2019 ACCOUNTING ANSWER BOOK final

ACCOUNTING ANSWER BOOK 2019 – 2021 Teacher Development Implementation National Institute for Curriculum and Professional Development(NICPD)

GRADE 12: ACCOUNTING: ANSWER BOOK FIXED ASSETS (Tangible Assets) BASELINE ACTIVITY 1: Analysing Transactions No Account Debited Account credited Assets Equity Liabilities BASELINE ACTIVITY 2: Calculating Depreciation Vehicles are depreciated at 20% on cost (straight line method) CURRENT ACCUMULATED CARRYING VEHICLES COST PRICE DEPRECIATION DEPRECIATION VALUE Purchased on 1 July 2016 R360 000 On 30 June 2017 On 30 June 2018 On 30 June 2019 Equipment is depreciated at 25% on carrying value (diminishing balance method) CURRENT ACCUMULATED CARRYING EQUIPMENT COST PRICE DEPRECIATION DEPRECIATION VALUE Purchased on 1 July 2016 R200 000 On 30 June 2017 On 30 June 2018 On 30 June 2019 BASELINE ACTIVITY 3: Basic Ledger Accounts 1.1 Calculate: Depreciation on Equipment GRADE 12 ACCOUNTING | ANSWER BOOK | 1

1.2 ACCUMULATED DEPRECIATION ON EQUIPMENT B7 2018 Mar 1 Balance 62 000 DEPRECIATION (N10) BASELINE ACTIVITY 4: Calculation, Fully Depreciated Asset ACTIVITY 1 1.1 WORKINGS ANSWER (i) Current Depreciation (ii) Asset Disposal amount: Accumulated Depreciation (iii) Remaining Depreciation at financial year end. 2 | GRADE 12 ACCOUNTING | ANSWER BOOK

1.2 ASSET DISPOSAL (N12) 1.3 Provide a suitable reason for the equipment being disposed (sold). BASELINE ACTIVITY 5: Understanding the Fixed Asset Note Calculate the missing amounts on the note. Fixed Asset note LAND AND EQUIPMENT TOTAL BUILDINGS Carrying value on 1 March 2018 4 200 000 780 000 Cost 4 200 000 5 460 000 Accumulated depreciation 0 Movements 811 000 Additions 1 030 000 Disposals 0 (38 000) Depreciation Carrying value on 28 February 2019 5 000 000 Cost 1 370 000 Accumulated depreciation 0 ACTIVITY 2 2.1 ASSET DISPOSAL (N12) GRADE 12 ACCOUNTING | ANSWER BOOK | 3

2.2 WORKINGS ANSWER (i) (ii) (iii) (iv) 2.3 Show the amount/s (and details) that will be reflected on: DETAILS AND WORKINGS AMOUNT The Income Depreciation: Statement: Profit on disposal The Balance Non-current assets Sheet ACTIVITY 3 3.1 WORKINGS ANSWER (i) (ii) (iii) 4 | GRADE 12 ACCOUNTING | ANSWER BOOK

3.2 ASSET DISPOSAL (N12) 3.3 As internal auditor, state TWO concerns you would raise with the board of directors. Provide reasons in each case. CONCERN REASON SPECIFIC CASES OF FIXED ASSETS INTEGRATED: Example Amounts for the Income Statement: Profit/Loss on sale of asset: Depreciation: Example 2 Amounts for the Income Statement: Loss on equipment stolen Depreciation GRADE 12 ACCOUNTING | ANSWER BOOK | 5

Example 3 Amounts for the Balance Sheet: Vehicles: Equipment: Example 4: Cost of additional delivery vehicles: CASH EFFECTS OF INVESTING ACTIVITIES Change in fixed deposit 6 | GRADE 12 ACCOUNTING | ANSWER BOOK

INVENTORY VALUATION (STOCK) Activity 1 FIFO method Weighted average method Activity 2 Activity 3 GRADE 12 ACCOUNTING | ANSWER BOOK | 7

Weighted average Description FIFO Weighted average Table calculating the number of units that should be on hand 8 | GRADE 12 ACCOUNTING | ANSWER BOOK

ACTIVITY 4 4.1 Calculate the stock values that will appear in the Balance Sheet. Show all workings using the number of units and the appropriate unit value. 9 Belts (use the FIFO method). 5 4.2 Calculate the following for the belts: Cost of sales (check operation) 6 Gross profit 3 Mark-up % achieved 3 GRADE 12 ACCOUNTING | ANSWER BOOK | 9

Stock turnover rate 4 Stock holding period in days 5 4.3 Hildah suspects that a number of belts have been shop-lifted. Calculate the number of belts stolen. 5 5 INVENTORY VALUATION 5.1 (a) Calculate the closing stock of Johx watches on 31 August 2015. 10 | GRADE 12 ACCOUNTING | ANSWER BOOK

(b) Calculate the cost of sales of Johx watches for the year ended 31 August 2015. 5.2 (a) Calculate the closing stock of Kwatz watches for the year ended 31 August 2015. (b) Calculate the sales of Kwatz watches on 31 August 2015. GRADE 12 ACCOUNTING | ANSWER BOOK | 11

QUESTION 6 INVENTORY VALUATION 6.1 Explain the difference between the perpetual stock system and the periodic stock system. Perpetual stock system Periodic stock system . 6.2 Calculate the value of the stock on hand on 28 February 2015 using the weighted-average method. 6.3 Calculate the value of the closing stock using the FIFO method. 6.4 Give ONE reason in favour of changing to the FIFO method. 12 | GRADE 12 ACCOUNTING | ANSWER BOOK

