2020 Accounting Highflyers Document

CURRICULUM GRADE 10 – 12 DIRECTORATE MATRIC INTERVENTION PROGRAMME GRADE 12 HIGH FLYERS ACCOUNTING 2020

Accounting Grade 12 2 KZN Highflyers 2020 TABLE OF CONTENTS TOPIC PAGE A. Financial statements 3 B. Cash Flow Statement 18 C. Inventory Valuation 32 D. Bank Reconciliation 43 E. Debtors Reconciliation 47 F. Creditors Reconciliation 49 G. Value Added Tax 53 H. Manufacturing 55 I. Budgeting 62

KZN Accounting 3 KZN Highflyers 2020 A. FINANCIAL STATEMENTS ACTIVITY A1 (Q 3 NOV 2016) 1.1 CONCEPTS Choose the correct term to complete each of the following statements. Write only the term next to the question number (1.1.1–1.1.4) in the ANSWER BOOK. cash and cash equivalents; current asset; non-current asset; income; net working capital; expense; current liability; non-current liability 1.1.1 Interest on a bank overdraft is a/an ... 1.1.2 Consumable stores on hand are a/an ... 1.1.3 The portion of a loan to be paid during the next financial year is regarded as a/an … in the Balance Sheet. 1.1.4 The difference between current assets and current liabilities is known as … (4 x 1) (4) 1.2 AUDIT REPORT You are provided with an extract from the audit report of Fralezi Ltd. REQUIRED: 1.2.1 To whom is the audit report addressed? (1) 1.2.2 Who has to ensure that the financial statements are prepared and presented at the annual general meeting? (1) 1.2.3 Choose the correct word from those in brackets. Write the answer next to the question number (1.2.3) and explain your choice. Fralezi Ltd received a/an (qualified/unqualified/disclaimer of opinion) audit report. (2) 1.2.4 Explain why the independent auditors referred to pages 11–29 in the report. (2) INFORMATION: We have examined the financial statements set out on pages 11–29. In our opinion, the annual financial statements present fairly, in all material respects:  The financial position of Fralezi Ltd on 30 June  The cash flow for the year then ended, in accordance with International Financial Reporting Standards (IFRS) and as required by the Companies Act of South Africa Roux and Pieterse Chartered Accountants (CA) Registered Accountants and Auditors Schilbach Street, Parys Please turn over

KZN Accounting 4 KZN Highflyers 2020 1.3 INCOME STATEMENT You are provided with information relating to Fralezi Ltd for the financial year ended 30 June 2020. REQUIRED: Complete the Income Statement for the financial year. (60) INFORMATION: Figures extracted from the Pre-adjustment Trial Balance on 30 June 2020: R Balance Sheet Accounts Mortgage loan: Parys Bank 333 200 Bank (favourable) 482 000 Debtors' control 116 500 Trading stock 209 500 Provision for bad debts 3 732 Nominal Accounts Sales (less allowances) 4 777 300 Cost of sales ? Directors' fees 375 000 Salaries and wages 365 540 Sundry expenses ? Depreciation 124 260 Audit fees 23 000 Repairs 100 000 Rent income 101 900 Interest income ? Bad debts recovered 10 540 Packing material 13 600 Advertising 20 596 Loss of computer due to theft 9 300 Ordinary share dividends 200 000 Adjustments and additional information: A. A credit note for R35 700 issued to a debtor, dated 27 June 2020, was not recorded. The cost price of these goods was R21 000. The goods were placed back into stock. B. The business prices its goods at a mark-up of 70% on cost. Trade discount of R297 200 was allowed on invoices to certain customers. C. Adjust the provision for bad debts of debtors to 4%. D. Stock counts on 30 June 2020 revealed the following on hand:  Trading stock, R225 500  Packing material, R3 700 E. External auditors are owed a further R7 250. F. Interest on the loan is capitalised and has not been recorded yet. The loan statement from Parys Bank on 30 June 2020 reflected a closing balance of R372 920. Please turn over

KZN Accounting 5 KZN Highflyers 2020 G. Corrections must be made in respect of a computer that was stolen on 31 March 2020. The bookkeeper completed the following page in the Fixed Assets Register, using the incorrect method of depreciation: SUNCREST COST DEPRECIATION BOOK COMPUTER VALUE 1 July 2018 R42 000 R42 000 30 June 2019 R8 400 R33 600 31 March 2020 R6 300 R27 300 Insurance pay-out R18 000 Loss of computer due to theft R9 300 Depreciation on this asset should have been calculated at 20% p.a. on the diminishing- balanced method. H. The monthly rent did not change during the year. During April 2020 the tenant paid R6 000 for repairs to the premises. He deducted this from his rent for May 2020, as repairs are the responsibility of the company. The repairs were not recorded. The rent for July 2020 was received and deposited during June 2020. I. Advertising consists of a monthly contract with the local newspaper for the entire financial year. Advertising was paid for 11 months only. From 1 April 2020, the contract rate was decreased by R152 per month. J. Net profit after tax is R504 000. Use the following percentages to calculate certain missing figures:  Operating profit on sales: 15%  Income tax rate: 28% of net profit Please turn over

KZN Accounting 6 KZN Highflyers 2020 ANSWER BOOK 1.1 1.1.1 1.1.2 1.1.3 1.1.4 4 1.2 AUDIT REPORT 1.2.1 To whom is the audit report addressed? 1 1.2.2 Who has to ensure that the financial statements are prepared and presented at the annual general meeting? 1 1.2.3 Fralezi Ltd received a/an (qualified/unqualified/disclaimer of opinion) audit report. Explain your choice. 2 1.2.4 Explain why the independent auditors referred to pages 11–29 in the report. 2 Please turn over

KZN Accounting 7 KZN Highflyers 2020 1.3 FRALEZI LTD INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2020 Sales Cost of sales Gross profit Other income Operating expenses Directors' fees Salaries and wages Sundry expenses Operating profit Interest income Profit before interest expense Interest expense Net profit before tax Income tax for the year Net profit after tax 504 000 Please turn over

KZN Accounting 8 KZN Highflyers 2020 ACTIVITY A2 (NOV 2017) The following information relates to Odette Ltd. The financial year ended on 29 February 2020. REQUIRED: 2.1 Refer to Information B. Calculate the missing amounts denoted by (a) to (e). (22) 2.2 Complete the Balance Sheet (Statement of Financial Position) on 29 February 2020. Show workings. (37) INFORMATION: A. Amounts extracted from the records on 29 February 2020: Balance Sheet accounts section R Ordinary share capital ? Retained income (28 February 2020) 520 000 Fixed assets (carrying value) ? Loan from Beque Bank 284 000 Trading stock 408 880 Net trade debtors 67 200 Fixed deposit: Elze Bank ? Bank (favourable) ? SARS: Income tax (provisional payments) 209 000 Creditors' control 184 000 Nominal accounts section (pre-adjustment amounts) Insurance 30 200 Rent income 108 450 Electricity 42 000 B. Fixed assets: LAND AND VEHICLES EQUIPMENT TOTAL BUILDINGS Cost 350 000 460 000 Accumulated depreciation (315 000) Carrying value (01/03/2019) (a) 35 000 Movements: Additions 325 000 422 550 0 Disposals 0 0 (d) Depreciation (b) (13 766) Carrying value (29/02/2020) 2 550 000 (c) 50 994 (e) Cost 772 550 340 000 Accumulated depreciation Please turn over

