Question Tag: Discounts

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  • 20 Marks

CR – May 2017 – L3 – Q4 – Revenue Recognition (IFRS 15)

Advise on the correct accounting treatment for transactions involving contracts, licences, and purchase of components.

Dango Plc is a conglomerate company operating in Nigeria with diverse interests across Africa. It prepares its financial statements in accordance with International Financial Reporting Standards with a year-end of September 30. The following transactions relate to Dango Plc.

(a) In February 2016, Dango Plc won a significant new contract to supply large quantities of rice to the government of Guyama, a small West African country, for the next two years. Under the terms of the arrangement, payment is made in cash on delivery once goods have been cleared by customs. The rice will be delivered in batches four (4) times every year, on April 1, July 1, October 1, and January 1. The batches for April 1, 2016, and July 1, 2016, amounting to N250 million and N380 million respectively, were delivered and paid. Dango incurred significant costs on customs duties for the first batch of delivery. The October 1 batch, valued at N520 million, was shipped prior to the year-end but delivered and paid for on October 1, 2016.

(b) On October 1, 2010, a 12-year licence was awarded to Dango Plc by the Federal Government to be the sole manufacturer of a chemical used in the Nigerian pharmaceutical industry. The licence was recognised on that date at its fair value of N196 million. The award of the licence motivated Dango Plc in 2011 to purchase a division of another Nigerian competitor company making similar products. Goodwill of N240 million was recognised on the purchase of the division. Dango Plc merged the activities of the newly acquired division with its own to create a specialist chemical sub-division, which it now classifies as a separate cash-generating unit. By 2016, the revenue of this cash-generating unit now amounts to 5% of the Group’s revenue.

(c) Dango Plc buys raw materials from overseas suppliers. It has recently taken delivery of 1,000 units of component X, used in the production of chemicals. The quoted price of component X was N1,200 per unit, but Dango Plc has negotiated a trade discount of 5% due to the size of the order. The supplier offers an early settlement discount of 2% for payment within 30 days, and Dango Plc intends to achieve this. Import duties of N60 per unit must be paid before the goods are released through customs. Once the goods are released, Dango Plc must pay a delivery cost of N5,000 to have the components taken to its warehouse.

Required:
Write a report to the directors advising them on the correct accounting treatment of the above transactions in the financial statements for the year ended September 30, 2016, in accordance with the provisions of the relevant standards.

Note: You may consider the relevance of the following standards to the transactions: IAS 20, IAS 2, IAS 38, IFRS 3, and IFRS 15.

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  • 1 Marks

QTB – MAY 2016 – L1 – SA – Q2 – Mathematics

Calculate original price of a discounted item

A store holding a clearance sale advertises that all prices have been discounted by 20%. If a certain article is on sale for N28.00. What was its price before the sale?

A. N15

B. N25

C. N35

D. N45

E. N55

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  • 1 Marks

FA – Nov 2013 – L1 – SA – Q16 – Recording Financial Transactions

Identifying the ledger where discount data can be found.

In which of the following ledgers can data relating to discount be found?

A. Nominal ledger
B. Cash book
C. Sales ledger
D. Private ledger
E. Petty cash book

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  • 1 Marks

FA – Nov 2021 – L1 – SA – Q11 – Trial Balance

This question evaluates the treatment of discounts in the cash book and their impact on the trial balance.

If the total discount allowed in a cash book was N52,000 and the total discount received was N66,700, which of the following is TRUE concerning the two discounts?
A. They should not appear in the trial balance as they were already either received or paid out
B. They must be balanced in the cash book and the difference taken to the receivables
C. They must not appear in the general ledger
D. They must be balanced in the cash book and the difference taken to the trial balance
E. They should not be balanced in the cash book before being taken to the trial balance

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  • 15 Marks

FA – May 2022 – L1 – SB – Q4b – Recording Financial Transactions (Including Source Documents, Books of Prime Entry, and Cash Books)

Record business transactions in a three-column cashbook for Alhaji Aberuagba's business in June 2020.

