transferred to the Capital Reserve Account is ₦200.

The correct calculation isolates the capital component paid on the forfeited shares (excluding the share premium), which totals ₦0.50 per share or ₦500 for 1,000 shares. Upon reissue at ₦0.70 per share (a discount of ₦0.30 per share below the ₦1.00 nominal value), ₦300 of the forfeited balance is utilized to cover the discount. The net gain remaining in the Forfeited Shares Account is ₦500 - ₦300 = ₦200, which is transferred to the Capital Reserve Account.

Step-by-Step Solution

1

Determine the capital portion paid per share prior to forfeiture

Capital paid per share = ₦0.30 (Application) + (₦0.40 - ₦0.20 Premium) (Allotment) = ₦0.50 per share

Share premium already collected must be credited to the Share Premium Account and excluded from the Forfeited Shares Account.

2

Calculate the total amount credited to the Forfeited Shares Account

Total Forfeited Amount = 1,000 shares × ₦0.50 = ₦500

The company retains the capital portion already paid up by the defaulting shareholder.

3

Calculate the discount allowed on reissue

Discount per share = ₦1.00 (Nominal value) - ₦0.70 (Reissue price) = ₦0.30 per share. Total Discount = 1,000 shares × ₦0.30 = ₦300

When forfeited shares are re-issued at a discount, the loss is debited to the Forfeited Shares Account.

4

Calculate the net balance transferred to Capital Reserve

Capital Reserve Transfer = ₦500 (Forfeited Amount) - ₦300 (Reissue Discount) = ₦200

The remaining surplus in the Forfeited Shares Account after covering the reissue discount represents a capital gain and must be transferred to the Capital Reserve Account.

Key Concept

Accounting for Forfeiture and Re-issue of Shares at a Discount

Estimated Time:2m 0s

Question 5990Question →

A regional planning map with a statement scale of $2\text{ cm to } 5\text{ km}$ is enlarged so that its linear dimensions are increased by a factor of $2.5$ . If the distance between two agricultural centers on the enlarged map measures $16\text{ cm}$ , what is the actual ground distance between them?

6.4\text{ km}

16.0\text{ km}

40.0\text{ km}

100.0\text{ km}

Show answer & explanation

Answer: $16.0\text{ km}$

Answer

The actual ground distance between the two agricultural centers is

16.0\text{ km}

.

The original statement scale of

2\text{ cm to } 5\text{ km}

simplifies to

1\text{ cm to } 2.5\text{ km}

. Enlarging the map's linear dimensions by a factor of

2.5

means that details become

2.5

times larger, so

1\text{ cm}

on the new map represents

\frac{2.5\text{ km}}{2.5} = 1.0\text{ km}

. Therefore, a measured distance of

16\text{ cm}

on the enlarged map corresponds to

16\text{ cm} \times 1.0\text{ km/cm} = 16.0\text{ km}

on the ground.

Step-by-Step Solution

1

Determine the unit scale of the original map.

Since

2\text{ cm}

represents

5\text{ km}

,

1\text{ cm}

represents

\frac{5\text{ km}}{2} = 2.5\text{ km}

.

Establishing the distance represented by

1\text{ cm}

on the original map provides the baseline linear scale.

2

Calculate the new linear scale after map enlargement.

The new scale denominator is

\frac{2.5\text{ km}}{2.5} = 1.0\text{ km}

per centimeter (

1\text{ cm to } 1\text{ km}

).

Enlarging a map by a linear factor of

2.5

means each centimeter on the new map represents a smaller ground distance by a factor of

2.5

.

3

Compute the actual ground distance using the enlarged map measurement.

\text{Ground Distance} = 16\text{ cm} \times 1.0\text{ km/cm} = 16.0\text{ km}.

Multiplying the measured distance on the enlarged map by the new ground equivalence yields the total actual distance.

Key Concept

Map Scale Conversion during Linear Enlargement

Estimated Time:2m 0s

Question 5991Question →

A sole trader extracted the following balances from their accounting records at the end of the financial year:

- Sales: $\text{₦}90,000$
- Opening Inventory: $\text{₦}15,000$
- Purchases: $\text{₦}50,000$
- Carriage Inwards: $\text{₦}4,000$
- Carriage Outwards: $\text{₦}6,000$
- Closing Inventory: $\text{₦}19,000$

What is the gross profit for the period?