KZN Accounting 9 KZN Highflyers 2020  Depreciation on vehicles is calculated at 20% p.a. on cost.  The company has two vehicles on 29 February 2020. One of these vehicles was purchased on 1 September 2019.  Extract from the Fixed Assets Register in respect of equipment sold: Fridge (Model X3) Date purchased: 1 March 2017 Date sold: 31 December 2019 Sold for: R81 250 Depreciation rate: 10% p.a. (diminishing-balance method) COST DEPRECIATION BOOK VALUE 28 February 2018 R120 000 R12 000 R108 000 29 February 2019 ? ? 31 December 2019 ? ? C. The electricity account for February 2020, R5 600, was still outstanding. D. The provision for bad debts must be increased by R270. E. An additional insurance policy was taken out on 1 November 2019. The annual premium of R10 200 was paid and recorded. F. The rent for February 2020 has not been received yet. The rent increased by 15% on 1 July 2019. G. Net profit after tax, R518 000, was calculated after taking into account all the adjustments above. Income tax is 30% of the net profit. H. 75% of the authorised share capital of 900 000 shares was in issue. The directors declared a final dividend of 24 cents per share on 29 February 2020. I. Extract from Beque Bank loan statement: Balance on 1 March 2019 R376 000 Instalments (including interest) R92 000 Interest capitalised R48 000 Balance on 29 February 2020 ? NOTE:  Interest has not been entered in the books.  R50 000 of the loan balance will be settled in the next financial year. J. The net asset value per share on 29 February 2020 is 620 cents. K. The current ratio is 2,1 : 1 on 29 February 2020. Please turn over

KZN Accounting 10 KZN Highflyers 2020 2.3 AUDIT REPORT An extract of the independent audit report of Karin Ltd for the financial year ended on 29 February 2020 is provided. REQUIRED: As a shareholder, what concerns would you have regarding this audit report? Explain THREE points. (6) INFORMATION: EXTRACT FROM THE AUDIT REPORT OF KARIN LTD We have audited the annual financial statements of Karin Ltd for the year ended 29 February 2020. These financial statements are the responsibility of the company's directors. Basis for Disclaimer of Opinion In the course of our audit we established that bonuses paid to directors, amounting to R9,8 million, had not been authorised by the Remunerations Committee. Audit Opinion Because of the significance of the matters described above, we have not been able to obtain sufficient audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements of Karin Ltd for the year ended 29 February 2020. Bongani and Botha, Chartered Accountants (SA) 65 Please turn over

KZN Accounting 11 KZN Highflyers 2020 ASNSWER SHEET 2.1 (a) Calculate the carrying value of Land and Buildings on 1 March 2019. 2 (b) Calculate the total depreciation on Vehicles on 29 February 2020. 6 (c) Calculate the carrying value of Vehicles on 29 February 2020. 4 (d) Calculate the carrying value of Equipment sold on 31 December 2019. 6 (e) Calculate the total carrying value of Fixed Assets on 29 February 2020. 4 Please turn over

KZN Accounting 12 KZN Highflyers 2020 2.2 BALANCE SHEET OF ODETTE LTD ON 29 FEBRUARY 2020 ASSETS NON-CURRENT ASSETS CURRENT ASSETS Inventory 408 880 Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY Ordinary share capital Retained income 520 000 NON-CURRENT LIABILITIES CURRENT LIABILITIES TOTAL EQUITY AND LIABILITIES 37 Please turn over

KZN Accounting 13 KZN Highflyers 2020 2.3 AUDIT REPORT As a shareholder, what concerns would you have regarding this audit report? Explain THREE points. Point 1: Point 2: Point 3: 6 Please turn over

KZN Accounting 14 KZN Highflyers 2020 ACTIVITY A3 (NOV 2019) 3.1 Choose an explanation in COLUMN B that matches the term in COLUMN A. Write only the letters (A–E) next to the question numbers (3.1.1 to 3.1.5) in the ANSWER BOOK. COLUMN A COLUMN B 3.1.1 Internal auditor A appointed by shareholders to manage a company 3.1.2 Memorandum of incorporation B the body responsible for registration of all (MOI) companies 3.1.3 Limited liability C employed by a company to ensure good internal control procedures 3.1.4 Director D indicates that a company has a legal personality of its own 3.1.5 Companies and Intellectual E the document that establishes the rules and Property Commission (CIPC) procedures of a company (5 x 1) (5) 3.2 VISIV LTD The financial year ended on 29 February 2020. REQUIRED: 3.2.1 Calculate:  Amounts for (i) and (ii) in the Fixed Assets Register (5)  Profit/Loss on sale of asset (2)  Fixed assets carrying value on 29 February 2020 (4) 3.2.2 Calculate the correct net profit after tax for the year ended 29 February 2020. Indicate (+) for increase and (–) for decrease. (9) 3.2.3 Refer to Information A–H. Prepare the following on 29 February 2020:  Retained Income Note (9)  Statement of Financial Position (Balance Sheet). (27) NOTE: Show workings. Certain figures are provided in the ANSWER BOOK. Please turn over

KZN Accounting 15 KZN Highflyers 2020 INFORMATION: A. Fixed assets: A delivery vehicle was sold on 31 October 2019 but no entries were made to record this transaction. Details of vehicle sold: Delivery Vehicle X43 Date purchased: 1 March 2017 Date sold: 31 October 2019 Sold for: R195 000 (cash) Depreciation rate: 25% p.a. (diminishing-balance method) CARRYING COST DEPRECIATION VALUE 28 February 2018 R400 000 R100 000 R300 000 28 February 2019 75 000 225 000 31 October 2019 (i) (ii) B. List of balances/totals on 29 February 2020 (before taking into account all adjustments below): Ordinary share capital R8 152 000 Retained income (1 March 2019) 865 300 Mortgage loan: Prati Bank 1 758 000 Fixed assets (carrying value) 10 190 000 Fixed deposit: Prati Bank (balancing figure) ? Trading stock 1 102 000 Net trade debtors 1 090 000 Bank (favourable) ? SARS: Income tax (provisional tax payments) 155 000 Creditors' control 1 906 800 C. Net profit before tax, R822 700, was calculated before correcting the following:  Provision for bad debts must be increased by R65 000.  R9 800 of an advertising contract applies to the next financial year.  A tenant paid rent of R334 000 for the period 1 March 2019 to 31 March 2020. Rent was increased by R3 000 per month from 1 January 2020.  Depreciation and profit/loss on the vehicle sold must be recorded.  A further R43 000 is owed for income tax. Please turn over

KZN Accounting 16 KZN Highflyers 2020 D. Ordinary shares: DATE DETAILS 1 March 2019 2 000 000 shares in issue; total book value R7 600 000 31 May 2019 360 000 shares repurchased at R4,10 each 1 October 2019 800 000 new shares issued 29 February 2020 2 440 000 shares in issue E. Dividends:  Interim dividends were paid in September 2019, R295 200.  Final dividends of 20c per share were declared on 29 February 2020. F. A creditor with a debit balance of R7 600 must be transferred to the Debtors' Ledger. G. A cheque for R75 000, dated 30 April 2020, was issued to a supplier in February. H. After processing all adjustments:  The current ratio is 0,8 : 1.  The current liabilities totalled R2 900 000.  The current portion of the loan is the balancing figure. Please turn over

KZN Accounting 17 KZN Highflyers 2020 3.3 AUDIT REPORT FOR YEAR-END 29 FEBRUARY 2020 The financial statements of Visiv Ltd (see QUESTION 3.2.3) were audited. You are provided with extracts from the audit report. Extracts from the audit report: Basis for audit report Point 1 We were unable to obtain sufficient audit evidence to support the amounts provided for certain income and expense items ... Point 2 Furthermore, the repurchase of shares on 31 May 2019 is not in accordance with provisions of the Companies Act, 1973 (Act 61 of 1973), as the liquidity of the company has been compromised … Opinion Point 3 Because of the significance of the matters described above, we do not express an opinion … REQUIRED: 3.3.1 Refer to Point 3. What type of audit report did the company receive? (1) 3.3.2 Refer to Point 1. Give TWO examples of audit evidence that the auditors would have required regarding this problem. (2) 3.3.3 Refer to Point 2.  Apart from the current ratio, identify and calculate ONE other financial indicator that the auditors would have used in deciding on this opinion. (4)  Explain what the directors could have done to prevent this comment by the auditors. Provide TWO points. (2) 70 Please turn over