The following are the business transactions of Alhaji Aberuagba for the month of June 2020:

Date Details
June 1 Balances brought forward: Cash ₦9,700, Bank ₦218,600
June 2 The amount due from customers: R. Hausa ₦100,000, C. Kola ₦28,000, P. Peters ₦18,000, R. Chinwe ₦60,000
June 3 Cash sales paid directly into the bank ₦13,400
June 5 Paid rent by cash ₦8,800
June 6 Paid suppliers by cheque after deducting 2½% discount: J. Charles ₦40,000, H. Salam ₦64,000, D. Craig ₦20,000
June 8 Withdrew cash from the bank for business use ₦25,000
June 10 Cash sales ₦20,600
June 12 D. Kehinde paid his account of ₦8,900 by cheque less ₦200 cash discount
June 14 Paid wages by cash ₦254,000
June 16 Paid accounts by cheque: L. Lucas ₦11,700 less ₦6,000 cash discount, D. Fisher ₦20,600 less ₦800 cash discount
June 20 Bought fixtures by cheque ₦800,000
June 24 Bought motor van paid by cheque ₦716,600
June 29 Received ₦16,900 cheque from D. Sanni
June 30 Cash sales ₦116,000

Required:
Record the above transactions in a three-column cashbook.

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  • 1 Marks

FA – Nov 2022 – L1 – SA – Q11 – Trial Balance

Determine the correct treatment of discounts allowed and received in the trial balance.

If the total discount allowed in a cash book was N52,000 and the total discount received was N66,700, which of the following is TRUE concerning the two discounts?
A. They should not appear in the trial balance as they were already either received or paid out
B. They must be balanced in the cash book and the difference taken to the receivables
C. They must not appear in the general ledger
D. They must be balanced in the cash book and the difference taken to the trial balance
E. They should not be balanced in the cash book before being taken to the trial balance

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  • 12 Marks

FA – May 2024 – L1 – SB – Q2b – Recording Financial Transactions (Including Source Documents, Books of Prime Entry, and Cash Books)

Records the items in the relevant books of prime entry and explains how to post from the books of prime entry to the ledgers.

b. Ladu Limited has the following transactions related to sales and purchases in the month of July 2023:

  • July 2: Purchases from Abe Limited: ₦300,000
  • July 5: Sales to Jide Limited: ₦150,000
  • July 9: Purchases returns to Abe Limited: ₦50,000
  • July 12: Sales returns from Jide Limited: ₦20,000
  • July 14: Purchases from Bola Limited (offering a trade discount of 5%): ₦400,000
  • July 15: Sales to Yau Limited: ₦200,000
  • July 22: Sales returns from Yau Limited: ₦30,000
  • July 25: Sales to Zeb Limited (cash discount of 2.5% granted): ₦250,000
  • July 26: Purchases from Cletus Limited: ₦250,000
  • July 31: Purchases returns to Cletus Limited: ₦30,000

Required:

i. Record the items in the relevant books of prime entry of Ladu Limited in July 2023. (7 Marks)

ii. State how the postings will be done from the books of prime entries into the ledgers. (5 Marks)

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  • 7 Marks

MA – Nov 2018 – L2 – Q3a – Cost-volume-profit (CVP) analysis

Calculation of the Economic Order Quantity (EOQ) and analysis of the impact of a quantity discount on total inventory costs.

The quarterly demand for an item of raw materials is estimated at 2,000 units at a purchase price of GH¢180 per unit. It is estimated that the cost per order will be GH¢270 and the cost of holding a unit of material in inventory will be GH¢24.