\text{₦}40,000

\text{₦}34,000

\text{₦}48,000

\text{₦}21,000

Show answer & explanation

Answer: $\text{₦}40,000$

Answer

The gross profit for the period is

\text{₦}40,000

.

The gross profit of

\text{₦}40,000

is obtained by deducting the cost of goods sold (

\text{₦}50,000

) from sales revenue (

\text{₦}90,000

). Cost of goods sold includes opening inventory (

\text{₦}15,000

), purchases (

\text{₦}50,000

), and carriage inwards (

\text{₦}4,000

), less closing inventory (

\text{₦}19,000

).

Step-by-Step Solution

1

Calculate Cost of Goods Sold (COGS)

\text{COGS} = \text{Opening Inventory} + \text{Purchases} + \text{Carriage Inwards} - \text{Closing Inventory} = \text{₦}15,000 + \text{₦}50,000 + \text{₦}4,000 - \text{₦}19,000 = \text{₦}50,000

Carriage inwards is a direct expense added to purchases, while closing inventory is deducted to determine the cost of inventory sold during the period.

2

Calculate Gross Profit

\text{Gross Profit} = \text{Sales} - \text{COGS} = \text{₦}90,000 - \text{₦}50,000 = \text{₦}40,000

Gross profit is the difference between total sales revenue and the cost of goods sold.

Key Concept

Trading Account and Gross Profit Determination

Question 5992Question →

A petty cashier was maintained on the imprest system with an initial float of $₦50,000$ on March 1, 2026. During the month of March, the following transactions took place:

- Paid for office stationery: $₦8,400$
- Paid for postage and stamps: $₦4,600$
- Paid for office cleaning: $₦6,500$
- Paid for staff traveling expenses: $₦9,200$
- Paid to a ledger creditor (Mr. Okafor): $₦5,000$
- Received refund from an employee for overpaid traveling expenses: $₦1,500$

At the end of the month, management decided to increase the imprest float by $₦10,000$ starting from April 1. What is the total amount (in $₦$ ) required from the chief cashier to restore and adjust the petty cash float to its new level?

Show answer & explanation

Answer: 42200

Answer

The total amount required from the chief cashier to restore and adjust the petty cash float is

₦42,200

.

Under the imprest system, the amount issued by the chief cashier must restore spent funds and accommodate any decided increase in the float. Net expenditure incurred during the period is total disbursements (

₦33,700

) minus refunds received (

₦1,500

), yielding

₦32,200

. Adding the

₦10,000

increase in float gives a total required amount of

₦32,200 + ₦10,000 = ₦42,200

.

Step-by-Step Solution

1

Calculate total petty cash disbursements during the month

₦33,700

Sum all petty payments made:

8,400 + 4,600 + 6,500 + 9,200 + 5,000 = ₦33,700

.

2

Determine net expenditure by subtracting petty receipts

₦32,200

The

₦1,500

refund received reduces net spent cash from float:

33,700 - 1,500 = ₦32,200

.

3

Calculate cash remaining in hand at month end

₦17,800

Subtract net spent amount from original float:

50,000 - 32,200 = ₦17,800

.

4

Determine cash required from chief cashier for new float level

₦42,200

New float requirement is

₦50,000 + ₦10,000 = ₦60,000

. Cash needed =

60,000 - 17,800 = ₦42,200

(or net expenses of

₦32,200

plus float increase of

₦10,000

).

Key Concept

Imprest system reimbursement and float adjustment calculation

Estimated Time:2m 0s

Question 5993Question →

Zainab and Chidi opened a Joint Bank Account to execute a joint venture in imported fabrics, sharing profits and losses in the ratio of $3:2$ . Zainab and Chidi contributed $\text{₦}1,500,000$ and $\text{₦}1,000,000$ respectively into the Joint Bank. Goods costing $\text{₦}1,800,000$ were paid for from the Joint Bank, and freight charges of $\text{₦}120,000$ were also paid from the Joint Bank. Zainab supplied additional materials valued at $\text{₦}250,000$ from her personal stock. Chidi incurred advertising expenses of $\text{₦}80,000$ from his personal funds and was entitled to a $5\%$ commission on gross sales for managing the venture. Total sales proceeds of $\text{₦}3,000,000$ were deposited into the Joint Bank Account. At the close of the venture, Zainab took over unsold goods valued at $\text{₦}150,000$ . What is the final cash amount in Naira ( $\text{₦}$ ) paid to Chidi from the Joint Bank Account to close his account?

