Series: MAR/JULY 2020

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FR – March 2020 – L2 – Q4b – Financial Statement Presentation of Government Grants

Prepare financial statement extracts using two methods of presenting government grants under IAS 20

Question

b. During the year ended June 30, 2019, Gbogbonise Enterprises having qualified for the 25% local equity participation, received the following grants from Central Bank of Nigeria (CBN).

(i) On September 1, 2018, a grant of N1 million was received from CBN. The grant was in respect of training casual workers. The training cost incurred by Gbogbonise Enterprises in this respect, was N1.75 million.

(ii) On November 1, 2018, Gbogbonise Enterprises acquired plant and equipment costing N8.75 million and received a grant of N2.5 million from Central Bank of Nigeria (CBN) in respect of the purchase. The plant and equipment which has a residual value of N1.25 million is depreciated on straight-line basis over its useful life of 5 years.

(iii) On June 1, 2019, a grant of N2.5 million was made by CBN. The grant was in respect of relocation costs that Gbogbonise Enterprises had incurred for movement of its business to a free trade zone allocated to Medium, Small and Micro Enterprises (MSME). The grant is repayable in full unless Gbogbonise Enterprises recruits at least one hundred (100) employees from the free trade zone local area by the end of the month of June 2019. Gbogbonise is finding it difficult to recruit this number of employees in the local area.

Required:
Prepare extracts of the statement of financial position and statement of profit or loss of Gbogbonise Enterprises for the year ended June 30, 2019 using the two methods of presenting grants in the financial statement of business entities. (12 Marks)

Answer

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Level: Level 2

Topic: Accounting for Government Grants
Series: MAR/JULY 2020

FR – March 2020 – L2 – Q6b – Financial Reporting

Discuss objectives of FRCON and ethical issues in reporting.

Question

b. The regulatory body responsible for issuing accounting standards in accordance with local and international regulations in Nigeria is the Financial Reporting Council of Nigeria (FRCON).
Required:
Explain briefly THREE main objectives of setting up the Financial Reporting Council of Nigeria (FRCON) and identify TWO ethical issues in financial reporting which companies may be sanctioned for by this body.
(10 Marks)

Answer

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Tags: Conceptual Framework, Economic Decisions, Financial Reporting
Level: Level 2

Topic: Conceptual Framework for Financial Reporting
Series: MAR/JULY 2020

CSME – Mar/Jul 2020 – L2 – Q4b – Board Diversity Categories and Benefits

Explain six categories of board diversity and evaluate its benefits.

Question

b. i. What is Board Diversity and explain SIX categories of Board Diversity? (5 Marks)
ii. Evaluate the benefits of Board Diversity. (5 Marks)

Answer

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Tags: Board Diversity, Corporate Governance, Decision Making, Ethical Business Practices
Level: Level 2

Topic: Board Diversity, Corporate Governance
Series: MAR/JULY 2020

CSME – Mar/July 2020 – L2 – Q2b – Ethical Absolutism vs Relativism in Accounting

Distinguish between ethical absolutism and ethical relativism and identify types of ethical relativism.

Question

b. An adequate understanding of basic concepts and theories of ethics is a prerequisite for the evolution of the skills needed to address ethical issues that could arise while carrying out your duty as a professional accountant. Distinguish between ethical absolutism and ethical relativism. Also, identify THREE types of ethical relativism. (10 Marks)

Answer

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Tags: Business Ethics, Ethical Absolutism, Ethical Relativism, Professional Ethics
Level: Level 2

Topic: Ethics in Business, Professional Ethics
Series: MAR/JULY 2020

AA – Mar/July 2020 – L2 – Q5 – Assurance Services and Due Diligence for Hallmark Ltd

List control objectives and activities for cash sales and bank lodgments.

Question

List TWO control objectives and THREE control activities that should be put in place for each of the following:
i. Cash sales. (5 Marks)
ii. Lodgments into bank. (5 Marks)

Answer

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Tags: Bank Lodgments, Cash Sales, Control Activities, Control Objectives, Internal Control
Level: Level 2

Topic: Internal Control Systems
Series: MAR/JULY 2020

PSAF – Mar/July 2020 – L2 – Q4 – Responsibilities of EFCC and Debt Burden Transfer

This question requires the preparation of financial statements for Amotekun State University of Education, Ode, for 2018.