KZN Accounting 18 KZN Highflyers 2020 ANSWER SHEET 3.1 3.1.1 3.1.2 3.1.3 3.1.4 3.1.5 5 3.2 VISIV LTD 3.2.1 (i) Calculate: Depreciation for the current year Workings Answer (ii) Calculate: Carrying value of vehicle sold Workings Answer 5 Calculate: Profit/Loss on sale of asset Workings Answer 2 Calculate: Fixed assets carrying value on 29 February 2020 Workings Answer 4 Please turn over

KZN Accounting 19 KZN Highflyers 2020 3.2.2 Calculate the correct net profit after tax for the year ended 29 February 2020. Indicate (+) for increase and (–) for decrease. Workings Answer Incorrect net profit before tax 822 700 Correct net profit after tax 9 3.2.3 RETAINED INCOME NOTE: Balance at beginning 865 300 Ordinary share dividends Balance at end 9 Please turn over

KZN Accounting 20 KZN Highflyers 2020 VISIV LTD STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) ON 29 FEBRUARY 2020 ASSETS Non-current assets Fixed assets Fixed deposit Current assets Inventories 1 102 000 Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES Ordinary shareholders' equity Ordinary share capital 8 152 000 Non-current liabilities Current liabilities 2 900 000 Current portion of loan TOTAL EQUITY AND LIABILITIES 3.3 AUDIT REPORT Please turn over

KZN Accounting 21 KZN Highflyers 2020 3.3.1 What type of audit report did the company receive? 1 3.3.2 Give TWO examples of audit evidence that the auditors would have required regarding this problem. Example 1 Example 2 2 3.3.3 Apart from the current ratio, identify and calculate ONE other financial indicator that the auditors would have used in deciding on this opinion. Identify ONE other financial indicator: Calculate the financial indicator: 4 Explain what the directors could have done to prevent this comment by the auditors. Provide TWO points. Point 1 Point 2 2 Please turn over

KZN Accounting 22 KZN Highflyers 2020 B. CASH FLOW STATEMENT AND INTERPRETATION ACTIVITY B1 (NOV 2019) 1.1 Three financial statements are provided as options in which each of the following items would appear. Choose the financial statement and write only the letter (A–C) next to the question numbers (1.1.1 to 1.1.4) in the ANSWER BOOK, e.g. 1.1.5 D. A Statement of Financial Position (Balance Sheet) B Statement of Comprehensive Income (Income Statement) C Cash Flow Statement 1.1.1 Profit on sale of a fixed asset 1.1.2 Amount due to shareholders for final dividends payable 1.1.3 Total amount spent on the repurchase of shares 1.1.4 Total income tax amount for the current financial year (4 x 1) (4) 1.2 SUNSET LTD The financial year ended on 29 February 2020. REQUIRED: 1.2.1 Calculate the following figures for the 2020 Cash Flow Statement:  Income tax paid (4)  Dividends paid (4)  Proceeds of shares issued (6)  Fixed assets purchased (5) 1.2.2 Calculate financial indicators for the year ended 29 February 2020:  % operating profit on sales (4)  Net asset value per share (4)  Debt-equity ratio (4) Please turn over

KZN Accounting 23 KZN Highflyers 2020 INFORMATION FOR SUNSET LTD: A. Information from Income Statement on 29 February 2020: Sales R8 725 000 Gross profit 3 525 000 Depreciation 408 000 Operating profit 2 033 900 Interest expense 441 000 Income tax 477 900 Net profit after tax 1 138 000 B. Information from Balance Sheet on February: 2020 2019 Fixed assets (carrying value)* R11 835 100 R10 658 000 SARS: Income tax 18 000 Cr 63 000 Dr Shareholders' equity 8 625 000 10 065 000 Ordinary share capital 7 724 000 9 300 000 Loan: Funza Bank 3 500 000 2 800 000 Shareholders for dividends 372 000 195 000 *NOTE: Fixed assets were sold at carrying value, R490 000. C. Share capital and dividends: NUMBER OF SHARE CAPITAL DETAILS OF SHARES SHARES 1 March 1 500 000 In issue at R6,20 per share 2019 30 April 300 000 Repurchased at R6,90 per share 1 January 40 000 New shares issued 2020 29 February 1 240 000 In issue DIVIDENDS DIVIDENDS PER SHARE Final 2 March 2019 Paid 13 cents Interim 31 August 2019 Paid 35 cents Final 29 February 2020 Declared 30 cents Please turn over

KZN Accounting 24 KZN Highflyers 2020 1.3 HORIZON LTD and OPTIMA LTD Refer to Information D to F. Mike Mbele owns shares and is a director in both these companies. He recently invested another R420 000 in each company by buying shares on the JSE at market value as follows: HORIZON LTD OPTIMA LTD R8,40 R4,00 REQUIRED: NOTE: Provide figures, financial indicators or calculations in EACH case to support your comments and explanations. 1.3.1 Purchase of shares:  Explain why directors should be interested in the price of their companies' shares on the JSE. (2)  Calculate the number of additional shares in Horizon Ltd that Mike was able to buy on the JSE in 2020. (3)  Comment on the price that Mike paid for these shares and give TWO reasons why he might have been satisfied to pay this price. (6) 1.3.2 Dividends and earnings:  Explain your opinion on which company has the better dividend (6) pay-out policy.  Compare and comment on the % return on equity earned by EACH company. (4)  Mike feels that the earnings per share (EPS) of Optima Ltd is much better than that of Horizon Ltd. Explain why he feels this way. (5) 1.3.3 Refer to the Cash Flow Statements. The poor economy has negatively affected Horizon Ltd more than Optima Ltd.  Explain TWO decisions taken by the directors of Horizon Ltd in response to the state of the economy, and how these decisions will affect the company in future. (6)  Explain TWO decisions taken by the directors of Optima Ltd that affect risk and gearing. Quote and comment on TWO financial indicators. (8) Please turn over

KZN Accounting 25 KZN Highflyers 2020 D. Shareholding of Mike Mbele in two companies: HORIZON LTD OPTIMA LTD Number of shares bought in 2018 580 000 shares 1 430 000 shares Total shares issued by each company 1 240 000 shares 2 600 000 shares Additional shares bought by Mike ? 105 000 shares Mike's % shareholding before buying 46,8% 55,0% additional shares E. Financial indicators and additional information on 29 February 2020: HORIZON LTD OPTIMA LTD Earnings per share (EPS) 97 cents 83 cents Dividends per share (DPS) 65 cents 80 cents Debt-equity ratio 0,1 : 1 0,7 : 1 % return on average equity 6,2% 18,2% % return on average capital employed 9,4% 15,1% Net asset value (NAV) 750 cents 445 cents Additional information: Interest rate on loans 12,0% 12,0% Interest on investments 6,5% 6,5% F. Extracts from Cash Flow Statements for year ended 29 2020: HORIZON LTD OPTIMA LTD Cash flows from investing activities R2 700 000 (R2 730 000) Purchase of fixed assets 0 (1 580 000) Sale of fixed assets 1 800 000 0 Change in investments 900 000 (1 150 000) Cash flows from financing activities (2 670 000) 4 000 000 Proceeds of new shares 0 200 000 issued Shares repurchased (1 070 000) 0 Cash effects of long-term loan (1 600 000) 3 800 000 75 Please turn over

KZN Accounting 26 KZN Highflyers 2020 ANSWER SHEET 1.1 1.1.1 1.1.2 1.1.3 1.1.4 4 1.2 SUNSET LTD 1.2.1 Calculate: Income tax paid Workings Answer 4 Calculate: Dividends paid Workings Answer 4 Calculate: Proceeds of shares issued Workings Answer 6 Calculate: Fixed assets purchased Workings Answer 5 1.2.2 Calculate financial indicators for the year ended 29 February 2020: % operating profit on sales Workings Answer 4 Net asset value per share Workings Answer 4 Debt-equity ratio Workings Answer 4 Please turn over

KZN Accounting 27 KZN Highflyers 2020 1.3 HORIZON LTD and OPTIMA LTD 1.3.1 Explain why directors should be interested in the price of their companies' shares on the JSE. 2 Calculate the number of additional shares in Horizon Ltd that Mike was able to buy on the JSE in 2020. Workings Answer 3 Comment on the price that Mike paid for these shares and provide TWO reasons why he might have been satisfied to pay this price. Comment (with figures): Reason 1 : Reason 2: 6 1.3.2 Explain your opinion on which company has the better dividend pay-out policy. Quote figures. 6 Compare and comment on the % return on equity earned by EACH company. Quote figures. 4 Please turn over

