Fmay2014 Questions and Solutions For Skills May Diet 2014
Fmay2014 Questions and Solutions For Skills May Diet 2014
Fmay2014 Questions and Solutions For Skills May Diet 2014
Question Papers
Suggested Solutions
Plus
Examiners’ Reports
PATHFINDER
FOREWORD
This issue of the PATHFINDER is published principally, in response to a growing
demand for an aid to:
(ii) Unsuccessful candidates in the identification of those areas in which they lost
marks and need to improve their knowledge and presentation;
The answers provided in this publication do not exhaust all possible alternative
approaches to solving these questions. Efforts had been made to use the methods,
which will save much of the scarce examination time. Also, in order to facilitate
teaching, questions may be edited so that some principles or their application may
be more clearly demonstrated.
NOTES
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FOUNDATION EXAMINATION – MAY 2014
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TABLE OF CONTENTS
SUBJECT PAGES
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Write ONLY the alphabet (A, B, C, D or E) that corresponds to the correct option in
each of the following questions/statements:
A. Carriage inwards
B. Carriage outwards
C. General administrative overheads
D. Depreciation of land and building
E. Discount allowed
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A. Articles of Association
B. Loan notes
C. Register of Members
D. Memorandum of Association
E. Memorandum of Understanding
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8. Where a specific trade receivable is written off as bad, the corresponding credit
is expected to be in
A. Purchases Account
B. Profit or Loss Account
C. Trade Payables Account
D. Sales Ledger Control Account
E. Discount Allowed Account
A. N40,000
B. N50,000
C. N60,000
D. N70,000
E. N75,000
10. What is the balance on the share premium account following the rights issue?
A. N140,000
B. N150,000
C. N160,000
D. N190,000
E. N200,000
11. Aye Limited has a gross profit of 11% and its sales are N150,000. What is the
cost of sales?
A. N133,500
B. N142,500
C. N154,500
D. N160,000
E. N165,000
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12. What are the accounting entries on consignment for stolen or lost goods?
13. The accounting entries for salary paid or payable to a partner are
14. In partnership business, the account maintained to determine the profit or loss
arising from the sale of assets on dissolution is called
A. Revaluation Account
B. Asset Disposal Account
C. Profit or Loss Account
D. Receipt and Payment Account
E. Realisation Account
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15. A, B and C are in Partnership sharing profits in the ratio of 5:4:2 respectively. In
the year ended 31 March 2013, C’s share of profit was N180,000. What is A`s
share of profit for the year?
A. N360,000
B. N400,000
C. N450,000
D. N550,000
E. N600,000
16. The Partnership of X, Y, and Z made a net profit for the past five years as shown
below:
Year Profit
(N,000)
2009 30,000
2010 18,000
2011 9,000
2012 15,000
2013 21,000
The firm intends to admit V into the business and for this purpose has decided
to fair value goodwill at 4 years purchase of the average super profits over the
last 5 years on normal profit of N6,000,000 per annum.
A. N42,400,000
B. N46,400,000
C. N49,200,000
D. N50,400,000
E. N62,200,000
A. Wordstar
B. Informix
C. Msword Logo Script
D. Display writer
E. Professional writer
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18. Chuks and Bala are in partnership sharing profit or loss in ratio 2:1. If Bode is
admitted as a new partner to take one-fifth as his share of profit or loss, while
the old partners retain their old ratios, what should be the new profit or loss
sharing ratio of the Partners?
Current Account
N N
Interest on Capital 5,600 Balance b/f 540
Commission 3,000 Drawings 12,400
Balance c/f 21,740 Share of Profit ____x__
30,340 30,340
The balance brought forward was entered correctly and the other entries are all
correct in amounts. However, the bookkeeper is not very sure of the difference
between debit and credit entries.
20. What is the value of the item in the Current Account marked <X=?
A. N8,700
B. N13,060
C. N15,700
D. N16,000
E. N17,400
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FOUNDATION EXAMINATION – MAY 2014
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Write the answer that best completes each of the following questions/statements:
1. The Companies and Allied Matters Act, CAP C20 LFN 2004 requires that the
statutory books and records of a company to be kept at .............................
4. What is the cost of an asset or other amount substituted from costs, less its
residual value?
Which of the items above will be required for cash book adjustment?
9. State the TWO major types of data that the computer master file is expected
to hold in respect of each employee’s salary records .......................
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12. The process where two or more Partnerships combine to form a new
Partnership is known as.....................
13. The cost of direct materials, direct wages and direct expenses are the
components of .............................
16. Fidelis Textile Mills transfers manufactured products to the Sales Department
at cost plus 20%. The following production costs were given to you:
N
Prime cost 25,000
Production overhead 8,000
Opening inventory of WIP 2,000
Closing inventory of WIP 3,000
Calculate the value of goods transferred to the Sales Department during the
period.
17. In Container accounting, the difference between the cost and carrying
amount of a container is known as .........................
18. In accounting for Containers using container trading account method, the
necessary accounting entries to record scrapped containers are ......................
19. The guaranteed amount payable where the royalty calculated on the basis of
actual production falls short of the estimated level is ...........................
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QUESTION 1
b. List the costs which should be included when measuring the cost of inventories
and identify any cost which should be excluded. (5 Marks)
QUESTION 2
The bookkeeper of Jafola Ltd, having been unable to agree the trial balance as at 31
January 2013, raised a Suspense Account in which he entered the difference.