Show answer & explanation

Answer: 1530000

Answer

The final cash amount paid to Chidi from the Joint Bank Account to settle his ledger account is ₦1,530,000.

The final cash settlement is determined by finding the closing balance of Chidi's personal ledger account. Total revenue earned by the venture is ₦3,150,000 (₦3,000,000 cash sales + ₦150,000 stock taken by Zainab). Total expenses equal ₦2,400,000 (₦1,800,000 purchases + ₦120,000 freight + ₦250,000 materials supplied by Zainab + ₦80,000 advertising paid by Chidi + ₦150,000 commission earned by Chidi). The net profit is ₦750,000, of which Chidi's 2/5 share is ₦300,000. Crediting Chidi's account with his capital contribution (₦1,000,000), advertising expenses paid (₦80,000), commission (₦150,000), and profit share (₦300,000) gives a final settlement amount of ₦1,530,000 paid to him from the Joint Bank Account.

Step-by-Step Solution

1

Calculate Chidi's management commission on gross sales.

Commission = 5% × ₦3,000,000 = ₦150,000

Chidi is entitled to a 5% commission on total sales proceeds generated by the joint venture.

2

Determine total income credited to the Joint Venture Account.

Total Credits = ₦3,000,000 (Sales) + ₦150,000 (Unsold stock taken over by Zainab) = ₦3,150,000

Both sales proceeds and the value of inventory taken over by co-venturers represent income to the venture.

3

Determine total costs and expenses debited to the Joint Venture Account.

Total Debits = ₦1,800,000 (Purchases) + ₦120,000 (Freight) + ₦250,000 (Zainab's materials) + ₦80,000 (Chidi's advertising) + ₦150,000 (Chidi's commission) = ₦2,400,000

All direct venture costs paid via Joint Bank, personal expenditure by venturers, and earned commission are venture expenses.

4

Calculate the overall net profit of the joint venture.

Net Profit = Total Income (₦3,150,000) - Total Expenses (₦2,400,000) = ₦750,000

Net profit is the excess of total venture revenue over total venture costs.

5

Calculate Chidi's share of the net profit using the profit-sharing ratio of 3:2.

Chidi's Share of Profit = (2 / 5) × ₦750,000 = ₦300,000

Chidi receives 2 parts out of the total 5 parts of the net joint venture profit.

6

Calculate the closing credit balance on Chidi's Personal Account.

Chidi's Balance = ₦1,000,000 (Initial Capital) + ₦80,000 (Advertising paid) + ₦150,000 (Commission) + ₦300,000 (Share of profit) = ₦1,530,000

Chidi's ledger account is credited with all cash contributed, personal expenses incurred on behalf of the venture, commission earned, and his profit share.

Key Concept

Final cash settlement in joint venture accounts using a separate set of books

Question 5994Question →

A logistics company enters into a commercial contract to supply 1,000 industrial water pumps to a manufacturing firm. The agreement explicitly specifies that delivery must take place on or before May 1st as time is of the essence for factory operations. The supplier fails to deliver until June 15th, causing major operational disruption. What is the primary legal consequence of this breach of contract?

The injured party can treat the contract as repudiated and claim damages, because the late delivery breaches a fundamental condition.

The injured party is entitled only to claim monetary damages, because time of delivery is always treated legally as a minor warranty.

The contract is rendered null and void ab initio because time stipulations are treated merely as non-binding invitations to treat.

The injured party must accept the late delivery and seek complete financial compensation under general insurance indemnity principles.

Show answer & explanation

Answer: The injured party can treat the contract as repudiated and claim damages, because the late delivery breaches a fundamental condition.