KZN Accounting 28 KZN Highflyers 2020 Mike feels that the earnings per share (EPS) of Optima Ltd is much better than that of Horizon Ltd. Explain why he feels this way. Quote figures or calculations. 5 1.3.3 Explain TWO decisions taken by the directors of Horizon Ltd in response to the state of the economy, and how these decisions will affect the company in future. Decision 1 (with figures): Decision 2 (with figures): Effect on Horizon Ltd in future: 6 Explain TWO decisions taken by the directors of Optima Ltd that affect risk and gearing. Quote and comment on TWO financial indicators. Decision 1 (with figures): Decision 2 (with figures): Quote and comment on TWO financial indicators that affect risk and gearing. 8 Please turn over

KZN Accounting 29 KZN Highflyers 2020 ACTIVITY B2 (JUNE 2019) 2.1 Choose a term from the list below that answers the specific following questions. Write only the term next to the question numbers (2.1.1 to 2.1.4) in the ANSWER BOOK. gearing; return on equity; solvency; liquidity; profitability 2.1.1 Is the business able to pay off all its debts? 2.1.2 Can the business pay off short-term debts in the next financial year? 2.1.3 Will shareholders be satisfied with the benefit that they receive for investing in the company? 2.1.4 To what extent is the company financed by loans or borrowed capital? (4) 2.2 KULFI LTD Information for the financial year ended 29 February 2020 is provided. Where financial indicators are required to support your answer, quote the financial indicator and actual figure/ratio/percentage and trends. REQUIRED: 2.2.1 Prepare the Retained Income Note to the Balance Sheet. (12) 2.2.2 Calculate the following amounts for the Cash Flow Statement. Show workings.  Income tax paid (4)  Dividends paid (4) 2.2.3 Complete the following sections of the Cash Flow Statement:  Cash effects of investing activities (9)  Net change in cash and cash equivalents (4) 2.2.4 Calculate the following financial indicators on 29 February 2020:  Acid-test ratio (4)  Debt-equity ratio (4)  % return on average shareholders' equity (ROSHE) (5) 2.2.5 The shareholders are satisfied with the improvement in the liquidity position. Quote THREE financial indicators (with figures) to support this statement. (6) 2.2.6 The company increased the share capital by R840 000, and the loan by R550 000.  Explain how this affected the gearing and risk of the company. Quote TWO financial indicators. (5)  Explain what the directors have done with this cash inflow. State TWO points. (4) Please turn over

KZN Accounting 30 KZN Highflyers 2020 2.2.7 The directors decided to decrease the dividend pay-out percentage.  Provide calculations to show the change in the pay-out rate. (4)  Give ONE reason why many shareholders were satisfied with the change in policy. Quote figures. (2) 2.2.8 On 1 March 2019 Martha owned 475 000 shares in the company. She did not purchase any shares from the shares issued on 1 May 2019.  Explain how the repurchase of the shares benefited Martha's shareholding. Quote figures. (4) INFORMATION: A. Share capital:  There were 900 000 ordinary shares in issue on 1 March 2019.  An additional 100 000 ordinary shares were issued on 1 May 2019.  On 1 October 2019 the company repurchased 60 000 shares at R9,00 per share. The average share price at the time was R8,04. B. Dividends:  Interim dividends of 25 cents per share were paid on 15 September 2019.  Final dividends were declared on 29 February 2020. C. Extract from Income Statement for the year ended 29 February 2020: R Depreciation 123 600 Interest expense 143 000 Income tax (at 30% of the net profit) 293 100 Please turn over

KZN Accounting 31 KZN Highflyers 2020 D. Extract from Balance Sheet on 29 February 2020: 2020 2019 R R Fixed assets (carrying value)* 8 775 720 8 430 720 Fixed deposit: Flay Bank 150 000 100 000 Current assets 996 480 684 300 Inventories 448 000 281 000 Trade and other receivables (Note 1) 288 300 378 300 Cash and cash equivalents 260 180 25 000 Shareholders' equity ? 7 341 500 Ordinary share capital 7 557 600 7 200 000 Retained income ? 141 500 Loan: Home Bank 1 400 000 850 000 Current liabilities 553 600 923 520 Trade and other payables (Note 2) 553 600 781 000 Bank overdraft 0 142 520 * Old equipment was sold at carrying value, R111 800, for cash. Note 1: Trade and other receivables: 2020 2019 Debtors' control 288 300 367 000 SARS: Income tax 0 11 300 Note 2: Trade and other payables: 2020 2019 Creditors' control 325 000 421 000 Shareholders for dividends 206 800 360 000 SARS: Income tax 21 800 0 E. The following financial indicators were calculated on February: 2020 2019 Current ratio 1,8 : 1 0,7 : 1 Acid-test ratio ? 0,4 : 1 Debtors' collection period 28 days 39 days Creditors' payment period 60 days 60 days Debt-equity ratio ? 0,1 : 1 Return on shareholders' equity (ROSHE) ? 10.2% Return on total capital employed (ROTCE) 12,9% 14,4% Earnings per share (EPS) 71 cents 83 cents Dividends per share (DPS) 47 cents 80 cents Net asset value per share (NAV) 837 cents 816 cents Market value per share 840 cents 807 cents Interest rate on loans 13,5% 13,5% 75 Please turn over

KZN Accounting 32 KZN Highflyers 2020 ANSWER SHEET 2.1 2.1.1 2.1.2 2.1.3 2.1.4 4 2.2 KULFI LTD 2.2.1 RETAINED INCOME NOTE: Balance on 1 March 2019 Net profit after tax Ordinary share dividends Balance on 29 February 2020 12 2.2.2 Calculate: Income tax paid Workings Answer 4 Calculate: Dividends paid Workings Answer 4 Please turn over

KZN Accounting 33 KZN Highflyers 2020 2.2.3 Cash effects of investing activities 9 Net change in cash and cash equivalents 4 2.2.4 Calculate: Acid-test ratio Workings Answer 4 Calculate: Debt-equity ratio Workings Answer 4 Calculate: % return on average shareholders' equity (ROSHE) Workings Answer 5 Please turn over

KZN Accounting 34 KZN Highflyers 2020 2.2.5 The shareholders are satisfied with the improvement in the liquidity position. Quote THREE financial indicators (with figures) to support this statement. 6 2.2.6 The company increased the share capital by R840 000, and the loan by R550 000. Explain how this affected the gearing and risk of the company. Quote TWO financial indicators. 5 Explain what the directors have done with this cash inflow. State TWO points. 4 2.2.7 Provide calculations to show the change in the pay-out rate. 4 Give ONE reason why many shareholders were satisfied with the change in policy. Quote figures. 2 Please turn over

KZN Accounting 35 KZN Highflyers 2020 2.2.8 Explain how the repurchase of the shares benefited Martha's shareholding. Quote figures. 4 ACTIVITY B3 (NOV 2018) You are provided with information about Vooma Limited for the past two financial years ended 30 June. The company is situated in KZN and trades in racing bikes. REQUIRED: NOTE: Provide figures or financial indicators (ratios or percentages) and comparisons with the previous year to support comments or explanations. 3.1 Calculate the following for 2020: 3.1.1 % operating expenses on sales (2) 3.1.2 Acid-test ratio (4) 4.1.3 % return on shareholders' equity (4) 3.2 Calculate the following figures that will appear in the 2020 Cash Flow Statement: 3.2.1 Change in investments (2) 3.2.2 Income tax paid (4) 3.2.3 Fixed assets sold (at carrying value) (5) 3.3 Cash flow and financing activities: 3.3.1 Explain why the directors are satisfied with the improvement in cash and cash equivalents since 1 July 2018. (3) 3.3.2 Decisions and gearing in 2020:  Identify THREE decisions that the directors made to pay for land and buildings.  Explain how these decisions affected: (6) - Capital employed - Financial gearing (Quote TWO indicators.) (6) 3.3.3 From the Cash Flow Statement identify ONE decision made by the directors in 2019 that they did NOT make in 2020, besides the points mentioned above. Give a possible reason for the decision in 2019. (3) Please turn over