Consequently, he prepared a draft Statement of Financial Position to reflect the
amount in the Suspense Account.
i. The addition of the analysis column in the tabular purchase journal posted to
goods purchased for resale account was found to be under-cast by N15,000,
though the addition of the total column was correct.
ii. Goods bought from a supplier amounting to N5,250 had been posted to the
credit of his account as N55,000.
iv. An item of N10,500 entered in the sales returns book was posted to the debit
of the customer who returned the goods
v. Sundry items of plant sold amounting to N300,000 was posted to the sales day
book, the total of which had been posted to the credit of sales account.
vi. A sum of N60,000 owed by a customer was omitted from the schedule of
sundry receivables.
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vii. Discounts amounting to N2,250 allowed to a customer was duly entered in his
account but not posted to discounts allowed account.
viii. An amount of N45,000 being tenement rates paid in advance in the previous
year was not brought forward as a balance on the tenement rates account.
a. Show the Suspense Account as raised by the book keeper with the adjusting
entries. (5 Marks)
b. Explain the effect the above errors would have on the profit shown in the
accounts (if not rectified) and on the total accounts. Assume the purchase and
sales ledgers to be self-balancing. (10 Marks)
(Total 15 Marks)
QUESTION 3
The information below relates to ABC Football Club in respect of the year ended 31
October 2013
N’000
Rent and rates 2,500
Stadium repairs and maintenance 4,500
Match takings 20,000
State government grant and aid 25,000
Wages and salaries 15,000
Payment of match bonus 5,000
Transfer fees of players who left the club 12,000
Match expenses 3,500
Transfer fees of new players bought 8,000
Fines and penalties paid to NFF 3,000
Cash and bank balances at the beginning of the period 8,700
Sales proceeds of memorabilia 900
Prize money for winning FA cup 3,500
Motor running expenses 500
Donations received 9,500
Administration expenses 2,000
Printing and stationeries 400
Communication 600
Honorarium 200
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(ii) The club is currently facing NFF disciplinary committee investigation for
players and fans misconduct in respect of week 25 match between ABC and
Kwara United. The club lawyers have stated in their last letter that it was
highly probable that the club will be found liable, and based on past
experience and the information gathered so far, the club could be fined up to
N2,000,000 among other punishments.
(iv) Other match takings not yet remitted by the club’s agent amounted to
N2,600,000.
Prepare the Club’s Statement of Income and Expenditure in vertical format for the
year ended 31 October 2013. (15 Marks)
QUESTION 4
Biggy and Smallie were in partnership, sharing profits and losses in ratio 2:1. They
agreed to admit Fanny into the partnership from 1 January 2012. Fanny is to
introduce N140,000 out of which N130,000 is to be his fixed capital. He is to receive
a commission of N30,000 per annum in addition to a share of profit. The new profit
sharing ratio is 2:2:1 to Biggy, Smallie and Fanny respectively. Other provisions of
the Partnership Deed are:
(i) Debit balance in current accounts at the beginning of the year is to attract 5%
interest.
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(iii) Details of the existing partners fixed capital and current accounts for the
purpose of the agreement are:
(iv) The draft final accounts for the year ended 31 December 2012, before taking
into account Fanny’s commission and interest on Partners’ current accounts
revealed a profit of N347,000.
a. Statement showing the sharing of profit for the year ended 31 December 2012.
(5 Marks)
b. The Partners’ capital and current accounts for the year ended 31 December
2012. (10 Marks)
(Total 15 Marks)
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QUESTION 5
The following balances were extracted from the books of Gowell Limited as at 31
December 2012 after the preparation of the Trading account:
N’000
Share capital: Authorised, issued and fully paid:
300 million ordinary shares of N1 each 300,000
Cash at bank and in hand 750
Inventories as at 31 December 2012 91,800
Trade receivables 28,657
Trade payable s 22,513
Gross profit from trading account- 31 December 2012 193,413
Revenue reserve as at 1/1/2012 50,000
Salaries and wages 42,645
Prepayments 900
Bad debts 750
Accrued expenses 789
Directors’ current account 3,750
Finance cost 900
Rents and insurance 2,280
Sundry expenses 6,150
6% Loan notes 30,000
Electricity 1,965
Postages and telephones 1,200
Motor vehicle (cost N37.5 million) 22,500
Office fittings and equipment (cost N98.25 m) 63,525
Retained earnings as at 1 January 2012 33,450
Land and buildings 369,893
Additional Information:
(i) Office fittings and equipment to be depreciated at 15% per annum on cost and
motor vehicles at 20% on cost.
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(a) The Statements of Profit and Loss of Gowell Limited for the year ended 31
December 2012.
DR CR
N’000 N’000
Capital on 1 July 2012 20,000
Drawings 4,000
Inventories as at 1 July 2012- Department X 2,280
Inventories as at 1 July 2012- Department Y 1,960
Purchases/sales analysis- Department X 7,920 14,800
Purchases/sales analysis-Department Y 7,480 13,260
Inter-departmental transfer-X 500
Inter-departmental transfer-Y 500
Returns inwards-Department X 700
Returns inwards-Department Y 560
Salaries and wages 3,300
Advertisement and catalogues 1,740
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Additional information:
(i) Write off bad debts of N120,000 and increase the provision for doubtful
receivables to 5% of the outstanding receivables.