Required:

i) Compute the optimal order quantity, and total minimum costs. (4 marks)

ii) Suppose a supplier offers 5% quantity discount for purchase of 8,000 units, should the offer be accepted? (3 marks)

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  • 20 Marks

CR – May 2017 – L3 – Q4 – Revenue Recognition (IFRS 15)

Advise on the correct accounting treatment for transactions involving contracts, licences, and purchase of components.

Dango Plc is a conglomerate company operating in Nigeria with diverse interests across Africa. It prepares its financial statements in accordance with International Financial Reporting Standards with a year-end of September 30. The following transactions relate to Dango Plc.

(a) In February 2016, Dango Plc won a significant new contract to supply large quantities of rice to the government of Guyama, a small West African country, for the next two years. Under the terms of the arrangement, payment is made in cash on delivery once goods have been cleared by customs. The rice will be delivered in batches four (4) times every year, on April 1, July 1, October 1, and January 1. The batches for April 1, 2016, and July 1, 2016, amounting to N250 million and N380 million respectively, were delivered and paid. Dango incurred significant costs on customs duties for the first batch of delivery. The October 1 batch, valued at N520 million, was shipped prior to the year-end but delivered and paid for on October 1, 2016.

(b) On October 1, 2010, a 12-year licence was awarded to Dango Plc by the Federal Government to be the sole manufacturer of a chemical used in the Nigerian pharmaceutical industry. The licence was recognised on that date at its fair value of N196 million. The award of the licence motivated Dango Plc in 2011 to purchase a division of another Nigerian competitor company making similar products. Goodwill of N240 million was recognised on the purchase of the division. Dango Plc merged the activities of the newly acquired division with its own to create a specialist chemical sub-division, which it now classifies as a separate cash-generating unit. By 2016, the revenue of this cash-generating unit now amounts to 5% of the Group’s revenue.

(c) Dango Plc buys raw materials from overseas suppliers. It has recently taken delivery of 1,000 units of component X, used in the production of chemicals. The quoted price of component X was N1,200 per unit, but Dango Plc has negotiated a trade discount of 5% due to the size of the order. The supplier offers an early settlement discount of 2% for payment within 30 days, and Dango Plc intends to achieve this. Import duties of N60 per unit must be paid before the goods are released through customs. Once the goods are released, Dango Plc must pay a delivery cost of N5,000 to have the components taken to its warehouse.

Required:
Write a report to the directors advising them on the correct accounting treatment of the above transactions in the financial statements for the year ended September 30, 2016, in accordance with the provisions of the relevant standards.

Note: You may consider the relevance of the following standards to the transactions: IAS 20, IAS 2, IAS 38, IFRS 3, and IFRS 15.

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  • 1 Marks

QTB – MAY 2016 – L1 – SA – Q2 – Mathematics

Calculate original price of a discounted item

A store holding a clearance sale advertises that all prices have been discounted by 20%. If a certain article is on sale for N28.00. What was its price before the sale?

A. N15

B. N25

C. N35

D. N45

E. N55

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  • 1 Marks

FA – Nov 2013 – L1 – SA – Q16 – Recording Financial Transactions

Identifying the ledger where discount data can be found.

In which of the following ledgers can data relating to discount be found?

A. Nominal ledger
B. Cash book
C. Sales ledger
D. Private ledger
E. Petty cash book

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  • 1 Marks

FA – Nov 2021 – L1 – SA – Q11 – Trial Balance

This question evaluates the treatment of discounts in the cash book and their impact on the trial balance.

If the total discount allowed in a cash book was N52,000 and the total discount received was N66,700, which of the following is TRUE concerning the two discounts?
A. They should not appear in the trial balance as they were already either received or paid out
B. They must be balanced in the cash book and the difference taken to the receivables
C. They must not appear in the general ledger
D. They must be balanced in the cash book and the difference taken to the trial balance
E. They should not be balanced in the cash book before being taken to the trial balance

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  • 15 Marks

FA – May 2022 – L1 – SB – Q4b – Recording Financial Transactions (Including Source Documents, Books of Prime Entry, and Cash Books)

Record business transactions in a three-column cashbook for Alhaji Aberuagba's business in June 2020.

