Series: MAR/JULY 2020

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  • 12 Marks

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

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)

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  • 10 Marks

FR – March 2020 – L2 – Q6b – Financial Reporting

Discuss objectives of FRCON and ethical issues in reporting.

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)

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  • 10 Marks

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

Explain six categories of board diversity and evaluate its benefits.

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

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  • 10 Marks

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.

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)

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  • 10 Marks

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.

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)

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  • 20 Marks

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.

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

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  • 20 Marks

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.

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)

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  • 20 Marks

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.

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)

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  • 20 Marks

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.

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)

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  • 20 Marks

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.

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)

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  • 1 Marks

BL – MarJul 2020 – L1 – SA – Q8 – Law Relating to Banking

Question testing knowledge of the reporting limits for foreign exchange transactions under the Money Laundering Act.

Under the Money Laundering (Prohibition) Act, what is the limit of foreign exchange in a single transfer that must be reported to the Central Bank of Nigeria?
A. $10,000
B. $20,000
C. $50,000
D. $100,000
E. $500,000

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  • 1 Marks

BL – MarJul 2020 – L1 – SA – Q7 – Business Ethics and Corporate Governance

Question on the maximum prison term for bribery charges against public officers

The maximum prison term for a public officer found guilty of bribery is ………… year(s)
A. 1
B. 3
C. 5
D. 7
E. 10

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  • 1 Marks

BL – MarJul 2020 – L1 – SA – Q6 – Business Ethics and Corporate Governances

Question assessing the understanding of acceptable modes of conduct in society.

  1. Commonly acceptable mode of conduct or behaviour of a given society is known as
    A. Order
    B. Principle
    C. Ethics
    D. Instruction
    E. Rule

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  • 1 Marks

BL – MarJul 2020 – L1 – SA – Q5 – Company Law

Question assessing the role of a receiver/manager in managing the assets of an insolvent company.

A person appointed by the secured creditors to manage the assets of an insolvent company is
A. Bailiff
B. Auctioneer
C. Debt Collector
D. Accounts Officer
E. Receiver/Manager

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  • 1 Marks

BL – MarJul 2020 – L1 – SA – Q4 – Company Law

Question testing knowledge on the requirement for naming a private company under the Companies and Allied Matters Act 2004.

Under the Companies and Allied Matters Act 2004, the name of a private company limited by shares shall end with the word:
A. Registered
B. Limited
C. Incorporated
D. Corporation
E. Cooperative

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  • 1 Marks

BL – MarJul 2020 – L1 – SA – Q3 – Partnership Law

Question assessing understanding of partnership liability and the implications for legal action against partners.

When the liability of partners in a partnership is described as several, it means an aggrieved party could sue the partners
A. Jointly
B. Collectively
C. With families
D. With firm only
E. Individually

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  • 1 Marks

BL – MarJul 2020 – L1 – SA – Q2 – The Nigerian Legal System

Question testing knowledge on the characteristics of the Nigerian Constitution.

Which of the following is a characteristic of the Nigerian Constitution?
A. Federalism
B. Divisionism
C. Territorialism
D. Regionalism
E. Zoning

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  • 1 Marks

BL – MarJul 2020 – L1 – SA – Q1 – Sources of Nigerian Law

Question assessing the understanding of sources of Nigerian law under the received English law.

  1. Under the Received English Law, which of the following is classified as a source of Nigerian law?
    A. Law of general application
    B. Statutes of limited application
    C. International treaty
    D. Common law
    E. Basic law

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  • 20 Marks

BMF – Mar July 2020 – L1 – SB – Q6 -Basics of Business Finance and Financial Markets

Evaluating two projects based on discounted payback period and advising management.

Perfumes Nigeria Limited is considering the purchase of a new machine and has two alternatives. The company uses discounted payback period as a criterion for project selection and has a policy of not investing in any project unless the discounted payback period is less than 4 years. The expected cash flow profiles of the two projects are as shown below:

Year Machine Perf. (₦) Machine Fumes (₦)
2020 (2,000,000) (2,000,000)
2021 200,000 1,000,000
2022 400,000 1,000,000
2023 1,200,000 200,000
2024 1,400,000 100,000
2025 1,600,000 100,000

The company’s cost of capital is 10%.

Required:
Evaluate the two projects and offer your advice to support the investment decision of the management of the company. Assume 360 days make a year and express discounted payback period in years plus days. Show all workings. (20 marks)

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  • 20 Marks

BMF – Mar July 2020 – L1 – SB – Q5 – Basics of Business Finance and Financial Markets

Calculating NPV and present value of cash flows for Favour Limited.

(a) Favour Limited is considering a project which will cost N2,000,000 now and generate the following cash flows:

Years Cash Flow (₦)
1-4 500,000 each year
5-8 300,000 each year
9-15 200,000 each year

The company’s cost of capital is 20%.

Required:
What is the NPV of the project?

(b) What is the present value of constant annual cash flows of ₦120,000 at 15% if the cash flow starts:

i. In year 1?
ii. In year 6?
iii. Immediately? (9 marks)

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