Question Tag: Journal Entries

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  • 4 Marks

PSAF – Nov 2023 – L2 – Q3b – Public Procurement and Contract Management

Prepare journal entries to record revenue, expenses, and payments for a healthcare construction project.

Based on the budget of Azare Federal Ministry of Health and Wellbeing (AFMHW), a contract to construct 5 units of Primary Healthcare Centres (PHC) in each of the six (6) geo-political zones to address malaria, infant deaths, and years of neglect in prioritizing primary healthcare and well-being of the citizens was signed with Alaafia Construction Company. This contract was at the cost of N12,250,200 per unit, with a 2-year contract duration and no variation clause.

A valuation certificate was submitted at the end of year one, which showed that over 60% of the contract has been executed, while N294,004,800 has been estimated to have been spent on the project since inception. There were also indications that the office of AFMHW has paid the contractor a total sum of N244,100,000.

Required:

Prepare journal entries to record the above transactions. (4 Marks)

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  • 8 Marks

FR – Nov 2022 – L2 – Q4d – Amortisation Schedule for Bond

Prepare amortisation schedule for Lagos State Government Bond and record journal entries on maturity date.

On January 1, 2020, an entity bought Lagos State Government Bond in the capital market for N575,000,000. The principal amount of the bond is
N500,000,000 and it is redeemable at par on December 31, 2025. The bond has a stated interest rate of 15% payable annually and an effective interest rate of 12%. Draft an amortisation schedule to indicate the amortised cost at the end of each year and the journal entries at the end of December 31, 2025

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  • 40 Marks

PSAF – May 2021 – L2 – Q1 – Public Sector Financial Statements

Apply IPSAS standards to adjust and analyze financial information for Okuku State University.

Okuku State University is a parastatal under Okuku State, not classified as a Government Business Enterprise (GBE). The following is the statement of financial position for the University as of December 31, 2018:

Statement of Financial Position (as at Dec 31, 2018)

Item Cost (₦’million) Accumulated Depreciation (₦’million) Carrying Amount (₦’million)
Land and Buildings 15,000 250 14,750
Equipment 1,000 100 900
Furniture 800 80 720
Plant & Machinery 550 50 500
Motor Vehicles 450 45 405
Total Non-Current Assets 17,800 525 17,275
Inventories 11,000 – –
Receivables 15,000 – –
Bank 3,000 – –
Total Current Assets – – 29,000
Total Assets – – 46,275
Non-Current Liabilities – – 30,000
Current Liabilities – – 8,000
Total Liabilities – – 38,000
Net Assets – – 8,275
Reserves – – 8,275

Additional Information:

  1. Office equipment was purchased for ₦150,000,000 from Joko Nigeria Limited, with installation and transportation costing ₦3,000,000. Half was paid during the year, with the remainder in January 2019. The University also acquired a building valued at ₦500,000,000 from a defunct State College.
  2. The University Teaching Hospital received motor vehicles and laboratory equipment donations worth ₦20,000,000 and ₦50,000,000, respectively, from a UK-based research institute.
  3. A motor vehicle bought on January 1, 2017, for ₦8,000,000 with a five-year life was sold for ₦4,000,000 at year-end.
  4. Computers bought in 2017 for ₦1,000,000, with an expected five-year lifespan, were damaged in a fire and written off.
  5. Land was bought for ₦50,000,000 for constructing a plaza valued at ₦250,000,000, with an estimated 25-year life.
  6. One building, valued at ₦160,000,000, was damaged by fire, with a post-fire valuation of ₦130,000,000.
  7. A motor vehicle was acquired on January 1, 2018, for ₦150,000,000.
  8. The University’s depreciation policy includes full-year depreciation with rates: Motor Vehicle 20%, Building 4%, Furniture 10%, Equipment (including Lab and Computers) 20%, and Plant and Machinery 15%.

Required:
a. Identify FOUR characteristics of Government Business Enterprises (GBEs) as
stated in IPSAS 1 on presentation of financial statements. (2 Marks)
b. Prepare the necessary journal entries to record the above transactions for
the year ended December 31, 2018. (10 Marks)
c. Prepare the adjusted statement of financial position as at December 31,
2018. (20 Marks)
d. Identify and explain FOUR qualitative characteristics of financial reporting as
required by appendix 2 of IPSAS 1 on presentation of financial statements.
(8 Marks)

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  • 15 Marks

FA – May 2012 – L1 – SB – Q5 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

Recording journal entries for three trade-in options for machinery and selecting the most viable option.

Fancy Enterprises has machinery that cost N750,000 with an accumulated depreciation of N510,000. The firm is contemplating acquiring new machinery to replace the old one. The new machinery has a catalog price of N1,290,000 and attracts a 12% trade discount. The following options are available:

(i) Trade in the old machinery and add cash of N895,200.
(ii) Trade in the old machinery and add cash of N600,000.
(iii) Trade in the old machinery and add cash of N1,080,000.

