NATIONAL OPEN UNIVERSITY OF NIGERIA

UNIVERSITY VILLAGE, PLOT 91, CASDASTRAL ZONE, NNAMDI AZIKIWE EXPRESS WAY, JABI, ABUJA.
FACULTY OF MANAGEMENT SCIENCES
JUNE/JULY 2018 EXAMINATION

Course Code: ACC 419                                                             

Credit Unit: 3

Course Title:  Advanced Financial Accounting

Time Allowed: 3 Hours

Instructions:

1. Attempt question number one (1) and any other three (3).

2. Question number 1 is compulsory and carries 25 marks while the other 3 carry 15 marks each.

1.

The following balances remained in the books of Lagview Plc at December 31, 2016 after determining the gross profit:

The following additional information is relevant:

1. Office fittings and equipment are to be depreciated at 15% of cost, and Motor vehicle at 20% of cost.
2. Provisions are to be made for:

                           Directors‟ Fees                N6,000,000

                           Audit Fees                         N2,500,000

3. The amount of insurance includes a premium of N600,000 paid in September 2016 to cover the company against fire for the period September 1, 2016 to August 31, 2017.

4. A bill for N548,000 in respect of electricity consumed up to December 31, 2016 has not been posted to the ledger.

Required:

1. Prepare the Statement of profit or loss for the year ended December 31, 2016; (15 marks)

and                                                                                                                        

2. The Statement of financial position as at December 31, 2016.

(10 marks)

2.

Shita Plc purchased 960 million shares in Karama Plc a year ago when Karama had a credit balance of N190 million in retained earnings.  The fair value of the non-controlling interest at the date of acquisition was N330 million.  At the date of acquisition, the freehold land of Karama Plc was valued at N140 million in excess of its carrying value.  The revaluation has not been recorded in the accounts of Karama.

The financial statements comprising Statement of Financial Position of Shita Plc and Karama Plc as at 31 December 2015 are as follows:

Shita Plc          Karama Plc

                                                                                                                                         NmNm

                                 Non-Current Assets                                                                                                                                                                     

                                      Land and building                                                     630                                                                  556

                                       Machinery and equipment                                     570                                                                           440

Karama Plc owes Shita Plc N50million for goods purchased during theyear.  Inventory of Karama Plc includes goods bought from Shita Plc at the price that includes a profit to Shita Plc of N24million.

The management of Shita Plc wants the financial statements to be consolidated using the acquisition method and wishes to know whether there is goodwill on acquisition of Karama Plc and the amount involved.

You are required to:

Prepare the Consolidated Statement of Financial Position as at 31 December 2015.

(15 marks)

3.

Donat Co is a manufacturer of domestic appliances. Its chairman is pleased with the results for the year ended 31 December 2015 as they show a continuing improvement over recent past performance. However, the finance director says that a better assessment of the company’s performance would be made by a comparison to other companies in the same sector. The finance director has obtained some ratios for Donat Co.’s business sector, based on a year end of 31 December 2015, which are:

The summarised financial statements of Donat Co are:

Statement of profit or loss for the year ended 31 December 2015