Answer

The injured party can treat the contract as repudiated and claim damages, because the late delivery breaches a fundamental condition.

In commercial law, when a contract specifies that time is of the essence, punctual performance is a condition that goes to the root of the contract. Failing to deliver on time constitutes a breach of condition, granting the injured party the legal right to terminate (repudiate) the contract and recover damages for losses sustained.

Step-by-Step Solution

1

Identify the nature of the breached contract term

The clause stating delivery by May 1st with 'time is of the essence' makes punctual delivery a vital term (condition), not a secondary obligation (warranty).

In commercial contracts, expressly making time of the essence elevates the delivery timeline to a fundamental condition of the contract.

2

Determine the remedies available for breach of a condition

Breach of a condition gives the innocent party the option to discharge (repudiate) the contract and sue for damages suffered.

Under contract law, a breach of condition goes to the root of the contract, unlike a breach of warranty which only allows a claim for damages.

Key Concept

Distinction between Breach of Condition and Breach of Warranty in Contract Law

Question 5995Question →

Match each qualitative characteristic of accounting information on the left with its correct definition or primary feature on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Relevance matches with information being capable of making a difference in economic decisions; Faithful Representation matches with reporting being complete, neutral, and free from material error; Comparability matches with enabling users to identify similarities and differences across periods or entities; Verifiability matches with independent observers reaching consensus.

Relevance pertains to making a difference in economic decisions; Faithful Representation requires completeness, neutrality, and freedom from error; Comparability involves consistent reporting across entities and periods; and Verifiability ensures independent observers reach consensus on financial depiction.

Step-by-Step Solution

1

Identify fundamental qualitative characteristics of accounting information.

Relevance and Faithful Representation are established as fundamental characteristics.

Fundamental characteristics define the content quality essential for financial data utility.

2

Identify enhancing qualitative characteristics.

Comparability and Verifiability are identified as enhancing characteristics.

Enhancing characteristics improve the usefulness of relevant and faithfully represented accounting information.

3

Match each item based on international accounting conceptual frameworks.

Each qualitative concept is correctly paired with its defining attribute.

Understanding these definitions distinguishes fundamental attributes from enhancing ones in financial statements.

Key Concept

Qualitative Characteristics of Accounting Information

Question 5996Question →

Public sector entities classify government spending into specific recurrent and capital categories depending on whether the disbursement creates long-term physical assets or meets ongoing operational needs. Match each of the following government financial transactions with its appropriate accounting expenditure classification.

Click a left item, then click its matching right item

Show answer & explanation

Answer

The civil servant emoluments represent Recurrent Expenditure (Personnel Cost); the highway construction represents Capital Expenditure (Infrastructure Development); the hospital structural expansion represents Capital Expenditure (Asset Acquisition & Enhancement); and the stationery/utilities represent Recurrent Expenditure (Overhead Cost).

Disbursements for salaries and pensions are ongoing human resource operational costs (Recurrent — Personnel Cost). Highway construction produces new permanent public assets (Capital — Infrastructure). Structural hospital additions enhance existing physical capacity and lifespan (Capital — Asset Enhancement). Office supplies and vehicle servicing represent routine administrative running expenses (Recurrent — Overhead Cost).

Step-by-Step Solution

1

Analyze the nature and period of benefit for each public transaction.

Identify whether the spending funds day-to-day operations (recurrent) or creates/improves long-term fixed assets (capital).

Recurrent expenditure is continuous and consumed within one financial year, while capital expenditure provides economic benefits over multiple financial years.

2

Categorize recurrent expenditures into Personnel Costs and Overhead Costs.

Emoluments to civil servants are Personnel Costs, while office running expenses like stationery and vehicle maintenance are Overhead Costs.

Public sector accounting distinguishes human resource costs from administrative running costs.

3

Distinguish between routine repairs (recurrent) and major structural enhancements (capital).

Major structural modification of the hospital increases capacity, making it a capital enhancement rather than routine maintenance.

Expenditures that increase asset capacity, structural strength, or useful life must be capitalized.

