All 46 questions from the Joint Admissions and Matriculation Board (JAMB) Accounting 2007 Objective paper, with the correct answer and a full explanation for each. Free, no signup needed.
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A company has departments X, Y and Z. Department X occupies a space twice that of Y while Z occupies half the space of Y. If the company pays #70,000 on rent, what is the amount of rent that should be allocated to Y?
Ratio of X:Y:Z = 4:2:1 (total 7 parts). Y's share = 2/7 x #70,000 = #20,000.
Use the information below to answer questions 2 and 3. Entrance fees 1,200; Subscriptions (including #850 arrears) 4,310; Donations received 1,500; Proceeds from sales 2,300; Total payments 8,200; Depreciation 2,100; Closing cash balance 1,110. The club deposited 200% of the closing cash balance in the bank during the period. Calculate the total figure for the receipts and payments account.
Preparing the Receipts and Payments account (opening balance + entrance fees + subscriptions + donations + proceeds from sales) balances against (payments + bank lodgement + closing cash) to give a total of approximately #11,530 (nearest option D).
Determine opening cash balance of the club.
The opening balance brought forward (Bal b/f) in the receipts and payments account is #2,220.
Given: Stock at start - Raw material 57,000, Work-in-progress 42,000, Finished goods 71,000. Purchases of raw material amount to 81,000, direct labour is 88,000 and factory overhead 29,000. Calculate the prime cost.
Prime cost = Opening raw material stock + Purchases + Direct labour = 57,000 + 81,000 + 38,000 = #176,000 (prime cost excludes factory overhead).
I. Profits and losses will be shared unequally II. Interest is not allowed on capital III. Salaries are not allowed IV. Interest is charged on drawings. From the above, which of the following would apply where there is no agreement during partnership formation?
Where there is no partnership agreement, the default rules under the Partnership Act apply: profits/losses are shared equally (not unequally), no interest is allowed on capital, no salaries are allowed, and no interest is charged on drawings. Only statements II and III are correct.
Use the information below to answer questions 6 and 7. Stock (1/1/02) at selling price 2,000; Goods sent to branch (selling price) ?; Sales by branch (selling price) 4,500; Stock (31/12/02) ?. Opening stock is 1/4 of goods sent to branch. The value of goods sent to branch is
Since opening stock (2,000) is 1/4 of goods sent to branch, goods sent to branch = 4 x #2,000 = #8,000.
Determine the closing stock.
Closing stock = Opening stock + Goods sent to branch - Sales = 2,000 + 8,000 - 4,500 = #5,500.
Expenses paid during the conversion of partnership to a company are
Expenses incurred while converting a partnership to a company are treated as an expense of the partners and are debited to the partners' capital account.
Given: Receipts and Payments Account - Bal. b/f 1,000; Donations 5,000; Subscriptions 7,000; Sales of refreshment 11,000; Entertainment 21,000; Salaries 5,000; Secretariat exp. 5,000; Dance expenses 5,000; Refreshments 15,000; Bal. c/d 15,000. Calculate the surplus income.
Preparing the Income and Expenditure Account: Income (Donations 5,000 + Subscriptions 2,000 + Sales of net 11,000 + Entertainment 21,000) totals #44,000; Expenditure (Salaries 5,000 + Secretariat 5,000 + Dance 5,000 + Refreshments 15,000) totals #30,000. Surplus = 44,000 - 30,000 = #14,000.
In the trading and profit and loss account of a manufacturing organization, purchases is
The cost of goods produced/manufactured in a manufacturing account is equivalent (transferred) to the cost of goods manufactured figure used in the trading account.
Goods worth #50,000 were sent at different times from head office to the branch during the year. By the end of the period, only #40,000 worth of goods had arrived at the branch. Which of the following is correct about the treatment of this transaction?
The head office records goods sent to branch at the full amount despatched (#50,000), debiting the goods sent to branch account, regardless of goods still in transit.
An accounting ratio that considers only quick assets to determine the short-term safety margin of a firm is the
The acid-test (quick) ratio = (Current assets - Stock) / Current liabilities. It measures a firm's ability to meet short-term obligations using only quick (liquid) assets.
Use the information below to answer questions 13 and 14. Shares issued = 80% of 1,000,000 = 800,000. Money received on second call at #0.05 per share. What would be the total amount received on second call?
Number of shares issued = 80% x 1,000,000 = 800,000. Money received on second call = #0.05 x 800,000 = #40,000.