(ii) Depreciate furniture and fittings at 10% per annum
(iii) Accrue N40,000 for sundry expenses owed at 30 June 2013
(iv) The values of the inventories on hand on 30 June 2013 were Department X,
N2,960,000, Department Y N1,700,000
(v) Catalogue in hand was valued at N60,000
(vi) Inter departmental transfers were made at cost
(vii) All expenses are to be allocated between Department X and Y in the proportion
of two thirds and one third respectively except for carriage inwards which is to
be apportioned on the basis of purchases
(viii) Dividend received is to be treated as Head Office income
SOLUTIONS TO SECTION A
1. A
2. A
3. D
4. D
5. B
6. B
7. A
8. D
9. C
10. D
11. A
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12. B
13. A
14. E
15. C
16. D
17. B
18. D
19. E
20. E
Tutorials
N N
Q11. Sales revenue (100%) 150,000
Gross profit (11%) 16,500
Cost of sales 89% 133,500
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EXAMINERS’ REPORT
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2. Objectivity
4. Depreciable Amount/Value
5. Trial Balance
12. Amalgamation
14. Deficit
15. Direct cost
16. N38,400
17. Depreciation
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TUTORIAL
EXAMINERS’ REPORT
SECTION B
QUESTION 1
(a) Inventories are assets held for sale in the ordinary course of business in the
process of production for such sale, or in the form of materials or supplies to
be consumed in the production process or in the rendering of services.
(b) Costs which should be included in the cost of inventories are cost of purchase,
cost of conversion and other costs incurred in bringing the inventories to their
present location and condition.
Costs which should be excluded from the cost of inventories are the costs of
abnormal waste, storage costs (unless necessary in the production process
before a further production stage) and administrative overheads that do not
contribute to bringing inventories to their present location or condition.
If production is abnormally low, unallocated fixed production overheads are
also excluded from the cost of inventories.
(c) Construction contracts are often long-term, as work may begin in one
accounting period, but not end until a later period. If IAS 2 is applied to such
contracts, it would be necessary at the end of each period to measure work in
progress at the lower of cost and net realisable value. This would mean that
none of the profit arising on a construction contract would be recognised until
the contract has ended.
It is fairer to spread contract revenue, expenses and profit over the accounting
periods in which the work is performed.
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EXAMINERS’ REPORT
They are advised to pay more attention to the requirement of the International
Financial Reporting Standards.
QUESTION 2
JAFOLA LIMITED
SUSPENSE ACCOUNT
N N
Difference in trial balance 151,000 Goods purchased for resale (i) 15,000
Customer’s account (iv) 21,000 Supplier’s account (ii) 49,750
Sundry receivables (vi) 60,000
Discounts allowed (vii) 2,250
______ Rates (viii) 45,000
172,000 172,000
EFFECT ON
TOTAL ACCOUNTS PROFIT OR LOSS ACCOUNTS
i. No effect Profit will be overstated by N15,000
ii. Trade payables account will be No effect
overstated by N49,790
iii. Trade receivables account will be No effect
understated by N200,000
iv. Trade receivables will be overstated No effect
by N21,000
v. No effect Sales and profit will be overstated by
N300,000
vi. No effect No effect
vii. No effect Profit will be overstated by N2,250
viii. No effect Profit will be overstated by N45,000
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Tutorial Notes:
(iii) To correct this entry, debit customer and credit bills receivables. The situation
arising from the customer’s default may require provision for bad debts.
(iv) To rectify this entry, debit sales and credit plant. Depreciation and profit or
loss on sales of asset will be written off the carrying value of the plant sold to
reduce it to NIL.
The above corrections will reduce the profit by N362,250 made up as follows:
N
(i) 15,000 Profit overstated by N15,000
EXAMINERS’ REPORT
Majority of the candidates attempted the question and performance was poor.
Candidates’ major pitfalls were their poor understanding on how to raise journal
entries and identify the effects of the errors on business profit.
Candidates are advised to have a good understanding of double entry principles and
correction of errors.
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QUESTION 3
ABC FOOTBALL CLUB
INCOME AND EXPENDITURE FOR THE YEAR ENDED 31 OCTOBER,
2013
INCOME: N’000 N’000
Match takings (Wk 1) 22,600
State government grant and aid 25,000
Transfer fees received 12,000
Sales of memorabilia 900
Prize money for winning FA cup 3,500
Donation 9,500
73,500
EXPENDITURES:
Insurance 500
Depreciation 150
Rent and rates 2,500
Repairs and maintenance - Stadium 4,500
Wages and salaries 15,000
Match bonus 5,000
Match expenses 3,500
Transfer fees on new players purchased 8,000
Fines and penalties (Wk 2) 5,000
Motor running expenses 500
Administration expenses 2,000
Printing and stationeries 400
Communication 600
Honorarium 200 (47,850)
SURPLUS OF INCOME OVER EXPENDITURE
25,650
PATHFINDER
EXAMINERS’ REPORT
Majority of the candidates attempted the question and their performance was fairly
good, however, few candidates did not prepare their solution in vertical format as
required.
QUESTION 4
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ii. BIGGY, SMALLIE AND FANNY PARTNERS’ CAPITAL ACCOUNTS AS AT 31 DECEMBER 2012
EXAMINERS’ REPORT
About half of the candidates attempted the question and performance was fairly
good. Candidates’ commonest pitfall was their inability to interpete the question
correctly.
Candidates are advised to prepare well for future examinations of the Institute.