Key Concept

Classification of Recurrent and Capital Expenditure in Public Sector Accounting

Question 5997Question →

Ngozi and Bello are partners in a firm sharing profits and losses in the ratio of $3:2$ . They admit Emeka into the partnership for a $\frac{1}{4}$ share of future profits. Emeka pays $\mathcal{N}20,000$ in cash as his share of premium for goodwill, which is to be retained in the business. Which of the following correctly describes the ledger entry required to credit the existing partners for the goodwill premium?

Credit Ngozi's Capital Account with

\mathcal{N}12,000

and Bello's Capital Account with

\mathcal{N}8,000

Credit Ngozi's Capital Account with

\mathcal{N}10,000

and Bello's Capital Account with

\mathcal{N}10,000

Debit Ngozi's Capital Account with

\mathcal{N}12,000

and Bello's Capital Account with

\mathcal{N}8,000

Credit Ngozi's Capital Account with

\mathcal{N}15,000

and Bello's Capital Account with

\mathcal{N}5,000

Show answer & explanation

Answer: Credit Ngozi's Capital Account with $\mathcal{N}12,000$ and Bello's Capital Account with $\mathcal{N}8,000$

Answer

Credit Ngozi's Capital Account with

\mathcal{N}12,000

and Bello's Capital Account with

\mathcal{N}8,000

When an incoming partner brings cash for premium for goodwill, the cash is debited to the Bank/Cash account and credited to the existing partners' capital accounts in their sacrificing ratio. With an old ratio of

3:2

, Ngozi receives

\frac{3}{5} \times \mathcal{N}20,000 = \mathcal{N}12,000

and Bello receives

\frac{2}{5} \times \mathcal{N}20,000 = \mathcal{N}8,000

.

Step-by-Step Solution

1

Determine the sacrificing ratio of the existing partners

Since no new ratio is explicitly stated, the sacrificing ratio equals the old profit-sharing ratio of

3:2

(total parts =

3 + 2 = 5

).

When a new partner is admitted without specific new ratio details, existing partners sacrifice in their old profit-sharing ratio.

2

Calculate Ngozi's share of the goodwill premium

Ngozi's share =

\frac{3}{5} \times \mathcal{N}20,000 = \mathcal{N}12,000

Multiply total premium by Ngozi's proportion of the sacrificing ratio.

3

Calculate Bello's share of the goodwill premium

Bello's share =

\frac{2}{5} \times \mathcal{N}20,000 = \mathcal{N}8,000

Multiply total premium by Bello's proportion of the sacrificing ratio.

4

Formulate the credit entry to capital accounts

Credit Ngozi's Capital Account with

\mathcal{N}12,000

and Bello's Capital Account with

\mathcal{N}8,000

.

Goodwill premium brought in cash is credited to old partners' capital accounts to compensate them for sacrificing future profit shares.

Key Concept

Accounting treatment of premium for goodwill on admission of a partner

Question 5998Question →

Kalu Enterprise consigned $200$ cartons of goods to Bisi Traders at a cost price of $\text{₦}5,000$ per carton. Kalu paid $\text{₦}40,000$ for freight and insurance. Bisi Traders sold $150$ cartons at $\text{₦}6,000$ per carton and incurred selling expenses of $\text{₦}20,000$ . Bisi Traders is entitled to a $5\%$ ordinary commission and a $2.5\%$ del-credere commission on total sales. During the period, bad debts arising from credit sales amounted to $\text{₦}15,000$ . What is the net amount Bisi Traders will remit to Kalu Enterprise?

\text{₦}772,500

\text{₦}797,500

\text{₦}812,500

\text{₦}820,000

Show answer & explanation

Answer: \text{₦}812,500

Answer

The net amount to be remitted by Bisi Traders to Kalu Enterprise is

\text{₦}812,500

.

The correct net amount remitted is calculated by taking total sales proceeds of

\text{₦}900,000

(

150 \times \text{₦}6,000

) and subtracting the consignee's allowable deductions: selling expenses of

\text{₦}20,000

and total commission of

\text{₦}67,500

(

7.5\%

of

\text{₦}900,000

). Because Bisi Traders receives a del-credere commission, bad debts are borne entirely by the consignee and are not deducted from the consignor's funds, giving a net balance of

\text{₦}812,500

.

Step-by-Step Solution

1

Calculate the total gross sales proceeds realized by Bisi Traders.