The following are the business transactions of Alhaji Aberuagba for the month of June 2020:

Date Details
June 1 Balances brought forward: Cash ₦9,700, Bank ₦218,600
June 2 The amount due from customers: R. Hausa ₦100,000, C. Kola ₦28,000, P. Peters ₦18,000, R. Chinwe ₦60,000
June 3 Cash sales paid directly into the bank ₦13,400
June 5 Paid rent by cash ₦8,800
June 6 Paid suppliers by cheque after deducting 2½% discount: J. Charles ₦40,000, H. Salam ₦64,000, D. Craig ₦20,000
June 8 Withdrew cash from the bank for business use ₦25,000
June 10 Cash sales ₦20,600
June 12 D. Kehinde paid his account of ₦8,900 by cheque less ₦200 cash discount
June 14 Paid wages by cash ₦254,000
June 16 Paid accounts by cheque: L. Lucas ₦11,700 less ₦6,000 cash discount, D. Fisher ₦20,600 less ₦800 cash discount
June 20 Bought fixtures by cheque ₦800,000
June 24 Bought motor van paid by cheque ₦716,600
June 29 Received ₦16,900 cheque from D. Sanni
June 30 Cash sales ₦116,000

Required:
Record the above transactions in a three-column cashbook.

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  • 1 Marks

FA – Nov 2022 – L1 – SA – Q11 – Trial Balance

Determine the correct treatment of discounts allowed and received in the trial balance.

If the total discount allowed in a cash book was N52,000 and the total discount received was N66,700, which of the following is TRUE concerning the two discounts?
A. They should not appear in the trial balance as they were already either received or paid out
B. They must be balanced in the cash book and the difference taken to the receivables
C. They must not appear in the general ledger
D. They must be balanced in the cash book and the difference taken to the trial balance
E. They should not be balanced in the cash book before being taken to the trial balance

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  • 12 Marks

FA – May 2024 – L1 – SB – Q2b – Recording Financial Transactions (Including Source Documents, Books of Prime Entry, and Cash Books)

Records the items in the relevant books of prime entry and explains how to post from the books of prime entry to the ledgers.

b. Ladu Limited has the following transactions related to sales and purchases in the month of July 2023:

  • July 2: Purchases from Abe Limited: ₦300,000
  • July 5: Sales to Jide Limited: ₦150,000
  • July 9: Purchases returns to Abe Limited: ₦50,000
  • July 12: Sales returns from Jide Limited: ₦20,000
  • July 14: Purchases from Bola Limited (offering a trade discount of 5%): ₦400,000
  • July 15: Sales to Yau Limited: ₦200,000
  • July 22: Sales returns from Yau Limited: ₦30,000
  • July 25: Sales to Zeb Limited (cash discount of 2.5% granted): ₦250,000
  • July 26: Purchases from Cletus Limited: ₦250,000
  • July 31: Purchases returns to Cletus Limited: ₦30,000

Required:

i. Record the items in the relevant books of prime entry of Ladu Limited in July 2023. (7 Marks)

ii. State how the postings will be done from the books of prime entries into the ledgers. (5 Marks)

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  • 7 Marks

MA – Nov 2018 – L2 – Q3a – Cost-volume-profit (CVP) analysis

Calculation of the Economic Order Quantity (EOQ) and analysis of the impact of a quantity discount on total inventory costs.

The quarterly demand for an item of raw materials is estimated at 2,000 units at a purchase price of GH¢180 per unit. It is estimated that the cost per order will be GH¢270 and the cost of holding a unit of material in inventory will be GH¢24.

Required:

i) Compute the optimal order quantity, and total minimum costs. (4 marks)

ii) Suppose a supplier offers 5% quantity discount for purchase of 8,000 units, should the offer be accepted? (3 marks)

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