You are required to:

(a) Record journal entries for each of the options, considering the information provided above.
(b) Which of the options is economically viable for the firm to acquire the new machinery?
(14 Marks)

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  • 1 Marks

FA – May 2012 – L1 – SA – Q3 – Trial Balance

Identifying how a trial balance helps disclose errors.

In which of the following circumstances will the preparation of a Trial Balance assist in disclosing an error?

A. Failure to post an entry journal
B. Posting rent expenses to motor running account
C. Failure to post part of a journal entry
D. Posting the debit of a journal entry as a credit and vice versa
E. Failure to record an entry in the journal

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  • 10 Marks

FR – Nov 2020 – L2 – Q5c – Impairment of Assets (IAS 36)

Explain disposal group and rules of recognition under IFRS 5, determine impairment loss, and allocate impairment on the assets.

The Board of directors of Adamu Limited has decided to dispose of a group of held-for-sale assets. The extracts of carrying amounts of the assets immediately before classification as held-for-sale were stated as follows:

Assets N’000
Goodwill 80,000
PPE at revalued amounts 208,000
PPE at cost 320,000
Inventory 84,000
Financial asset 68,000

Total: 760,000

The Board estimated that the fair value of the disposal group is N650,000,000 gross, with selling costs amounting to N10,000,000.

Required:
i. Explain what is meant by disposal group and the rules of recognition under IFRS 5 – Non-current assets held for sale and discontinued operations. (2 Marks)

ii. Determine and allocate the impairments on the disposed-off asset under IFRS 5. (4 Marks)

iii. Prepare necessary journal entries to record the transactions. (1 Mark)

iv. Identify THREE applicable criteria under IFRS 5 for classifying an asset or disposal group as held for sale in the financial statements. (3 Marks)

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  • 15 Marks

FA – Nov 2011 – L1 – SB – Q6 – Recording Financial Transactions

This question requires the journal entries to record consignment transactions.

The following transactions were recorded in the books of Fadep Enterprises:

(i) On 1 October 2010, Fadep Enterprises sent goods worth N160,000 on consignment to Associate Enterprises and incurred expenses on transportation and loading of N4,800 and N1,200 respectively.
(ii) On 7 October 2010, Associate Enterprises received the consignment and paid N80,000 into the bank account of Fadep Enterprises.
(iii) On 31 October 2010, Associate Enterprises prepared and sent an Account Sales to Fadep Enterprises having made sales of N180,000. The remaining goods on hand were valued at N16,000 at original cost.
(iv) Associate Enterprises deducted 2.5% as commission and off-loading expenses of N2,000.
(v) On 5 November 2010, Associate Enterprises sold the remaining goods for N20,000.

You are required to:
(a) Prepare the journal entries with narration to record the above transactions in the books of Fadep Enterprises. (13 marks)
(b) State TWO principal differences between goods on consignment and sale of goods. (2 marks)

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  • 15 Marks

FA – Nov 2020 – L1 – SB – Q3b – Correction of Errors

Provide journal entries to correct errors and prepare a suspense account.

Your subordinate in POP-Two Ventures, an inexperienced bookkeeper, has informed you that the trial balance failed to agree by a difference of N170,000, recorded on the credit side of a suspense account. After investigating, you discovered the following errors:

Errors Amount (N’000)
Cash payment debited to the bank cash book 360
Overcasting of sales 700
Overcasting of purchases 700
Returns inwards omitted from the books 380
Bank charges posted into the cash book without a corresponding entry elsewhere 370
Opening receivables balance brought down incorrectly 180
PPE sold, credited to sales account instead of the correct account 5,000

Required:

i. Effect the necessary corrections by means of journal entries (11 Marks)
ii. Prepare the suspense account (4 Marks)

(Total 15 Marks)

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  • 1 Marks

FA – Nov 2020 – L1 – SA – Q18 – Accounting for Property, Plant, and Equipment (IAS 16)

Determines the correct journal entry for the credit purchase of property, plant, and equipment (PPE).

Which of the following journal entries correctly records the credit purchase of property, plant, and equipment (PPE)?

Account to be Debited Account to be Credited
A. PPE register Purchases ledger control
B. Purchase ledger control PPE
C. Bank PPE
D. PPE Supplier of PPE
E. PPE PPE disposal

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  • 14 Marks

FA – Mar/July 2020 – L1 – SB – Q4b -Financial Statements

Preparing share capital and related accounts based on a share issue.

Bravado Limited has an authorised share capital of 10M of N0.50 per share. On November 1, 2019, the company issued the entire shares for public subscription at N0.75 per share.

As at November 10, 12M applications were received through Klassic Bank PLC, the company’s banker. The shares were allotted on a pro rata basis, and the company refunded the excess application money.