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QUESTION 5
GOWELL LIMITED
N’000 N’000
Gross profit for the year 193,413.00
OPERATING EXPENSES:
Depreciation – Office fittings and equipment (Wk 1) 14,737.50
Depreciation – Motor vehicles (Wk 2) 7,500.00
Directors’ fees 12,000.00
Audit fees 5,000.00
Electricity (Wk 3) 2,787.00
Salaries and wages 42,645.00
Bad debts 750.00
Finance cost 900.00
Rents and insurance 2,280.00
Loan interest (Wk 3) 1,800.00
Sundry expenses 6,150.00
Postages and telephone 1,200.00 (97,749.50)
NET PROFIT FOR THE YEAR 95,663.50
Transfer to revenue reserves (30,000.00)
RETAINED EARNINGS FOR THE YEAR 65,663.50
Retained earnings b/f 33,450.00
RETAINED EARNINGS C/F 99,113.50
GOWELL LIMITED
CURRENT ASSETS:
Inventories 91,800.00
Trade receivables 28,657.00
Prepayments 900.00
Cash and bank balances 750.00
122,107.00
TOTAL ASSETS 555,787.50
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CURRENT LIABILITIES:
Trade payables 22,513.00
Accrued directors’ fees 12,000.00
Accrued audit fees 5,000.00
Accrued electricity 822.00
Accrued loan interest (Wk 3) 1,800.00
Other accrued expenses 789.00
Directors’ current account 3,750.00 46,674.00
TOTAL EQUITY AND LIABILITIES 555,787.50
GOWELL LIMITED
WORKING NOTES
WK 1: Calculation of depreciation on office fittings and equipment
N’000
Office fittings and equipment @ cost 98,250.00
Depreciation @ 15% 14,737.50
EXAMINERS’ REPORT
Most of the candidates attempted the question and performance was good.
Candidates commonest pitfall was their inability to correctly prepare final accounts
of companies.
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Candidates are advised to prepare well for future examinations of the institute.
QUESTION 6
DAPO TRADING EXTERPRISES
OPERATING EXPENSES:
Salaries and wages 2,200 1,100 3,300
Bad debts written off 80 40 120
Increase in provision for
doubtful receivables 224 112 336
Depreciation – Furniture and
fittings 200 100 300
Sundry expenses 1,013 507 1,520
Advertisement and catalogues 1,120 560 1,680
Rent 2,440 1,220 3,660
(7,277) (3,639) (10,916)
Profit (loss) for the year (164) 588 634
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EXAMINERS’ REPORT
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Write ONLY the alphabet (A, B, C, D or E) that corresponds to the correct option in
each of the following questions/statements.
A. A newspaper vendor
B. A performing artist
C. A movie audience
D. A food hawker
E. A household
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A. 1772
B. 1776
C. 1817
D. 1823
E. 1825
5. In the year 2006, the per capita income and population of Nigeria were put at
$66.66 and 180 million, respectively. What was the country’s GNP in Naira that
year if the exchange rate was N150/$1.00?
A. N12 million
B. N1.8 billion
C. N12 billion
D. N1.8 trillion
E. N18 trillion
7. Which of the following is considered the most effective tool by which the Central
Bank of Nigeria can control the activities of commercial banks?
A. Open Market Operation
B. Reserve Requirements
C. Bank Rate
D. Directives
E. Special Deposits
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C. Entrepreneurial decisions
D. Prices of the goods and services and the preferences of the economic
agents
E. Government controls
A. Economic Community
B. Economic Union
C. Common Market
D. Customs Union
E. European Union
A. Homogeneity
B. Portability
C. Acceptability
D. Divisibility
E. Pocketability
A. Closed system
B. Entropy
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C. Open system
D. Synergy
E. Subsystem
14. Managers may seek to raise ethical standards in their organisations by adopting
all but ONE of the following strategies
A. Develop an ethical code to guide the behaviour of all employees
B. Train all employees on ethical behaviour expected of them
C. Punish all those who violate the ethical codes while rewarding other who
adhere to them
D. Set performance targets that are achievable
E. Install Close Circuit Television (CCTV) cameras in all offices
15. The type of expense budget that shows material and labour costs of each item
produced including estimated overhead costs is
A. Financial budget
B. Operating budget
C. Engineered cost budget
D. Discretionary cost budget
E. Profit budget
16. Which of the following is NOT a common time management trap that can affect
the effectiveness of a manager at work?
A. Delayed decision
B. Uncontrolled telephone calls
C. Scheduled visitors
D. Failure to delegate
E. Waiting for people
17. The department that performs tasks that reflect the organisation’s primary goal
and mission is
A. Staff department
B. Functional department
C. Line department
D. Core department
E. Primary department
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18. The visual display of positions in the organisation as well as lines of authority is
A. Organisational structure
B. Organisational pyramid
C. Organisational chart
D. Organisational graph
E. Organisational network
20. Which of the following is NOT a benefit of using word processing software?
Write the answer that best completes each of the following questions/statements:
2. The first national rolling plan in Nigeria covered the period from
....................to ..............................
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11. A resource is scarce if the demand for it exceeds supply at ................... price
13. The management function that enables an organisation to cope with uncertainty
by formulating courses of action that will enable it achieve specific result is
............................
15. A diagram which maps possible decisions and their possible consequences
that is used to create a plan to reach a goal is known as .......................
16. When a manager is so busy that he/she gets to a state of emotional, mental
and even physical exhaustion, he/she is said to experience.......................
17. The process for defining and achieving an organisation’s long term objectives
is known as .............................
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19. In Blake and Mouton’s Managerial Grid, the style of leadership which is high
on concern for people and low on concern for production is called.................
20. A computer file which contains information that is sent to the central server
each time the computer connects to the internet is .............................
QUESTION 1
b. Explain any FOUR benefits derivable from the cashless policy of the Central
Bank of Nigeria. (12 Marks)
(Total 15 Marks)
QUESTION 2
The following table shows the short-run Average Cost (AC) of a perfectly
competitive firm whose per unit price is N62.00 and a fixed cost of N40.00.