INTERPRETING FINANCIAL STATEMENTS ACTIVITY 1: Identifying Financial Statements Identify the relevant financial statement where you will find the following information. Total amount owing to creditors Total amount of the loan either received or paid. Unissued number of shares. Income tax expense for the financial year Amount received for the issue of new shares Total cash paid to shareholders in respect of dividends The portion of the loan that must be paid in the next financial year. Total amount paid to SARS for Income tax Gross profit for the year Fixed assets purchased during the financial year ACTIVITY 2: Adjustments NO ACCOUNT DEBITED ACCOUNT CREDITED WORKINGS / AMOUNT (i) (ii) (iii) (iv) (v) (vi) (vii) GRADE 12 ACCOUNTING | ANSWER BOOK | 13

4.2 Amounts that will appear in the Income Statement AMOUNT Sales (555 000 Cost of sales (370 000 Bad debts (7 120 ACTIVITY 3: Using Financial Indicators to complete the Income Statement Incomplete Income Statement: Sales 7 612 500 Gross profit Gross operating income Operating profit 22 250 Profit before interest expense Net profit before income tax (448 000) Net profit after income tax 14 | GRADE 12 ACCOUNTING | ANSWER BOOK

BALANCE SHEET FORMAT SUN LTD BALANCE SHEET on 28 FEBRUARY 2018 ASSETS Notes NON-CURRENT ASSETS Fixed/tangible assets 3 Financial assets 160 000 CURRENT ASSETS 1 820 000 Inventories 4 956 000 5 Cash and cash equivalents 6 2 500 TOTAL ASSETS EQUITY AND LIABILITIES SHAREHOLDERS’ EQUITY 7 Retained income 8 218 200 NON-CURRENT LIABILITIES Mortgage Loan (740 000 – CURRENT LIABILITIES 921 800 Trade and other payables 9 Bank overdraft 45 300 Current portion of loan 148 000 6 800 000 GRADE 12 ACCOUNTING | ANSWER BOOK | 15

ACTIVITY 4: Using financial indicators to complete a Balance Sheet Current assets Inventories Trade and other receivables Cash and cash equivalents EQUITY & LIABILITIES Ordinary shareholders’ equity Ordinary share capital Retained income Non-current liabilities Loan Current liabilities Trade and other payables Shareholders for dividends ACTIVITY 5: Cash Flow Calculations NANDI LTD 5.1 Net profit Add: Changes in working capital Inventories Trade and other receivables Trade and other payables (12) 16 | GRADE 12 ACCOUNTING | ANSWER BOOK

5.2 Calculate the following: 5.2.1 Income tax paid (5) 5.2.2 Dividends paid (4) 5.2.3 Fixed assets purchased (5) 5.2.4 Proceeds from new shares issued (2) 5.2.5 Payment for the re-purchase (buy back) of shares. (5) 5.2.6 Net change in cash and cash equivalents. (3) ACTIVITY 6: Interpreting Financial indicators REQUIRED: 6.1 Comment on the profitability (operating efficiency) of the business. Quote and explain TWO relevant financial indicators (with figures). (6) 6.2 Directors feel that the business will experience difficulty in meeting its short term debts in the next financial year. Explain why you either agree or disagree with them. Quote THREE financial indicators with figures to support your opinion. (9) GRADE 12 ACCOUNTING | ANSWER BOOK | 17

6.3 Although shareholders are satisfied with their % returns, they are concerned about the change in dividend pay-out policy.  Explain why they are satisfied with their returns.  Provide TWO possible reason for the change in the dividend pay-out rate. (6) 6.4 The directors took the decision to increase the loan during the year. Explain why this was a poor decision. Quote relevant financial indicators in your explanation. (8) 6.5 The company paid R3,50 per share to repurchase 50 000 shares during April 2018. This was R0,75 above the average share price. Explain whether the shareholder received a fair price for his shares. Quote TWO financial indicators with figures. (6) ACTIVITY 7: Dividend pay-out rate and Majority Shareholding 7.1 Calculate H. Haw’s percentage shareholding before and after the issue of additional shares on 30 June 2018. 18 | GRADE 12 ACCOUNTING | ANSWER BOOK

7.2 Explain why Haw would be disappointed that he was not able to purchase any additional shares when these shares were issued. 7.3.1 Explain the effect of this re-purchase on Haw’s % shareholding. 7.3.2 Explain why the other shareholders would be concerned about this transaction, once they received inside information about the share buyback. 7.4 Show the change on the dividend pay-out rate by doing a calculation. 7.5 Provide TWO possible reasons why the directors decided to change the trend of previous year. GRADE 12 ACCOUNTING | ANSWER BOOK | 19

7.6 Will the shareholders be satisfied with this change on policy? Provide TWO points. Cash Flow Statement: Example: 3.1 Calculate the amount spent to purchase fixed assets in 2019 3.2 Calculate the change in the fixed deposit. Indicate if this is an inflow or outflow of cash. 3.3 Calculate the net change in cash and cash equivalents in 2019. Net change in cash and cash equivalents Cash and cash equivalents at beginning Cash and cash equivalents at end 3.4 Identify ONE decision that directors took last year that they did not take this year and ONE decision they took this year, and not last year. 20 | GRADE 12 ACCOUNTING | ANSWER BOOK

3.5 Identify TWO decisions revealed by the Cash Flow Statement taken last year, and explain the consequences of these decisions. DECISION CONSEQUENCE 3.6 Comment on the impact of the decisions regarding financing activities over the two year. Mention the overall effect on the total capital employed. DECISION IMPACT 3.7 Comment on the change on CCE from 1 July 2016. GRADE 12 ACCOUNTING | ANSWER BOOK | 21

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