Question

b. Amotekun State University of Education, Ode, was the second university established by the Amotekun State of Nigeria. The government, as a mark of its commitment towards the survival of this young institution, has continued to support the University Senate in all its efforts. At the last meeting of the stakeholders, held at the state hotel, Igbo, on June 30, 2019, the Bursar presented the following financial statements for discussion and approval:
Amotekun State University of Education
Statement of Financial Position as at December 31, 2018

The following notes form an integral part of these accounts.
Amotekun State University of Education
Statement of financial performance for the year ended December 31, 2018

The following notes which form an integral part of the accounts, were also provided

2.
The Oke-Mosan Microfinance Bank balance in 2018 represents the „short term
loan

The Chairman of the Governing Council, who incidentally is a chartered accountant, observed that the financial statements appeared incomplete because no statement of cash flows was prepared.
Required:
Prepare, a statement of cash flows for Amotekun State University of Education for the year ended December 31, 2018, using the direct method in accordance with IPSAS 2

Answer

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Tags: Financial Statements, Government Accounting, Public sector financial reporting
Level: Level 2

Topic: Public Sector Financial Statements
Series: MAR/JULY 2020

PSAF – Mar/July 2020 – L2 – Q2 – IPSAS 3 Changes and Expenditure Assignment Challenges

Explanation of changes in accounting policies and challenges in expenditure assignment according to IPSAS 3.

Question

IPSAS 3 – Accounting policies, changes in accounting estimates and errors, outlines criteria for selecting and changing accounting policies among other purposes.

a. Explain what constitutes changes in accounting policies under the standard.
(4 Marks)

b. Outline THREE disclosure requirements in the standard:

(i) When initial application of IPSAS 3 is made and has effects on current, prior, or future period.
(ii) When voluntary changes in accounting policy are made and have effects on current, prior, or future period.
(6 Marks)

c. Expenditure assignment refers to division or sharing of expenditure, regulatory, and tax functions or responsibilities among multi-levels of governments in a federation. Identify and explain FIVE challenges prevalent on expenditure assignment.
(10 Marks)

Answer

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Tags: Accounting Changes, Accounting Policies, Expenditure assignment, IPSAS 3
Level: Level 2

Topic: International public sector accounting standards
Series: MAR/JULY 2020

PSAF – Mar/July 2020 – L2 – Q3 – National Chart of Accounts Characteristics and Structures

Characteristics of National Chart of Accounts, its structures for budgeting, and problems with debt conversion programmes.

Question

National Chart of Accounts (NCOA) shows the complete list of budget and Accounting items for General Purpose Financial Reporting System (GPFS) and budgeting.
Required:
a. Identify FOUR characteristics of National Chart of Accounts. (4 Marks)

b. Discuss the SIX structures of the National Chart of Accounts for budgeting. (6 Marks)

c. Discuss FIVE problems associated with debt conversion programmes in a country. (10 Marks)

Answer

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Tags: Budgeting, Debt Conversion, National Chart of Accounts, Public Finance
Level: Level 2

Topic: Debt Management, National Chart of Accounts
Series: MAR/JULY 2020

PSAF – Mar/July 2020 – L2 – Q5 – Matanmi Local Government Council 2019 Budget Preparation

This question focuses on budgeting for overheads and road repairs by local governments and the characteristics of public goods.

Question

Major towns and cities in Ibadan State, which is one of the states in the South West of the country, are maintained by local government councils, which are funded through allocations from the federation account, state accounts, and internally generated revenue. The local government councils submit budgets each year, which forms the basis of the funds received.

Matanmi Local Government Council, one of the local government councils in Ibadan State, provides you with the following information as part of the 2019 budget preparation:

Overheads:
Overhead costs are budgeted on an incremental basis, taking the previous year’s actual expenditure and adding a set percentage to allow for inflation. Adjustments are also made for known changes. The details are:

Note 1: One new staff member will be added to the payroll, costing N300,000 in 2020.
Note 2: A move toward a paperless office is expected to reduce stationery costs by 20% in 2020.
Road Repairs:
In 2020, it is expected that 200 kilometers of road will require maintenance, but a contingency of an extra 10% has been agreed.
In 2019, the average cost of a road repair was N1,500,000 per kilometer, but this did not include any cost effects of extreme weather conditions. The following probability estimates have been made in respect of 2020:

Inflation on road maintenance costs is expected to be 10% between 2019 and 2020.

New roads are budgeted on a zero-based basis and will have to compete for funds along with other capital projects such as hospitals and schools.
Required:
a. Calculate the overheads and road repairs budgets for the year 2020.
(10 Marks)

b. The goods and services produced in every society can be classified into public and private goods.
Identify and explain TWO sub-divisions and THREE characteristics of public goods.
(10 Marks)

Answer

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Tags: Local Government Budget, Overheads, Public Goods, Road Repairs
Level: Level 2

Topic: Local Government Accounting, Public Goods
Series: MAR/JULY 2020

PSAF – Mar/Jul 2020 – L2 – Q1a – Accounting for Government Assets and Liabilities

Prepare a non-current assets schedule for a university and identify features of a finance lease in compliance with IPSAS.