Q 1 2 3 4 5 6 7 8 9 10
AC(N) 45 24 30 38 50 66 91 120 131 150
Required:
c. How much abnormal profit does the firm make at the profit-maximising
output? (3 Marks)
(Total 15 Marks)
QUESTION 3
PATHFINDER
QUESTION 4
b. Explain any FOUR reasons why the then Power Holding Company of Nigeria
(PHCN) lost its monopoly power. (12 Marks)
(Total 15 Marks)
QUESTION 5
a. State and explain briefly any FIVE roles managers play in an organisation
according to Mintzberg. (71/2 Marks)
QUESTION 6
a. Identify and explain any FIVE requirements needed for an effective control
system. (10 Marks)
b. Suggest FIVE reasons to justify the belief that Human Resources Managers
should undertake Human Resources Planning in their organisation.
(5 Marks)
(Total15 Marks)
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SOLUTIONS TO SECTION A
1. C
2. C
3. C
4. C
5. D
6. E
7. A
8. D
9. B
10. B
11. E
12. E
13. C
14. D
15. C
16. C
17. C
18. C
19. C
20. D
EXAMINERS’ REPORT
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1. Physical Capital
2. 1990, 1992
3. Foreign reserves
5. Velocity of money
6. Giffen good
7. Debt service
8. Implicit costs
9. Franchise
10. Depreciation
11. Zero
12. Localization
13. Planning
16. Burnout
18. Downsizing
20. Cookies
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EXAMINERS’ REPORT
SECTION B
QUESTION 1
(b) The following are benefits derivable from the cashless policy of the Central
Bank of Nigeria:
(i) Reduction in the high cost associated with handling volume of cash
from the Central Bank of Nigeria to other banks; from banks to bank
customers, etc.
(ii) Increased convenience of transactions for economic agents, e.g. traders.
(iii) Reduction in the risk of cash – related crimes.
(iv) It enhances the effectiveness of monetary policies in managing inflation
and driving economic growth.
(v) It discourages the informal economy –high cash usage results in a lot of
money outside the formal economy thus limiting the performance of the
economy productivity.
(vi) Create a trail of transaction which discourages corruption, leakages and
money laundering, amongst other cash related fraudulent activities.
(vii) It encourages greater financial inclusion, increased tax collection and
ultimately increased economic development – reduced revenue
leakages.
EXAMINERS’ REPORT
The question tests candidates’ understanding of the cashless policy of the Central
Bank of Nigeria and the likely benefits to be derived from the implementation of the
policy in Nigeria.
About 90% of the candidates attempted the question and their performance was
good.
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QUESTION 2
(a) The following schedule gives the costs and revenue at various levels of output
for the firm.
2 24 48 124 40 8 4 3 62
3 30 90 186 40 50 16.7 42 62
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(b) Diagram
Price N
AC
MC 350
MR 325
300
275
250
225
200
MC
175
150
AC
125
100
Profit-maximizing Point
75 A
MR
50
25
0 Q
1 2 3 4 5 6 7 8 9 10 Output
= (MR – AC) Q
= N(62 – 38) 4
= N96
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EXAMINERS’ REPORT
The question tests candidates’ understanding of the theory of the firm and
computation skills on cost, revenue and profit relations.
About 30% of the candidates attempted the question and performance was poor.
QUESTION 3
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economic integration of countries that come together to trade freely and
charge a common external tariff to all non-members.
The balance of trade is the difference between a country’s exports and imports
of goods, while a country’s balance of payments shows all the payments a
nation receives from foreign countries and all the payments it makes to them.
The balance of payments includes, the balance of trade, the balance on
current account, the balance on capital account and official reserves.
EXAMINERS’ REPORT
About 52% of the candidates attempted the question and performance was below
average.
The major pitfall was the misinterpretation of some of the concepts by candidates.
For example, many candidates misinterpreted <Free Trade Area= to mean <Free Trade
Zone=, <currency depreciation= as <Depreciation of assets=, <Customs Union= as
<customs agents=, etc.
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QUESTION 4
(a) Monopoly is a market situation where there is just one producer of a good or
service for which no close substitutes exist.
(b) Power Holding Company of Nigeria (PHCN) lost its monopoly powers for the
following reasons:
PATHFINDER
industrial enterprises to leave the country to other countries. The
realization that modern industrial economy is driven by electricity has
forced the Nigerian government to have a re-think on the monopoly
status conferred on Power Holding Company of Nigeria by law.
EXAMINERS’ REPORT
About 92% of the candidates attempted the question. Their performance in part (a)
of the question was good while it was average in part (b).
Many candidates were unable to articulate views why the PHCN lost out on its
monopoly status in Nigeria as have been shown above.
QUESTION 5
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Entrepreneurial role
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(ii) Authority and Responsibility: Authority is the right to give orders and
the power to exact obedience. This should be commensurate with
responsibility which is the amount of work and resources placed at the
disposal of the manager.
(iii) Discipline: an outward mark of respect and obedience for the rules and
objectives of the organisation in accordance with formal agreement
between the firm and its employees.
(iv) Unity of command: This is the principle of one worker reporting to one
supervisor. This will eliminate conflict and confusion. Workers should
receive orders from and be responsible to only one supervisor at any
given time.
(vii) Remuneration should be fair to both the employee and the firm.
(viii) Centralization depends on the size of the company and the quality of
management.
(x) Order: The right man in the right position, a place for everyone and
everyone in his place.
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EXAMINERS’ REPORT
The question tests candidates’ knowledge of Mintzberg’s managerial roles and Henri
Fayol’s principles of administrative management.