KZN Accounting 36 KZN Highflyers 2020 3.4 Dividends, returns and shareholding for the 2020 financial year:  On 1 July 2019 there were 800 000 shares in issue.  On 31 December 2019 interim dividends were paid.  On 1 January 2020, 200 000 shares were issued to existing shareholders.  On 30 June 2020 final dividends of 75 cents per share were declared on all shares, but have not yet been paid. 3.4.1 Calculate for the 2020 financial year:  Total interim dividends paid (3)  Interim dividends per share (3) 3.4.2 Calculate total dividends earned by Dudu Mkhize for the 2020 financial year. Her shareholding is: SHARES PURCHASED PURCHASE PRICE 31 August 2018 380 000 shares R7,00 1 January 2020 110 000 shares R20,00 TOTAL 490 000 shares (5) 3.4.3 On 1 January 2020 each shareholder was offered two shares for every five shares owned. Dudu did not buy enough shares to become the majority shareholder. Calculate the minimum number of additional shares that Dudu should have bought. (3) 3.5 The directors decided to buy land and buildings in two other provinces in 2020 to solve the problem of low sales that they had previously had in KZN. 3.5.1 Explain:  Why it was necessary to purchase properties in other provinces instead of in KZN (2)  Whether the decision to purchase these properties had the desired effect on sales (3)  Another strategy they used to solve the problem of low sales (3) 3.5.2 The CEO, Ben Palo, wants to communicate other good news to the shareholders at the AGM. Give advice on what he should say about the following topics:  Earnings per share (3)  % return earned (3)  Share price on the JSE (3) Please turn over

KZN Accounting 37 KZN Highflyers 2020 INFORMATION FOR THE YEAR ENDED 30 JUNE: A. FIGURES IDENTIFIED FROM INCOME STATEMENT: 2020 2019 Sales R13 182 000 R7 740 000 Number of bikes sold 1 750 bikes 900 bikes Mark-up % 58% 72% Cost of sales 8 330 000 4 500 000 Gross profit 4 852 000 3 240 000 Operating expenses 1 900 000 1 500 000 Depreciation 412 000 275 000 Income tax 819 000 444 000 Net profit after tax 1 911 000 1 036 000 B. EXTRACT FROM BALANCE SHEET ON 30 JUNE: 2020 2019 Fixed assets (carrying value) R12 154 000 R8 031 000 Investments 625 000 600 000 Current assets 2 427 000 2 090 000 Inventories 1 652 000 1 250 000 Trade and other receivables 365 000 820 000 SARS: Income tax 0 15 000 Cash and cash equivalents 410 000 5 000 Shareholders' equity 12 112 000 7 191 000 Non-current liabilities (Loan) 1 850 000 2 600 000 Current liabilities 1 244 000 930 000 Trade and other payables 420 000 515 000 Shareholders for dividends 750 000 280 000 SARS: Income tax 74 000 0 Bank overdraft 0 135 000 Please turn over

KZN Accounting 38 KZN Highflyers 2020 C. CASH FLOW STATEMENT: 2020 2019 Cash flows from operating activities R1 850 000 R1 046 000 Cash generated from operations 3 322 000 1 989 000 Interest paid ? (260 000) Dividends paid (520 000) (254 000) Income tax paid ? (429 000) Cash flows from investing activities (4 560 000) (167 000) Purchases of land and buildings (4 840 000) 0 Sale of fixed assets ? 383 000 Change in investments ? (550 000) Cash flows from financing activities 3 250 000 (400 000) Share capital issued 4 000 000 0 Shares repurchased 0 (1 000 000) Change in non-current liabilities (750 000) 600 000 Cash and cash equivalents: Net change 540 000 479 000 Opening balance (130 000) (609 000) Closing balance 410 000 (130 000) D. FINANCIAL INDICATORS: 2020 2019 Mark-up % achieved 58% 72% Operating expenses on sales ? 19,4% Debt-equity ratio 0,2 : 1 0,4 : 1 Acid-test ratio ? 0,9 : 1 Return on shareholders' equity ? 14,4% Return on capital employed 20,8% 17,8% Earnings per share 208 cents 130 cents Dividends per share ? 70 cents Dividend pay-out rate 50% 54% Net asset value per share 1 211 cents 899 cents Market price on stock exchange 2 800 cents 2 100 cents Interest on loans 12% 12% Please turn over

KZN Accounting 39 KZN Highflyers 2020 ANSWER SHEET 3.1 CALCULATION OF FINANCIAL INDICATORS FOR 2020 3.1.1 Calculate: % operating expenses on sales Workings Answer 2 3.1.2 Calculate: Acid-test ratio Workings Answer 4 3.1.3 Calculate: % return on shareholders' equity Workings Answer 4 3.2 FIGURES FOR 2020 CASH FLOW STATEMENT 3.2.1 Calculate: Change in investments Workings Answer 2 3.2.2 Calculate: Income tax paid Workings Answer 4 Please turn over

KZN Accounting 40 KZN Highflyers 2020 3.2.3 Calculate: Fixed assets sold (at carrying value) Workings Answer 5 3.3 EXPLANATIONS ON CASH FLOW STATEMENT 3.3.1 Explain why the directors are satisfied with the improvement in cash and cash equivalents since 1 July 2018. Quote figures. 3 3.3.2 Identify THREE decisions that the directors made to pay for land and buildings. Decision 1 (with figures) Decision 2 (with figures) Decision 3 (with figures) 6 Explain how these decisions affected the capital employed in the 2018 financial year. Quote figures. Explain how these decisions affected the financial gearing in the 2018 financial year. Quote TWO indicators and their figures. 6 Please turn over

KZN Accounting 41 KZN Highflyers 2020 3.3.3 From the Cash Flow Statement identify ONE decision made by the directors in 2019 that they did NOT make in 2020, besides the points mentioned above. Give a possible reason for the decision in 2019. Decision (with figures) Possible reason 3 3.4 DIVIDENDS, RETURNS AND SHAREHOLDING 3.4.1 Calculate: Total interim dividends paid for the 2020 financial year Workings Answer Calculate: Interim dividends per share for the 2020 financial year Workings Answer 6 3.4.2 Calculate total dividends earned by Dudu Mkhize for the 2020 financial year. Workings Answer 5 3.4.3 Calculate the minimum number of additional shares that Dudu should have bought. Workings Answer 3 Please turn over

KZN Accounting 42 KZN Highflyers 2020 3.5.1 Explain why it was necessary to purchase properties in other provinces instead of in KZN. 2 Explain whether the decision to purchase these properties had the desired effect on sales. Quote figures. 3 Explain another strategy they used to solve the problem of low sales. Quote figures. 3 3.5.2 Give advice on what Ben Palo should say about the following topics: Advice on what to say on earnings per share: 3 Advice on what to say on % return earned: 3 Advice on what to say on share price on the JSE: 3 Please turn over