Question

In the year 2000, Amotekun State of Nigeria established two State Universities University of Education (ASUE), to cater for the indigenes of the state. The following information relates to each of the universities:
a. The Bursar of Amotekun State University, Oke-Mosan, delegated the preparation of Non-current assets schedule to be included in the final accounts of the University for the year ended December 31, 2018, to one of the Deputy Bursars in the Bursary Department.
In the discharge of the assignment, the Deputy Bursar reviewed the following documents:

International Public Sector Accounting Standards (IPSAS).
Previous year’s financial report.

He was able to obtain the following information:

(i)

Non-current assets register.
Valuation reports, etc.

(i) It is the policy of the University to charge a full year’s depreciation on assets irrespective of the month of purchase or revaluation during the year, while no depreciation is charged on assets disposed of during the year.

(ii) Equipment on lease is depreciated equally over the period of the lease.

(iii) Land and buildings were professionally revalued during the year by Parisco & Associates, a firm of Chartered Surveyors and Valuers, and approved by the State Ministry of Works and Housing. The valuation, which was based on the open market value, produced a revaluation surplus of N150,000,000 over the carrying amount as at January 1, 2018.

(iv) The University purchased plant and machinery which was imported from the United Kingdom at a cost of N430,500,000. Installation and transportation costs to the University amounted to N20,500,000.

(v) The Deputy Bursar that prepared the non-current assets schedule last year classified some of the computer equipment purchased on May 15, 2017, costing N26,000,000 as office equipment. A reclassification is required in the current year.

(vi) Office furniture and fittings costing N12,250,000 were disposed of during the year for N11,500,000, which resulted in a profit of N750,000.

(vii) The University entered into an equipment lease agreement with Ode Finance Limited; the terms and conditions of the finance lease are as follows:
Principal sum: N45,000,000
Lease period: 5 years
Lease rentals: N10,000,000 p.a.
(viii) During the year, the University acquired a fleet of vehicles at the cost of N50,000,000. The State Government financed this acquisition.

Required: i. In accordance with IPSAS 13, identify FIVE features of a finance lease. (5 Marks) ii. Prepare the non-current assets schedule of Amotekun State University suitable for publication. (15 Marks)

Answer

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Tags: Asset Register Question, Depreciation, Finance leases, IPSAS, Non-current assets schedule, Revaluation
Level: Level 2

BL – March July 2020 – L1 – SB – Q3b – Agency Law

Explains the legal consequences of agency transactions involving named and unnamed principals.

Question

Contracts made by an agent with third parties have legal consequences.

Required:
Explain briefly the consequences of the following in an agency transaction:
i. Named Principal (3 Marks)
ii. Unnamed Principal (3 Marks)

Answer

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Tags: Agency Law, Legal Liability, Named Principal, Unnamed Principal
Level: Level 1

Topic: Agency Law
Series: MAR/JULY 2020

BL – March July 2020 – L1 – SB – Q3a – Sale of Goods

Legal advice on breach of contract and actions for a seller against a defaulting buyer under the Sale of Goods Act.

Question

Bature Company Limited is a big manufacturer of a special brand of industrial split-unit air conditioners in the country. The company has a standard contract with all its distributors not to sell air conditioners above ₦200,000 per unit so as to make its products attractive in the market, and each distributor also obtained the same undertaking from their customers.

Katifa Ventures, one of the company’s major distributors, sold 20 units at the agreed price of ₦200,000 to Chinedu Enterprises, who resold each at ₦250,000, even though it also signed the undertaking. Bature Company Limited got to know this and intends to take legal action against Chinedu Enterprises.

Required:
Advise Bature Company Limited, explaining the legal issues involved.

Answer

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Tags: Breach of Contract, Contract Law, Legal Advice, Legal Liability, Sale of Goods
Level: Level 1

Topic: Sale of Goods
Series: MAR/JULY 2020

BL – March July 2020 – L1 – SB – Q2c – Company Law

Involves a case regarding the liability of the company and its shareholders when the company is winding up.

Question

Chief Ochoma was a very successful electronics dealer as a sole proprietor. Two years ago, he incorporated a limited liability company with the name “Ochoma and Sons Limited” to take over the business. Ochoma and his sons are the subscribers of the 1,000,000 equity shares of the company at ₦1.00 per share. Chief Ochoma subscribed 970,000 shares and each of the three sons subscribed to 10,000 shares.