Over 80% of the candidates attempted the question. On the whole, performance was
average.
Candidates are advised to pay attention to fundamental concepts as they provide the
foundation upon which further knowledge is built.
QUESTION 6
(a) The requirements for an effective control system include the following:
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(iii) Control system that points up exceptions at critical points: For a control
system to be effective, it must be such that is sensitive to and points up
exceptions that require actions by the manager. The exception (or red
flag) draws attention or signals the need to take action to ensure that
the plan is on course.
(v) Existence of standards for control: Effective control systems must have
standards against which actual performance is compared in order to
take corrective actions. Such standards must be objective, clear and
measurable.
(vi) Suitability of control system for the existing organisational culture: For
a control system to be effective, it must be suitable for the norms,
values and practices prevalent in the organisation. Lack of fit of the
control system with the existing organisational culture will result in its
ineffectiveness.
(ii) Attraction and retention of the right human resource: Human resource
planning helps in attracting and retaining the number of people with
the appropriate skills, expertise and competencies required by the
organisation.
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EXAMINERS’ REPORT
The question tests candidates’ knowledge of the requirements for an effective control
system as well as the reasons why Human Resource Managers undertake human
resource planning.
Over 60% of the candidates attempted the question. Performance was poor.
Many candidates could not provide the requirements for an effective control system.
Instead, some discussed problem solving process. With respect to the second part of
the question, most of the candidates confused the reasons why Human Resource
Managers undertake human resource planning with the roles of Human Resource
Manager.
Candidates are advised to read questions carefully and focus on what is required.
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Write ONLY the alphabet (A, B, C, D or E) that corresponds to the correct option in
each of the following questions/statements:
1. When a lower court differentiates between the judgement of a higher court and
the case at hand in deciding a matter, the lower court is said to be
A. Appraising
B. Reviewing
C. Distinguishing
D. Assessing
E. Evaluating
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5. The term of a contract that goes to the root of the agreement and can render the
contract unenforceable if breached is
A. Warranty
B. Mistake
C. Misrepresentation
D. Condition
E. Undue influence
8. The rule in sale of goods contract that a non-owner cannot validly pass good
title is often expressed in Latin as
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A. A credit sale
B. A hire purchase
C. A conditional sale
D. An outright sale
E. A provisional sale
10. The only type of contractual arrangement in which one party pays premium
periodically to the other party is a
A. Contract of lottery
B. Landlord – tenant contract
C. Contract between Estate Agents and Tenants
D. Contract of insurance
E. Non- insurable contract
11. Under the common law, the veil of incorporation will NOT be lifted where the
company
A. Has been formed for fraudulent or illegal purposes
B. Operates as agent of shareholders
C. Trades with alien enemies
D. Engages in acts that are detrimental to public interest
E. Engages in completely ultra vires activities
A. Fraudulent trading
B. Resolution by members to wind up
C. Reduction of membership below minimum number
D. Court Order
E. Possibility of abuse of limited liability system
13. The persons proposing to form a company are required to prepare and
present documents to the Corporate Affairs Commission for registration. Which
of the following documents states the objects of the proposed company?
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C. The Memorandum of Association
D. The Articles of Association
E. Written consent of the first directors
14. Under the Companies and Allied Matters Act, the contents of a notice of meeting
must specify the following EXCEPT the
A. Place
B. Date
C. Time
D. General nature of business
E. Remuneration of members
15. A partner in a trading firm has the following implied authority EXCEPT
17. A Banker may make disclosure of its customer’s account in the following
circumstances EXCEPT where
A. The banker is lawfully compelled to do so
B. Public duty warrants it
C. The customer’s creditor demands it
D. It is in the banker’s interest to disclose it
E. The customer makes express or implied request for it
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A. A Codicil
B. Death of the testator
C. Insanity of the testator
D. Bankruptcy of the testator
E. Accidental destruction
20. The court that has original jurisdiction to entertain a suit on bankruptcy is
Write the answer that best completes each of the following questions/statements:
4. The ordinary term of a contract which entitles the aggrieved party to sue only
for damages and not rescission of the agreement is a …........................
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6. In law of contract, the rule that a person who is not a party to a contract
cannot sue on the transaction is known as ..................................
7. An agent in whose possession goods are put with an implied authority to sell
them is a .................................
8. In Sale of Goods law, goods which have been produced by the seller are
known as ....................................
10. An insurer cannot carry on life insurance business if its share capital is less
than.......................................
11. The officer of a company who formally examines and verifies the financial
books of the company is the .............................
12. Company securities which public limited companies issue to raise capital for
their operations are mainly shares and ...............................
13. The type of winding up of a company that is ordered by the court is known as
....................... winding up
14. The officer of a company saddled with the responsibility of rendering proper
returns and giving notification to the Corporate Affairs Commission under the
Companies and Allied Matters Act is the .................................
17. The type of crossing by which a cheque can only be deposited and collected
through the bank account of the person whose name is written on it is a
............................
20. A person who holds the legal title to a property for the benefit of another is a
………….........................
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QUESTION 1
a. <Fundamental rights= are provided for in the 1999 Constitution of the Federal
Republic of Nigeria.
You are required to State any FOUR Fundamental rights contained in the
Constitution. (4 Marks)
b. Jones Plastic Packaging Company Limited has its head office in Lagos. The
company suspected that one of its accounting staff, Mrs. Kabuki, was
responsible for the economic losses suffered by the company in recent months.
On Monday, when Mrs. Kabuki resumed at the factory, she was detained at the
security gate for eight hours without questioning. Thereafter, she was
summarily dismissed. She had protested that she had no information about
what led to her dismissal. The only official communication from the company
to her in the last six months was the letter of dismissal from employment.