KZN Accounting 43 KZN Highflyers 2020 C. INVENTORY VALUATION ACTIVITY C1 (NOV 2018) 1.1 CONCEPTS Choose the correct term from those given in brackets. Write only the term next to the question numbers (1.1.1 to 1.1.3) in the ANSWER BOOK. 1.1.1 The most recent purchases will be considered as closing stock in the (FIFO/weighted- average) stock valuation method. 1.1.2 Merchandise purchased is recorded in a Trading Stock Account in the (perpetual/periodic) inventory system. 1.1.3 Carriage on purchases is recorded as an (asset/expense) in the periodic inventory system. (3 x 1) (3) 1.2 PHOTO-FIX TRADERS The information relates to Photo-fix Traders for the financial year ended 30 April 2020. The business is owned by Tom Samuels and sells two models of cameras (Grand and De-Lux) and photo frames.  The stock of cameras is valued using the specific identification method.  Photo frames are valued using the weighted average method. REQUIRED: 1.2.1 Calculate the value of closing stock of cameras on 30 April 2020. (9) 1.2.2 Calculate the value of closing stock of photo frames. (8) 1.2.3 The owner suspects that photo frames are being stolen. Provide a calculation to confirm his suspicions. (5) 1.2.4 Tom is thinking of employing an assistant at a wage of R3 500 per month to control the stock of photo frames. Explain why this is NOT a good idea. Provide TWO points with figures/calculations. (6) INFORMATION: The following information is in respect of the year ended 30 April 2020: A. CAMERAS: STOCK, BOUGHT AND SOLD BOUGHT UNITS UNITS UNIT COST TOTAL SOLD GRAND MODEL Opening stock 20 R5 500 R110 000 14 Purchases 240 R5 750 R1 380 000 170 DE-LUX MODEL Net purchases: 270 R1 104 000 235 September 2019 180 R4 000 R720 000 140 Returns (30) R4 000 (R120 000) January 2020 120 R4 200 R504 000 95 Please turn over

KZN Accounting 44 KZN Highflyers 2020 B. PHOTO FRAMES: STOCK, BOUGHT AND SOLD UNITS AMOUNTS Opening stock 60 R7 200 Purchases 720 R108 000 Returns 30 R4 500 Closing stock 80 ? Sales 657 1.3 MANAGEMENT OF INVENTORIES The information relates to Lyle Furnishers for the financial year ended 29 February 2020. The business sells cupboards, tables and chairs. No stock went missing during the year. REQUIRED: Provide ONE different problem (with figures) relating to EACH product and ONE solution to EACH problem. (9) INFORMATION: CUPBOARDS TABLES CHAIRS Opening stock (units) 200 160 1 300 Purchases (units) 2 500 3 050 6 000 Selling price per unit R1 750 R850 R350 Credit sales (units) 800 2 400 2 100 Returns by customers (units) (500) (10) 0 Cash sales (units) 1 000 600 2 250 Closing stock (units) 400 200 2 950 Cash received from cash sales R1 750 000 R470 000 R787 500 Please turn over

KZN Accounting 45 KZN Highflyers 2020 ANSWER SHEET 1.1 1.1.1 1.1.2 1.1.3 3 1.2 PHOTO-FIX TRADERS 1.2.1 Calculate: Value of closing stock of cameras Workings Answer 9 1.2.2 Value of closing stock of photo frames Workings Answer 8 1.2.3 The owner suspects that photo frames are being stolen. Provide a calculation to confirm his suspicions. Workings Answer 5 Please turn over

KZN Accounting 46 KZN Highflyers 2020 1.2.4 Tom is thinking of employing an assistant at a wage of R3 500 per month to control the stock of photo frames. Explain why this is NOT a good idea. Provide TWO points with figures/calculations. Explanation Figures Point 1 Point 2 6 1.3 MANAGEMENT OF INVENTORIES Product Problem Solution Cupboards Tables Chairs 9 Please turn over

KZN Accounting 47 KZN Highflyers 2020 ACTIVITY C2 (NOV 2019) George Grande is the majority shareholder and CEO of Grande Ltd. The company supplies hotels with cabinets and lamps. The periodic system is used. The year-end is 30 September 2020. REQUIRED: CABINETS 2.1 Calculate the value of closing stock for cabinets on 30 September 2020 using the first-in first-out method. (6) 2.2 In 2020, the company decided to extend the target market and to grant trade discounts to increase sales. 2.2.1 Calculate the % mark-up achieved in 2020. (4) 2.2.2 Provide TWO points (with figures) to prove that this decision achieved its aims. (4) 2.2.3 The CEO feels that this decision also negatively affected the company.  Provide TWO points (with figures) to support his opinion. (4)  Give the directors advice to solve this problem. Explain TWO points. (2) LAMPS 2.3 Calculate the stockholding period for lamps (use closing stock). (3) 2.4 George is concerned about the control of lamps. An investigation revealed that the store manager was supplying local boarding houses with lamps without documentation.  Calculate the number of missing lamps. (5)  Give TWO suggestions to solve this problem. (4) TELEVISION SETS 2.5 During April 2020, while George was in hospital, Bruce Swann (the chief financial officer) decided to include television sets in their product range. He was able to secure bulk discounts from Roseway on two TV set models, namely LYN and KYA. Calculate the value of the closing stock of TV sets on 30 September 2020 using the specific identification method. (7) 2.6 An employee of Roseway told George that Bruce received a 10% 'commission' from Roseway for buying excess stock. George wants to discuss this at the next board meeting. Explain THREE different concerns that George would have about this problem. (6) Please turn over

KZN Accounting 48 KZN Highflyers 2020 INFORMATION: A. Stock records of cabinets and lamps: CABINETS LAMPS UNIT UNITS TOTAL UNITS TOTAL PRICE Stock balances 1 Oct. 2019 370 R800 R296 000 600 R108 000 30 Sep. 2020 280 ? 265 R59 625 Purchases: 2020 January 800 R920 R736 000 1 200 R240 000 April 1 200 R990 R1 188 000 1 800 R432 000 July 250 R1 100 R275 000 800 R210 000 Total 2 250 R2 199 000 3 800 R882 000 Returns 20 R1 100 Sales 3 675 Cost of sales R930 375 B. Information relating to cabinets: 2020 2019 Sales R3 480 000 R3 375 000 Cost of sales R2 170 500 R1 950 000 Units sold 2 320 2 500 Selling price per unit R1 500 R1 400 % mark-up achieved ? 73% Customers on record 37 26 C. Stock records of television sets: MODELS UNITS UNIT PRICE TOTAL Purchases May 2020 LYN 800 R6 000 R4 800 000 KYA 950 R7 200 R6 840 000 July 2020 LYN 500 R6 000 R3 000 000 KYA 500 R7 200 R3 600 000 TOTAL 2 750 R18 240 000 Sales LYN 430 R8 400 R3 612 000 KYA 540 R10 080 R5 443 200 45 Please turn over

KZN Accounting 49 KZN Highflyers 2020 ANSWER SHEET CABINETS 2.1 Calculate the value of closing stock using FIFO. Workings Answer 6 2.2.1 Calculate the % mark-up achieved in 2020. Workings Answer 4 2.2.2 Provide TWO points (with figures) to prove that this decision achieved its aims. Point 1 Point 2 4 2.2.3 The CEO feels that this decision also negatively affected the company. Provide TWO points (with figures) to support his opinion. Point 1 Point 2 4 Give the directors advice to solve this problem. Explain TWO points. Point 1 Point 2 2 Please turn over

KZN Accounting 50 KZN Highflyers 2020 LAMPS 2.3 Calculate the stockholding period for lamps (use closing stock). Workings Answer 3 2.4 Calculate the number of missing lamps. Workings Answer 5 Give TWO suggestions to solve this problem. Suggestion 1 Suggestion 2 4 TELEVISION SETS 2.5 Calculate the value of the closing stock of TV sets on 30 September 2020 using the specific identification method. Workings Answer 7 2.6 Explain THREE different concerns that George would have about this problem. Concern 1 Concern 2 Concern 3 6 Please turn over

KZN Accounting 51 KZN Highflyers 2020 D. BANK RECONCILIATIONS ACTIVITY D1 (Q 1 NOV 2017) 1.1 Indicate whether the following statements are TRUE or FALSE. Write only 'true' or 'false' next to the question number (1.1.1–1.1.3) in the ANSWER BOOK. 1.1.1 A favourable balance on the Bank Statement is indicated as a debit. 1.1.2 A post-dated cheque received must be entered on the date received. 1.1.3 An issued cheque that has been lost must be cancelled in the CRJ. (3 x 1) (3) 1.2 MENZIES TRADERS The given information relates to Menzies Traders for June 2020. REQUIRED: 1.2.1 Calculate the following on 30 June 2020:  Correct totals for the CRJ and CPJ  Bank account balance (14) 1.2.2 Prepare the Bank Reconciliation Statement on 30 June 2020. (9) 1.2.3 Explain the problem relating to deposits. Quote evidence. Explain TWO strategies to prevent this in future. (4) INFORMATION: A. The Bank Reconciliation Statement on 31 May 2020 showed the following: Unfavourable balance on the Bank Statement R1 450 Outstanding deposits:  17 May 2020 30 000  31 May 2020 16 200 Outstanding cheques:  605 (dated 16 December 2020) 9 750  812 (dated 10 April 2020) 8 550  816 (dated 25 May 2020) 13 590  819 (dated 15 August 2020) 7 650  823 (dated 31 May 2020) 2 900 Unfavourable balance on the Bank account in the Ledger R5 210 B. Provisional Cash Journal totals on 30 June 2020:  Cash Receipts Journal: R90 500  Cash Payments Journal: R85 920 Please turn over