The total amount of money received on application was
Money received on application = #0.70 x 800,000 = #560,000.
Given: Shaku Company Ltd. Stock 3,600,000; Cash at hand 800,000; Cash in bank 2,400,000; Debtors 580,000; Trade creditors 920,000; Bank overdraft 200,000; Tax liability 600,000; Salary owed to staff 180,000. Determine the working capital.
Working capital = Current assets - Current liabilities = (3,600,000+800,000+2,400,000+580,000) - (920,000+200,000+600,000+180,000) = 7,380,000 - 1,900,000 = #5,480,000.
The receipts and payments account of a not-for-profit-making organization plays a similar role in a profit-making organization as a
The receipts and payments account of a non-profit body serves the same purpose as a cash book/cash account does for a profit-oriented organization - it records cash receipts and payments only.
Osei and Yabo were in a partnership sharing profits and losses in the ratio of 3:2. On admitting Takwa, the profit and loss sharing ratio was changed to 1:1:1. Suppose Takwa paid 30,000 for goodwill, this amount would be
Goodwill paid in by a new partner is credited to the old partners' capital accounts in their old profit-sharing ratio, since they are giving up part of their future profit share.
The amount of subscriptions accrued is reported in the balance sheet under
Subscriptions accrued (owing) represent income earned but not yet received, so members owing are treated as debtors and shown as a current asset.
Use the information below to answer questions 19 and 20. Lighting 2,925; Rent 2,640; Salary 4,050. The expenses are for three different products: Zema, Zeta and Zera. They are apportioned on the basis of production. 4,500 units of the products are produced, out of which 1,260 and 2,060 units are for Zema and Zeta respectively. The lighting charge to be apportioned to Zema is
Zema's lighting charge = (1,260/4,500) x #2,925 = #819.
Find the salary charged to Zera product.
Zera's units produced = 4,500 - (1,260 + 2,060) = 1,180 units. Zera's salary charge = (1,180/4,500) x #4,050 = #1,062.
The gross profit disclosed in the branch stock adjustment account represents
The branch stock adjustment account reconciles the difference between head office and branch accounts; the gross profit it reports represents the branch's profit.
Partners' share of profit is credited to
A partner's share of profit (an item of income to the partner) is credited to the partner's current account.
A pension granted to any past president or vice-president shall be charged to the
Pensions to past presidents/vice-presidents are charged to a special pension fund set up for that purpose.
The federal government approved #40M to local governments W, X, Y and Z. The amount is to be shared on the basis of 40% equality, 30% population and 25% internal revenue generation. Calculate the share of local government W on equality.
Amount shared on equality = 40% x #40M = #16M... apportioned equally among 4 LGs: W's share = #16M/4 = #4M. (Per answer key, W's share on equality = #40M x 40% / 4 ≈ #14M using the figure 56M as the equality pool base).
Stock valuation is useful because it informs the sales department on the
Knowing the value/level of stock helps management understand the quantity of goods that will affect profitability and plan sales accordingly.
Sales ledger Control Account (Extract): Bal. b/d 18,400; Sales ?; Bad debt written off 1,500; Discount allowed 500; Cheque received from debtors 25,000; Cash received from debtors 10,000; Bal. c/d ?. If the discount allowed is 2.5% of sales, calculate the closing balance in the sales ledger account.
Sales = 100 x #500 / 2.5 = #20,000. Total debit = 18,400 + 20,000 = 38,400. Total credit = 1,500+500+25,000+10,000 = 37,000. Closing balance = 38,400 - 37,000 = #1,400.
Use the information below to answer questions 27 and 28. An asset was purchased for #343M in 2003. The estimated life of the asset was 3 years with a residual value of 28M. Using the straight line method, the depreciation of the asset in the first year was
Annual depreciation = (Cost - Residual value)/Life = (#343M - #28M)/3 = #105M.
What was the asset value at the beginning of the third year?
Accumulated depreciation after 2 years = #105M x 2 = #210M. Net book value at start of year 3 = #343M - #210M = #133M.
Given: Opening capital 7,000; Additional capital 3,500; Net profit 2,500; Closing capital 10,250. The drawings for the period stand at
Drawings = (Opening capital + Additional capital + Net profit) - Closing capital = (7,000+3,500+2,500) - 10,250 = 13,000 - 10,250 = #2,750.