Total Sales =

150 \text{ cartons} \times \text{₦}6,000 = \text{₦}900,000

.

This represents the total credit entry to Bisi Traders' account in Kalu's ledger.

2

Calculate the total commission earned by Bisi Traders (ordinary + del-credere).

Total Commission Rate =

5\% + 2.5\% = 7.5\%

. Total Commission =

7.5\% \times \text{₦}900,000 = \text{₦}67,500

.

Bisi Traders is entitled to deduct both ordinary and del-credere commissions from the sales proceeds.

3

Determine the treatment of bad debts and calculate total allowable deductions.

Bad debts of

\text{₦}15,000

are absorbed by Bisi Traders because a del-credere commission was paid. Total Deductions = Expenses (

\text{₦}20,000

) + Commission (

\text{₦}67,500

) =

\text{₦}87,500

.

Del-credere commission guarantees payment from buyers, shifting credit risk from consignor to consignee.

4

Compute the net remittance balance in the Consignee Account.

Net Remittance = Total Sales (

\text{₦}900,000

) - Total Deductions (

\text{₦}87,500

) =

\text{₦}812,500

.

This is the net cash/bank draft balance owing from Bisi Traders to Kalu Enterprise.

Key Concept

Accounting for Consignee Personal Account and Del-Credere Commission in Consignor's Ledger

Question 5999Question →

On a topographical map with a Representative Fraction (RF) of $1 : 50,000$ , a straight coastline segment between two coastal lighthouses measures $14.4\text{ cm}$ . What is the actual ground distance between the two lighthouses in kilometers?

Show answer & explanation

Answer: 7.2

Answer

The actual ground distance between the two lighthouses is 7.2 km.

To find actual ground distance from a Representative Fraction (

1 : 50,000

), multiply the measured map distance (

14.4\text{ cm}

) by the scale denominator (

50,000

) to get

720,000\text{ cm}

. Converting to kilometers by dividing by

100,000

yields

7.2\text{ km}

.

Step-by-Step Solution

1

Calculate the ground distance in centimeters using the Representative Fraction denominator.

14.4\text{ cm} \times 50,000 = 720,000\text{ cm}

The scale ratio

1 : 50,000

means

1\text{ cm}

on the map represents

50,000\text{ cm}

on the ground.

2

Convert the ground distance from centimeters to meters.

720,000\text{ cm} \div 100 = 7,200\text{ m}

There are

100\text{ cm}

in

1\text{ meter}

.

3

Convert the ground distance from meters to kilometers.

7,200\text{ m} \div 1,000 = 7.2\text{ km}

There are

1,000\text{ meters}

in

1\text{ kilometer}

.

Key Concept

Converting map distance to actual ground distance using Representative Fraction (RF) scale

Estimated Time:1m 0s

Question 6000Question →

A surveyor measures a straight stretch of road between two agricultural settlements on a topographical map drawn to a scale of $1 : 75,000$ . If the distance between the two settlements on the map is $16\text{ cm}$ , what is the actual ground distance in kilometers?

Show answer & explanation

Answer: 12

Answer

The actual ground distance between the two settlements is

12\text{ km}

.

A Representative Fraction scale of

1 : 75,000

means

1\text{ cm}

on the map represents

75,000\text{ cm}

on the ground. Converting

75,000\text{ cm}

into kilometres gives

\frac{75,000}{100,000} = 0.75\text{ km}

. Multiplying the measured map length of

16\text{ cm}

by

0.75\text{ km/cm}

yields an actual distance of

12\text{ km}

.

Step-by-Step Solution

1

Convert scale denominator from centimetres to kilometres

1\text{ cm on map} = 75,000\text{ cm on ground} = 0.75\text{ km}

Dividing centimetres by

100,000

(

100\text{ cm/m} \times 1,000\text{ m/km}

) converts centimetres to kilometres.

2

Calculate the actual ground distance

16\text{ cm} \times 0.75\text{ km/cm} = 12\text{ km}

Multiplying the measured distance on the map by the ground distance represented per centimetre gives the total ground distance.

Key Concept

Map Scale Conversion and Ground Distance Calculation

Answer

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