KZN Accounting 52 KZN Highflyers 2020 C. Entries in the Cash Journals for June 2020 that do not agree with the June Bank Statement: JOURNAL DOCUMENT DATE DETAILS AMOUNT EFT 19 11 Paintco R5 500 CRJ Deposit slip 451 25 Cash sales R40 500 NOTE: EFT 19 was incorrectly entered in the CRJ instead of the CPJ. JOURNAL DOCUMENT DATE DETAILS AMOUNT Cheque 870 25 VN Ltd R16 800 CPJ EFT 21 30 SJ Stores R2 250 D. Items on the Bank Statement dated 30 June 2020 that do not agree with the June Cash Journals: DATE DETAILS DEBIT CREDIT 02 Deposit (17/5) 30 000 05 Cheque 812 8 550 09 Debit order (insurance) 2 290 11 Direct transfer to Paintco (EFT 19) 5 500 12 Cheque 816 13 590 16 Deposit (31/5) 16 200 18 Direct transfer from S Smit (rent) 16 500 22 Cheque 823 (see note below) 9 200 23 Unpaid cheque (B Blast settled his debt, R795) 750 24 Service fee 1 220 NOTE:  Cheque 823: Bank Statement figure is correct.  Service fees were overstated by R900. The bank will rectify the problem next month. E. The Bank Statement on 30 June 2020 reflected a balance of R?. Please turn over

KZN Accounting 53 KZN Highflyers 2020 ANSWER SHEET 1.1 1.1.1 1.1.2 1.1.3 3 1.2.1 Calculation of CRJ total Calculation of CPJ total 90 500 85 920 Bank account balance: 14 1.2.2 Bank Reconciliation Statement on 30 June 2020 9 Please turn over

KZN Accounting 54 KZN Highflyers 2020 1.2.3 Explain the problem relating to deposits. Quote evidence. Explain TWO strategies to prevent this in future. Strategy 1: Strategy 2: 4 ACTIVITY D2 (Q1 JUNE 2019) 2.1 BANK RECONCILIATION The following information relates to Thandeka Traders for May 2020. REQUIRED: 2.1.1 Calculate the correct Bank Account balance on 31 May 2020. Indicate whether this is favourable or unfavourable. (9) 2.1.2 Prepare the Bank Reconciliation Statement on 31 May 2020.The bank statement balance is the missing figure. (7) 2.1.3 Refer to Information B(iii). State TWO internal control measures that the business can use to ensure that this will not happen in the future. (4) INFORMATION: A. Before the bank statement was received, the Bank Account showed a favourable balance of R19 400 on 31 May 2020. Please turn over

KZN Accounting 55 KZN Highflyers 2020 B. Extract from the Bank Reconciliation Statement on 30 April 2020: Outstanding deposit (dated 23 April 2020): R31 560 Outstanding payments: Cheque 654 (dated 23 November 2019) R2 350 EFT(electronic funds transfer) R15 400 Cheque 705 (dated 30 June 2020) R9 450 NOTE: (i) Cheque 654 does not appear in the May Bank Statement. (ii) The EFT payment of R15 400 appearing the May Bank Statement. (iii) The outstanding deposit of R31 560 does not appear in the May Bank Statement. An investigation shows that this is cash paid by a debtor and has never been deposited. The amount must be written off. C. The following items must also be taken into account: (i) Items appearing in the May Bank Statement but not in the journals:  Bank charges, R1 060  A deposit of R4 500 made by another business. The bank will correct this error in June 2020.  Interest on favourable balance, R313 (ii) Items appearing in the journals but not in the May Bank Statement:  A deposit of R21 343 made on 31 May 2020  Cheque 797 (dated 15 June 2020), R14 350 (iii) An EFT payment appeared correctly in the Bank Statement as R5 678. The Cash Journal shows this EFT as R6 578. ANSWER SHEET 2.1 BANK RECONCILIATION 2.1.1 Calculate the correct Bank Account balance on 31 May 2020. Provisional Bank balance R19 400 Favourable/Unfavourable: 9 2.1.2 Bank Reconciliation Statement on 31 May 2020 Please turn over

KZN Accounting 56 KZN Highflyers 2020 DEBIT CREDIT 7 2.1.3 State TWO internal control measures that the business can use to ensure that this will not happen in the future. 4 ACTIVITY D3 (Q2 NOV 2019) The information relates to Klonex Traders. REQUIRED: 3.1 The owner, Ben Joseph, realises that many people are now using electronic funds transfers (EFTs) instead of cheques. 3.1.1 State THREE advantages of EFTs. (3) 3.1.2 Janet, the bookkeeper, has been assigned the duty of processing and controlling all EFTs. Explain TWO reasons why the internal auditor is concerned about this. (4) 3.2 Show changes in the Cash Journals for June 2020. (11) 3.3 Calculate the correct Bank Account balance on 30 June 2020. (4) 3.4 Prepare the Bank Reconciliation Statement on 30 June 2020. (8) INFORMATION: Please turn over

KZN Accounting 57 KZN Highflyers 2020 A. Extract: Bank Reconciliation Statement on31 May 2020 Outstanding deposit R9 500 Outstanding cheques No. Date 321 10 December 2019 R1 500 427 14 May2020 R1 400 444 27 May2020 R4 670 516 28 May2020 R7 950 Favourable balance on Bank Account R9 200 NOTE:  The outstanding deposit appeared on the June Bank Statement.  Cheque 321 was issued for the owner's club fees. It was never deposited.  Cheque 427 did not appear on the June Bank Statement. It was lost and a new cheque will be issued in July.  Cheque 444 did not appear on the June Bank Statement.  Cheque 516 appeared on the June Bank Statement with the correct amount of R5 250. B. Provisional totals in the Cash Journals on 30 June 2020 before receiving the Bank Statement: Cash Receipts Journal: R27 470 Cash Payments Journal: R32 400 C. Entries in the Cash Journals NOT on the June Bank Statement:  Deposit, R9 675  EFT 14 (30 June 2020), R3 800  Cheque 522 (12 August 2020), R4 580 D. Entries on the June 2020 Bank Statement NOT in the Cash Journals: DATE DETAILS R 15 Debit order: Micro Insurance* 1 125 Debit order: Micro Insurance* 1 125 16 Unpaid cheque (debtor, B Marais) 1 200 25 M Malan (EFT by tenant) 2 800 30 Interest income 130 30 Service fees 175 *Insurance appeared twice in error. This will be rectified next month. E. Bank Statement balance on 30 June 2020: …? 30 Please turn over

KZN Accounting 58 KZN Highflyers 2020 ANSWER SHEET 3.1.1 State THREE advantages of EFTs. Advantage 1 Advantage 2 Advantage 3 3 3.1.2 Janet, the bookkeeper, has been assigned the duty of processing and controlling all EFTs. Explain TWO reasons why the internal auditor is concerned about this. Reason 1 3.2 Show changes in the Cash Journals for June 2020. CASH RECEIPTS JOURNAL CASH PAYMENTS JOURNAL 27 470 Provisional totals 32 400 TOTALS 11 3.3 Calculate: Bank Account balance Workings Answer 4 3.4 BANK RECONCILIATION STATEMENT ON 30 JUNE 2020 Please turn over