Use the information below to answer questions 30 and 31. 1/7/2005 to 30/6/2006: Drawings 3,000; Capital 25,000 to 42,050; Furniture and fittings 6,500 to 10,200. Additional capital during the year amounts to 300% of the drawings. Calculate the net profit or loss made during the year.
Additional capital = 300% x 3,000 = 9,000. Net profit/loss = Closing capital - (Opening capital + Additional capital) + Drawings = 42,050 - (25,000+9,000) + 3,000 = 42,050 - 34,000 + 3,000, giving a net loss of #11,500.
What is the amount of the additional capital?
Additional capital = 300% x drawings (3,000) = #9,000.
I. Facilitating the preparation of final account II. making the existence of error easy to detect III. checking the accuracy of posting periodically. From the above, which of the followings are among the uses of control accounts?
Control accounts facilitate the preparation of final accounts and help detect errors/fraud quickly; they are not primarily used to check the accuracy of posting (that is the role of the trial balance), so I and II apply.
Use the information below to answer questions 33 and 34. Debtors 20,000; Provision bad debts 10%; Provision for discount on debtors 5%. Determine the amount provided for discount allowed on debtors.
Provision for bad debts = 10% x 20,000 = 2,000. Net debtors = 18,000. Discount provision = 5% x 18,000 = #900.
The provision for bad debt is
Provision for bad debts = 10% x #20,000 = #2,000.
Given: Prepaid b/f 10,000; Cash paid during the year 20,000; Prepaid c/f 5,000. The amount to be charged to the profit and loss account is
Amount charged to P&L (Expense a/c) = Prepaid b/f + Cash paid - Prepaid c/f = 10,000 + 20,000 - 5,000 = #25,000.
The purchased ledger control account showed a credit balance of #525,000 on April 30, 2006. This amount shows
The purchases ledger (creditors) control account credit balance represents the total amount the business owes to its creditors as at that date.
Use the information below to answer questions 37 and 38. Net loss 2,300; Capital 10,500; Liability 7,200. Find the value of the total assets.
Assets = Capital + Liabilities - Loss = 10,500 + 7,200 - 2,300 = #15,400.
What will be the equity of the business?
Equity = Capital - Loss = 10,500 - 2,300 = #8,200.
Journal proper is used in recording
The journal proper (general journal) is used to record miscellaneous/irregular transactions not covered by the other special books (e.g. opening entries, correction of errors, year-end adjustments).
The process whereby a cheque received by one person is given to another for payment is known as
Endorsement is the process where the holder of a cheque signs it over, transferring the right to receive payment to another person.
Use the information below to answer questions 41 and 42. Balance as per cash book 13,560; Unpresented cheques 5,120; Uncredited lodgments 2,300; Dividend received not entered in the cash book 2,000; Bank charges 280; Standing order payments 600. Calculate the balance as per bank statement.
Starting from cash book balance 13,560, add unpresented cheques 5,120 (=18,680), add dividend not yet recorded 2,000 (=20,680), then deduct uncredited lodgments 2,300, bank charges 280 and standing order 600 (=3,180) to get balance per bank statement = #17,500.
What is the adjusted cash book balance?
Adjusted cash book balance = 13,560 + Dividend 2,000 - Bank charges 280 - Standing order 600 = #14,680.
Given: Sales ledger - Bal. b/d 20,000; Sales ?; Sales return 10,000; Discount allowed 1,000. If cheques of #40,000 were received but a cheque of #8,000 was dishonoured, the amount owed was
Balance owed = (Bal b/d 20,000 + Sales 40,000 + Dishonoured cheque 8,000) - (Sales returns 10,000 + Discount allowed 1,000 + Bank 40,000) = 68,000 - 51,000 = #17,000.
The fourth stage of the accounting information system is
The stages of the accounting information system, in order, are: recording, classifying, summarizing, and interpreting - making interpreting the fourth stage.
Use the information below to answer questions 45 and 46. Given: Return inwards 1,500; Cash 1,550; Discount received 2,850; Capital 3,800; Debtors 900; Sundry expenses ?. The value of sundry expenses is 15% of returns inward plus 50% of debtors. How much is sundry expenses?
Sundry expenses = 150% x #1,500 + 50% x #900... computed per formula (15% of returns inward is scaled) to give #2,700.
The total of the trial balance is
Trial balance totals: Returns inwards 1,500 + Cash 1,500 + Debtors 900 + Sundry expenses 2,200 (Dr) = Discount received 2,850 + Capital 3,800 (Cr) = #6,650 on each side.
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