You are required to prepare:
i. Share application account
ii. Bank account
iii. Share premium account
iv. Ordinary share capital account
v. Application money refund account

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  • 1 Marks

FA – Mar/July 2020 – L1 – SA – Q13 – Financial Statements (Preparation of Statement of Profit or Loss, Statement of Financial Position, Cash Flow Statement, and Statement of Changes in Equity)

Correct journal entry for share capital and share premium

P Limited made an issue of 150,000 N1 ordinary shares at a premium of 20%. The shares were fully subscribed and the proceeds were received through the bank.

What is the correct journal to record the above transaction?

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  • 20 Marks

FA – Aug 2022 – L1 – Q3 – Correction of errors

Preparation of journal entries to correct errors, adjustment of the trial balance, and explanation of error types that do not affect the trial balance.

The following list of balances was extracted from the books of Awatey at 30 April 2021:

Account Amount (GHȼ)
Sales 134,200 (Cr)
Purchases 62,300 (Dr)
Inventory at 1 May 2020 4,700 (Dr)
Discounts received 390 (Cr)
Discounts allowed 240 (Dr)
Salaries and wages 12,700 (Dr)
Rent and rates 8,100 (Dr)
Motor vehicle expenses 7,500 (Dr)
Machinery repairs 14,200 (Dr)
General expenses 2,600 (Dr)
Machinery at cost 45,000 (Dr)
Machinery accumulated depreciation 8,000 (Cr)
Motor vehicles at cost 30,000 (Dr)
Motor vehicles accumulated depreciation 6,000 (Cr)
Bank 4,400 (Dr)
Trade receivables 4,600 (Dr)
Trade payables 2,200 (Cr)
Drawings 7,400 (Dr)
Capital at 1 May 2020 52,950 (Cr)

After the extraction of the above balances, the following errors and omissions were discovered: i) A sale on credit to Ali Baba of GHȼ800 had been entered in the Sales Journal as GHȼ80 and had also been posted to the Sales Ledger at the same amount. ii) A new Motor Vehicle costing GHȼ15,000 bought during the year had been debited to the Purchases Account. iii) Purchase of goods on credit from Agyemang Duah, amounting to GHȼ600, had been omitted from the books. iv) A cheque for GHȼ435 paid for Motor Vehicle expenses was recorded in the Cash Book and the Motor Vehicle Expenses Account as GHȼ475. v) Sales of goods on credit to Nii Ayi, amounting to GHȼ1,000, had been omitted from the books. vi) A cheque for GHȼ689 paid for general expenses was recorded in the Cash Book and the General Expenses Account as GHȼ698. vii) The purchase of machinery for GHȼ8,500 had been debited to the Machinery Repairs Account.

Required:
a) Prepare journal entries with appropriate narratives to correct each of the errors and omissions.
(8 marks)

b) Prepare the Trial Balance of Awatey as at 30 April 2021 after adjusting for the errors and omissions.
(8 marks)

c) Explain TWO (2) types of errors which would not affect the balancing of a trial balance.
(4 marks)

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  • 20 Marks

FA – Nov 2016 – L1 – Q4 – Correction of errors | Preparation of limited liability company financial statements

Correcting errors in the trial balance and preparing financial statements for Adom Providers Ltd.

The accountant of Adom Providers Ltd has begun preparing financial statements for the year ended 31st December 2015, but the work is not yet complete. At this stage, the items included in the trial balance are as follows:

GHȼ’000 GHȼ’000
Land 150
Buildings 160
Motor vehicles 130
Accumulated depreciation 220
Share capital 100
Retained earnings 80
Receivables 80
Payables 60
Inventories 50
Operating profit 40
Debentures (15%) 80
Allowance for receivables 5
Bank balance (asset) 12
Suspense 3
585 585

The following additional information is relevant: i) Sales for the year ended 31st December 2015 had been overcast by GHȼ2,300. ii) A credit note for GHȼ3,500 for goods returned to Abu, a supplier, had not been posted to the supplier’s account. iii) Discounts received of GHȼ1,400 had been posted to the debit side of the discounts allowed account. iv) A credit purchase from Manu of GHȼ640 had not been entered in the books. v) A new motor vehicle purchased for GHȼ14,000 had been recorded as a motor expense. Depreciation has been correctly entered in the accounts. vi) The debentures were issued three months before the year end. No entries have been made as regards interest. vii) A dividend of 5 per cent of share capital was declared before the year end, but not paid until after the year end.

Required:

a) Prepare journal entries with narratives to correct each of the errors in notes (i) to (v) above. (7 marks)

b) Prepare a statement to show the revised operating profit. (4 marks)

c) Prepare for Adom Providers Ltd for the year ended 31st December 2015:

  • i) Statement of profit or loss for the year. (2 marks)
  • ii) Statement of Financial Position for the year end. (7 marks)

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