The company’s warehouse was razed by fire last year, and all the stock of electronics was burnt, resulting in the company’s huge indebtedness to unsecured trade creditors. In the process of winding up Ochoma and Sons Limited, the unsecured creditors insisted that Chief Ochoma should pay the debts the company owes them because he is the de facto owner of the company.

Required:
Advise Chief Ochoma, stating the legal issues involved.

Answer

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Tags: Company Law, Corporate Veil, Limited Liability Company, Shareholding, Unsecured Creditors
Level: Level 1

Topic: Company Law
Series: MAR/JULY 2020

BL – March July 2020 – L1 – SB – Q2b – Company Law

Examines the consequences of incorporating a limited liability company.

Question

There are consequences of incorporation of a company.

Required:
State FIVE consequences of incorporation of a limited liability company.

Answer

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Tags: Company Law, Incorporation, Limited Liability
Level: Level 1

Topic: Company Law
Series: MAR/JULY 2020

BL – March July 2020 – L1 – SB – Q2a – Partnership Law

Legal advice for a partner on the dissolution of a partnership and personal liability of the firm.

Question

Musa, Ahmed, and Tukur formed a partnership as equal partners to engage in haulage business and adopted the partnership law as their partnership agreement. Due to his vast experience in haulage business, the partners appointed Tukur as the firm’s Managing Director with full powers to execute all business transactions for the firm, while Musa and Ahmed were to oversee the office administration.

Due to unfavorable economic conditions, the firm suffered huge losses for a couple of years, which caused huge indebtedness. The partnership was dissolved, leaving Tukur with an alleged incurred liability for the firm’s debts. Tukur claims that Musa and Ahmed were still in full control of the firm’s operations and that the firm’s liability alone is to be cleared. Tukur seeks your advice.

Required:
Advise Tukur, stating the legal issues involved. (10 Marks)

Answer

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Tags: Business Partnership, Firm Liability, Legal Issues, Partnership Law
Level: Level 1

Series: MAR/JULY 2020

BL – March July 2020 – L1 – SB – Q1 – Company Law

partnership law, and company names prohibited by CAMA.

Question

The Corporate Affairs Commission (CAC) is the government agency that registers business names in Nigeria.

Required:
Explain briefly FIVE types of names prohibited by the Companies and Allied Matters Act (CAMA) 2004. (10 Marks)

Answer

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Tags: Companies and Allied Matters Act, Corporate Affairs Commission, Prohibited Company Names
Level: Level 1

Topic: Company Law
Series: MAR/JULY 2020

BL – MarJul 2020 – L1 – SB – Q1b – Partnership Law

Explanation of relationships similar to partnership under partnership law.

Question

Under partnership law, there are rules for determining the existence of a partnership.

Required: Explain briefly THREE relationships that are similar to partnership but are not considered partnerships under the law.

Answer

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Tags: Business Entities, Legal Relationships, Partnership
Level: Level 1

Topic: Partnership Law
Series: MAR/JULY 2020

BL – MarJul 2020 – L1 – SB – Q1a – Sources of Nigerian Law

Explanation of Statute of General Application and English laws extending to Nigeria.

Question

Received English Law is one of the sources of Nigerian Law.

Required: Explain briefly the following terms:
i. Statute of General Application (2 Marks)
ii. English laws extending to Nigeria (2 Marks)

Answer

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Tags: English Laws, Nigerian Law, Statute of General Application
Level: Level 1

Topic: Sources of Nigerian Law
Series: MAR/JULY 2020

BL – MarJul 2020 – L1 – SA – Q20 – Alternative Dispute Resolution

Question on the primary objective of the Alternative Dispute Resolution (ADR) principle.

Question

The main objective of Alternative Dispute Resolution (ADR) principle is
A. Prescription of punishment for civil disputes
B. Advising appeal for legal redress
C. Amicable settlement of disputes
D. Referral of disputes to court
E. Rejection of court judgement

Answer

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Tags: ADR, Arbitration, Dispute Resolution, Legal Settlement, Mediation
Level: Level 1

Topic: Alternative Dispute Resolution
Series: MAR/JULY 2020

BL – MarJul 2020 – L1 – SA – Q19 – Employment Law

Question on identifying the employee's right to severance pay upon termination of employment.

Question

Which of the following is an employee’s right upon termination of employment?
A. Right to be provided transportation
B. Right to sue the employer
C. Right to severance pay
D. Right to contest in court
E. Right to challenge the hirer

Answer

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Tags: Compensation, Employee Rights, Employment Termination, Severance Pay
Level: Level 1