Required:
Advise Mrs. Kabuki on her Fundamental rights under the 1999 Constitution of
the Federal Republic of Nigeria. (6 Marks)
Ojoge beat up Olu thoroughly and fractured his arm. While attempting to flee
from the scene to avoid being lynched by an angry mob, his overall jacket
dropped and the mob used the jacket to locate Ojoge’s place of work.
Based on the fact that Ojoge works with Ozaro Bottling Company, Olu is
considering seeking legal redress against Ozaro Bottling Company for the act
of Ojoge.
Required:
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QUESTION 2
a. Mr. Loverboy Hubby and Mrs. Devoted Hubby were happily married until Mr.
Hubby met Miss Girlie. The desire of Mr. Hubby to follow Miss Girlie led to
separation between him and his wife, and Mr. Hubby moved out of the family
house to Miss Girlie’s residence.
Mr. Hubby intends to divorce Mrs. Hubby. As part of arrangement for the
divorce, they met and Mr. Hubby gave her a written statement that, in
consideration of Mrs. Hubby paying the mortgage on the family house which
was in the name of her husband, he would transfer the house into her sole
ownership. Mrs. Hubby paid the mortgage and asked for the transfer of the
house, but Mr. Hubby refused, claiming that the agreement is not binding on
him.
b. In hire purchase agreements, goods are delivered to the hirer who pays some
money to the owner of goods as deposit.
Explain briefly TWO characteristics of a hire purchase transaction. (5 Marks)
c. Steven insured his five-storey building with ABC Insurance Company Limited
and paid the premium for the building.
Steven had been told by his engineers that the building is weak and may
collapse in no distant future, but Steven did not disclose this to his insurers,
thinking it was immaterial.
A year after the policy was issued, the building collapsed and the insurance
company has refused to indemnify Steven on the ground of non-disclosure of a
material fact.
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Required:
QUESTION 4
a. <Every company must, by law, have a Secretary. A company may also serve as
a Secretary to another company. However, a sole director may not be the
Secretary of a company. The Company Secretary is the Chief Administrative
Officer of the company=.
Required:
Required:
Required:
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i. State FIVE documents that must be filed for the incorporation of the
company; and (5 Marks)
ii. Advise the parties on whether the proposed name, Jossy James Limited
is appropriate and, state FOUR prohibited or restricted company names.
(5 Marks)
b. The relationship between the banker and his customer is said to be the
relationship between a debtor and a creditor.
c. A testator that has made a Will can only revoke it under certain circumstances.
SOLUTIONS TO SECTION A
1. C
2. B
3. A
4. C
5. D
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6. E
7. B
8. C
9. B
10. D
11. B
12. E
13. C
14. E
15. C
16. B
17. C
18. B
19. A
20. E
EXAMINERS’ REPORT
The questions in this part test candidates’ knowledge of the salient principles of
Corporate and Business Law, and cover essentially the entire syllabus.
Candidates’ performance was good, as more than 70% of them scored 50% and above
of the allocated marks.
SHORT-ANSWER QUESTIONS
1. Acts
2. The Constitution
3. Crime
4. Warranty
5. Specific Performance
6. Privity of Contract
7. Factor Agent
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8. Existing Goods
9. Instalment
10. 2 Billion Naira
11. Auditor
12. Debenture/Corporate Bonds/Loan Notes
13. Compulsory
14. Company Secretary
15. Joint/Joint and Several
16. Dissolution
17. Special Crossing
18. Consideration
19. Creditors Petition
20. Trustee
EXAMINERS’ REPORT
In this part, the questions test candidates’ understanding of the elements of Business
Law. The questions cover the entire gamut of the syllabus.
Candidates had good understanding of the questions, as more than 75% of them
scored above 50% of the allocated marks.
SOLUTIONS TO SECTION B
QUESTION 1
a. The fundamental rights provided for under the Constitution of the Federal
Republic of Nigeria, 1999 are:
PATHFINDER
(x) Right to freedom from discrimination
(xi) Right to acquire and own immovable property in Nigeria
b. The case relates to the fundamental rights guaranteed under the Constitution
of the Federal Republic of Nigeria, 1999.
The wrongful detention of Mrs Kabuki at the gate house for eight hours
amounted to a violation of her right to freedom of movement.
The termination of Mrs. Kabuki’s employment with the company was a form of
punishment. She has a right to know the charges against her and to make a
defence prior to the punishment by the company. Failure on the part of the
company to hear from her amounted to a violation of her right to fair hearing.
Mrs. Kabuki can maintain an action against the company successfully on the
ground that her fundamental rights have been violated.
c. This question borders on the principle of vicarious liability in the law of torts.
Vicarious liability connotes that a master will be liable for the wrongful acts or
omission of his servants, provided the wrong was committed while the servant
was acting in the course of his employment.
In this instance, Ojoge’s wrongful act was committed outside the working
hours. It was also not within the scope of his employment to beat people up.
He was employed as a driver. The company is not liable to Olu for Ojoge’s
wrongful act.
EXAMINERS’ REPORT
It was well attempted by the candidates and their performance in parts (a) and (b)
was very good, while part (c) was fair.
Candidates’ commonest pitfall in (c) was their lack of appreciation of the application
of vicarious liability in the law of torts.
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Candidates are advised to read more on vicarious liability.
QUESTION 2
In this case, Mrs. Hubby has furnished consideration by paying the mortgage.
In addition, the parties to the domestic agreements under consideration are
not in harmony. They have separated and are not living together.
