NATIONAL OPEN UNIVERSITY OF NIGERIA

Plot 91 Cadastral Zone Nnamdi Azikiwe Express Way, Jabi, Abuja

FACULTY OF MANAGEMENT SCIENCES
DEPARTMENT OF FINANCIAL STUDIES
2021_2 EXAMINATION

COURSE CODE: ACC 311 CREDIT UNIT: 3

COURSE TITLE: FINANCIAL ACCOUNTING
TIME ALLOWED: 2 ½ HOURS
Instructions: Attempt question number one (1) and any other Three (3).
Question number 1 is compulsory and carries 25 marks while the other 3 questions carry
15 marks each. Present all your points in coherent and orderly manner.

QUESTIONS
1(a) The following trial balance is extracted from the books of Ajala Ltd as an 31 st December,
2020.

PARTICULARS Dr Cr
N N
Inventory 1/1/2020 20,000
Sales 90,500
Purchases 60,000
Carriage Inwards 440
Carriage outwards 160
Debtors and Creditors 21,000 21,000
Ordinary share capital 100,000
7% Preference share capital 30,000
6% Debentures 24,000
Goodwill 25000
Preliminary expenses 3,210
Land and Building 45,000
Equipment 35,000
Motor vehicle 55,000
Bank 24,000
Cash in hand 24,000
Provision for depreciation: Equipment 3,050
Motor vehicle 4,300
General reserve 13,200
Share premium 5,000
Interim ordinary dividend 4,050
Profit and loss 90,450
Motor expenses 780
General expenses 480
Debenture interest 740
Rates 1,520
Salaries & Wages 4,370

Directors remuneration 2,000

Auditors remuneration 1,000
327,750 327,750
Additional Information:

1
 i. Inventory at 31/12/2020 was N40,000.
ii. Accrued debenture interest and salary are N700 and N250 respectively.
iii. Transfer N4100 to general reserve
iv. Authorized share capital is N40,000 in Preference shares and N300,000 in ordinary shares.
v. Provision for depreciation: Motor vehicle – N4,5000
Equipment - N2,300
vi. Write off goodwill N1,500; Preliminary expenses N3,210
vii. Corporation Tax – N2,500
viii. Provide for preference dividend N2,100 and final ordinary dividend of 5%. You are required to prepare
the final accounts of Ajala Ltd for the year ended 31 st December, 2020.
(20 marks)

1(b) Outline five examples of cash flow from investing activities (5 marks)
2(a) Omega Limited and Alpha Limited have agreed to amalgamate with effect from January 1
2020, Omega & Alpha Limited was established to take over the business and has issued
200,000 N1 Ordinary shares and N100,000 7½ Debentures, in each case for cash by 31
December, 2019.
Below are the Statement of Financial Positions of Omega Limited and Alpha Limited
on 31 December, 2019.

Statement of financial position as at 31st December, 2019

Omega Ltd Alpha Ltd
N N N N
Ordinary Share Capital of N1 each 100,000 200,000
Reserves 50,000 100,000
150,000 300,000
Non-current Assets (Book value)
Land and Building 80,000 100,000
Plant and machinery - 100,000
Furniture and Fittings 50,000 -
Motor vehicle 30,000 50,000
160,000 250,000
Current Assets
Inventories 60,000 150,000
Receivables 30,000 70,000
Bank 25,000 10,000
115,000 230,000
Current Liabilities
Account Payables (45,000) (60,000)
Proposed Dividend - (20,000)
Bank Overdraft 70,000 (20,000) 130,000
230,000 380,000

2
Assets of Omega Limited and Alpha Limited were taken over by Omega & Alpha Limited as
follows:
Omega Limited Alpha ltd
Land and Building 80,000 Limited
100,000
Plant and Machinery --- 120,000
Motor Vehicle 18,000 50,000
Inventories 75,000 100,000
Receivables 30,000 70,000
Payables --- 70,000
Goodwill 64,500 100,000
Omega & Alpha Limited acquired all the assets of Omega Limited except for bank balance
which was retained by the latter to discharge some of the Account Payables. The agreed
purchase consideration consisted of N27,500 in cash and 300,000 ordinary share of N1 in
Omega & Alpha Limited at a premium of 10k. The liquidator of Omega Limited agreed to
discharge the remaining payables.
Omega & Alpha Limited acquired all assets in Alpha Limited and also assumed
responsibility for discharging all payables. The purchase consideration of N500,000 was
discharged by the issue of 400,000 ordinary share of N1 each in Omega & Alpha Limited
and the payment of N75,000 to settle outstanding debts including proposed dividend and
N7,500 liquidation expenses.

3
 You are required to prepare the necessary account to liquidate Omega Limited and Alpha
Limited (10 marks)

2(b) Outline five advantages of cash flow statement (5 marks)

3(a) Ojogwo Ltd issued 200000 ordinary shares of ₦1 each payable in installment as follows:

 Application 85k
 Allotment 60k
 First call 15k
 Second call 25k

Application were received for 400000 shares and it was decided to deal with them as follows:

i. To accept in full 50000 shares.

ii. To return cheque for 150000 shares
iii. To allot the remaining shares on the basis of 3 for every 4 applied for. All applicants
paid on due date.

Required: Post into all necessary books. (10 marks)

3(b) Explain how the following should be treated in Cashflow statement (i) Dividend Receivable
(ii) Interest Received (iii) Interest Paid (iv) Dividends Paid (v) Tax Paid (5 Marks)

4(a) Write notes on the following: (i) Authorized share capital (ii) Paid up capital (iii) Calls in
arrears (iv) Reserve Capital (v) Allotment of Share (10 marks)

4(b) List and explain two major types of business combination (5 marks)

5(a) Distinguish between Fixed Capital Accounts and Floating Capital Account (10 marks)
5(b) Outline five rules which partnership Act lays down to be observed in the absence
of agreement. (5 marks)