Mrs. Hubby can seek redress in court and on the basis of the above position,
can enforce the contract.
EXAMINERS’ REPORT
Candidates understood well the question and attempted it. Overall performance was
very good.
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QUESTION 3
(i) Existing goods: These are goods that have been manufactured, grown
or produced and owned by the seller at the time of the contract.
(ii) Future goods: These are goods which are to be grown, manufactured,
identified and agreed upon or acquired by the seller after the making of
the contract.
(iii) Specific goods: These are existing goods which have been identified
and agreed upon at the time the contract was made e.g. two tons of
maize in Ikeja XYZ warehouse.
(iv) Ascertained goods: These are goods which the buyer has identified and
agreed to buy from the seller. They are more or less the same with
specific goods.
(v) Unascertained goods: These are goods which are sold by description
but not identified or agreed upon at the time of the contract e.g. two
tons of maize. The distinguishing feature of this class of goods is that
property and risk do not pass immediately.
(i) It is a contract between owner of goods and the hirer which is required
to be in writing and to include certain statutory provisions.
(ii) The relationship between the parties is that of a bailor and a bailee,
but the bailment rules are modified.
(iii) The property does not pass when the agreement takes effect and it will
not pass until the stipulated time and until all conditions are satisfied
e.g. payment of the last instalment and exercise of option to purchase.
(iv) The hirer has the right to return the goods at any time and thereby
terminate the contract, thereafter, he is not liable to pay further
instalments.
(v) The hirer enjoys the option to purchase the goods if he so desires by
satisfying the agreed considerations.
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If he goes to court against the insurance company, his action is likely to fail.
The ABC Insurance company may decline to indemnify Steve on the ground of
non-disclosure, arguing that Steve did not manifest good faith by concealing a
material fact which he knew, conscious that if it was disclosed it would have
influenced their decision to insure the house.
EXAMINERS’ REPORT
The question tests candidates’ knowledge of the types of goods under the Sale of
Goods Act, 1893, the characteristics of a hire purchase transaction and the effect of
non-disclosure in a contract of insurance.
Candidates showed good understanding of the question and performance was very
goods.
QUESTION 4
a. The duties of the Company Secretary are prescribed under Section 298 of the
Companies and Allied Matters Act, CAP C20 LFN 2004 (CAMA) and they include
the following:
(i) Attending the meetings of the company, the board of directors and its
committees, rendering all necessary secretarial services in respect of the
meeting and advising on compliance of the meetings with applicable
rules and regulations.
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(v) Handling all correspondence with members and clients of the company.
(vi) Keeping the books of the company e.g. the company’s legal seal;
register; register of members.
b. It shall be the duty of a director to take all reasonable steps to ensure that the
Secretary of the company is a person who appears to him to have the requisite
knowledge and experience to discharge the functions of a Secretary of a
company, and in the case of a public company he shall have any of the
following qualifications by virtue of Sec 295 of CAMA:
c. The Partnership Act, 1890 also stipulates that in the following situations, a
person may receive part of the profits, of an undertaking without being a
partner.
(iii) If the widow or child of a deceased partner is given an annuity out of the
profits of a partnership.
(iv) If the seller of a business receives payment for his goodwill in the form
of an annuity or periodic-payments out of a firm’s profit, but this alone
shall not make him a partner.
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EXAMINERS’ REPORT
The question in parts (a) and (b) tests the understanding of candidates of the duties
and qualifications of a Company Secretary under the Companies and Allied Matters
Act; while part (c) is on rights and privileges of a partner in a partnership.
Candidates performed well in parts (a) and (b), while performance was poor in part
(c). Some of them did not attempt part (c) at all.
The commonest pitfall was their inability to understand the requirements of the
question in part (c).
Candidates are enjoined to take more interest in studying this part/aspect of the
syllabus.
QUESTION 5
a.(i) The documents needed for the incorporation of Jossy James Limited are:
The Memorandum of Association
The Articles of Association
Notice of the Registered Office of the company
The list and Particulars of Directors together with their consent to serve
Statement of Authorised Share Capital
Statutory Declaration of compliance with the provisions of the Act
Return on allotment of shares
Particulars of the Secretary
Any other documents required by the Corporate Affairs Commission
(CAC)
(ii) The proposed company can use the name Jossy-James Limited because
the proposed name does not fall under prohibited names or restricted
names that require the consent of the CAC. Such prohibited names are
a name:
(iii)
That is identical with that by which a company in existence is already
registered.
That contains the words <Chambers of Commerce<, except it is a
company limited by guarantee.
Which the CAC regards as misleading as to the nature and extent of the
company’s activities.
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Which in the opinion of the CAC would violate any existing trade mark
of a business
EXAMINERS’ REPORT
The question tests candidates’ knowledge of the documents required for the
incorporation of a company; company names prohibited or restricted from
incorporation and the advantages of a limited liability company over partnership.
Candidates were quite familiar with this question and therefore showed a good
understanding of same, and thus performed very well.
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QUESTION 6
(i) By a subsequent Will: Where the testator makes another Will, the
previous Will stands revoked.
(ii) A codicil which is supplemental to a Will has the capacity to revoke the
provision of the existing Will.
(iii) By destruction: Where the testator wilfully and intentionally destroyed
his existing Will, the Will stands revoked.
(iv) A Will is revoked automatically by a subsequent marriage under the
Act.
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EXAMINERS’ REPORT
Candidates performed poorly in part (a) while their performance in parts (b) and (c)
was good.
Their commonest pitfall was their apparent lack of interest in the topic under
reference.
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