KZN Accounting 59 KZN Highflyers 2020 E DEBTORS RECONCILIATION ACTIVITY E1. (Q2 NOV 2016) RECONCILIATION, AGE ANALYSIS (30 marks; minutes) 1.1 Simply Traders sell goods for cash and on credit. REQUIRED: 1.1.1 Simply Traders have the telephone numbers of all their debtors. What other information should they obtain before allowing customers to open accounts? State TWO points with a reason in EACH case. (4) 1.1.2 Refer to Information A, B and C. Calculate:  The correct closing balance of the Debtors' Control Account on 31 October 2020 (6)  The correct amounts owing by debtors: - J Ramsay (D2) - W Smith (D3) - C Prince (D5) (12) 1.1.3 Refer to Information D.  Calculate the percentage of debtors complying with the credit terms. (4)  Explain TWO measures to improve collection from debtors. (4) INFORMATION: A. Balance of the Debtors' Control Account on 31 October 2020, R179 500 (before adjustments). B. Debtors' list on 31 October 2020: DEBTORS FOLIO AMOUNT M Coley D1 R60 200 J Ramsay D2 37 500 W Smith D3 19 500 D Cummings D4 42 000 C Prince D5 3 900 TOTAL R163 100 C. The following errors and omissions must be taken into account: (a) An invoice for R2 500 issued to W Smith was not recorded in the books of Simply Traders. (b) The total of the Debtors' Allowances Journal was posted to the Debtors' Control Account as R20 100 instead of R21 000. (c) An invoice for R4 300 issued to C Prince was posted incorrectly to the account of J Ramsay. (d) Stock for R5 100 sold to C Prince was treated as a return of goods when posting it to the Debtors' Ledger Account of C Prince. (e) A cheque for R8 350, originally received from J Ramsay in settlement of debt of R8 500, was returned by the bank, marked R/D. No entries were made in the Debtors' Ledger. (f) An invoice for R3 600 issued to W Smith was recorded correctly in the Debtors' Journal, but posted as R6 300 to his account in the Debtors' Ledger. (g) The total for discount allowed in the CRJ was overstated by R500. D. Debtors' age analysis on 30 September 2020: 30–60 61–90 MORE THAN TOTAL CURRENT DAYS DAYS 90 DAYS 201 200 35 300 23 300 76 700 65 900 The credit period is 60 days. Please turn over

KZN Accounting 60 KZN Highflyers 2020 ANSWER SHEET 1.1.1 Simply Traders have the telephone numbers of all their debtors. What other information should they obtain before allowing customers to open accounts? State TWO points with a reason in EACH case. Information to be obtained Reason Point 1 Point 2 4 1.1.2 Calculate the correct closing balance of the Debtors' Control Account on 31 October 2020. 6 Calculate the correct amounts owing by debtors. Calculations Balance J Ramsay (D2) 37 500 W Smith (D3) 19 500 C Prince (D5) 3 900 12 1.1.3 Calculate the percentage of debtors complying with the credit terms. 4 Explain TWO measures to improve the collection from debtors. 4 Please turn over

KZN Accounting 61 KZN Highflyers 2020 ACTIVITY E2 (Q 5 JUN 2018) DEBTORS RECONCILIATION You are provided with information relating to Marlin Traders for July 2019. REQUIRED: 2.1 Give TWO steps that the bookkeeper must follow when he/she discovers a difference between the Debtors Control Account and the Debtors List. (2) 2.2 Refer to Information A. Show the effect of the errors and omissions to the Debtors Control Account in the General Ledger and to each Debtor’s Account in the Debtors Ledger. Indicate + increase and – for decrease. (Complete the tables provided. (16) 2.3 Refer to Information B. (Debtors’ Age Analysis)  Explain why you would be concerned about the management of debtors in this business. Quote relevant figures in your answer. (4)  Provide TWO internal control measures that the business can use to improve the collection of money from debtors. (4) INFORMATION: A. Errors and omissions: (i) The total of the Debtors Allowances Journal was under cast by R120. (ii) Stock sold on credit to M. Simkhadi was wrongly entered in the journal as R890 instead of R980 and posted accordingly to the debtors’ ledger. (iii) Interest of R75 must be charged to the overdue account of D. Slindile (iv) A cheque for R530 received from K. Mshibe was returned by the bankmarked R/D. No entries were made for this transaction. (v) Goods sold to F. Tuko for R1 320 was incorrectly posted to the account of M. Simkhadi. The entry in the journal was correct. (vi) A receipt issued to M. Simkhadi for R650 was correctly recorded in thejournal but was posted to the Debtors Ledger Account as R600. B. On 31 July 2019, the Debtors’ Age analysis was as follows: Credit terms: 30 days less 5% discount. TOTAL CURRENT 30-60 DAYS 61-90 DAYS MORE THAN 90 DAYS R23180 R4 636 R6 954 R9 272 R2 318 Please turn over

KZN Accounting 62 KZN Highflyers 2020 ANSWER SHEET DEBTORS RECONCILIATION 2.1 Give TWO steps that the bookkeeper must follow when he/she discovers a difference between the Debtors Control Account and the Debtors List. 2 2.2 Calculate the correct balance of the Debtors Control Account and the Debtors List by completing the table provided. DEBTORS CONTROL ACCOUNT No. 11 020 DEBTORS LIST: Show the adjustment amount next to each debtor. M. Simkhadi (4 480 D. Slindile (3 270 K. Mshibe ( 940 F. Tuko (2 260 16 2.3 DEBTORS’ AGE ANALYSIS Explain why you would be concerned about the management of debtors in this business. Quote relevant figures in your answer. 4 Provide TWO internal control measures that the business can use to improve the collection of money from debtors. 4 Please turn over

KZN Accounting 63 KZN Highflyers 2020 F. CREDITORS RECONCILIATION ACTIVITY F1 (Q 2 NOV 2018) CREDITORS' RECONCILIATION Claire Traders buys goods on credit from Mariti Suppliers. REQUIRED: 1.1 Use the table provided to indicate changes to the:  Creditors' Ledger Account in the books of Claire Traders  Creditors' Reconciliation Statement on 31 July 2019  (13) 1.2 The internal auditor insists that direct payments (EFTs) must be used to pay suppliers. Explain:  ONE reason to support his decision  (2)  ONE internal procedure to ensure control over this system  (2) 1.3 Refer to Invoice 301. It was discovered that the store manager, Vernon, had signed a fictitious order form and took the goods for himself when they arrived. Besides dismissing Vernon, provide:  ONE suggestion for action to be taken against him  ONE suggestion to prevent this problem in future  (4) INFORMATION: A. Creditors' Ledger of Claire Traders MARITI SUPPLIERS (CL5) DEBIT CREDIT BALANCE 2019 1 Balance b/d 67 500 July 10 Invoice 209 81 000 EFT 33 750 17 Debit Note 674 8 640 Invoice 282 40 950 Invoice 301 25 000 21 Invoice 360 50 250 24 Debit Note 995 8 100 27 Journal Voucher 570 5 400 31 Cheque and discount 77 190 147 820 B. Statement of account from Mariti Suppliers MARITI SUPPLIERS Claire Traders 25 July 2019 108 Kruger Road DEBIT CREDIT BALANCE 2019 1 Balance 67 500 July 10 Invoice 209 81 000 Receipt 695 33 750 17 Credit Note 741 6 840 Invoice 301 25 000 21 Invoice 360 20 250 24 Credit Note 811 8 100 145 060 Please turn over

KZN Accounting 64 KZN Highflyers 2020 C. Differences noted: (a) The incorrect entry for Debit Note 674 in the Creditor's Ledger Account of Mariti Suppliers relates to the correct Credit Note 741 on the statement. (b) Invoice 282 was incorrectly reflected in the account of Mariti Suppliers in the Creditors' Ledger. The goods were purchased from Genesis Suppliers. (c) Invoice 360 was incorrectly recorded on the statement from Mariti Suppliers. (d) Mariti Suppliers also purchased goods on credit from Claire Traders. Claire Traders has transferred a debit balance from the Debtors' Ledger (Journal Voucher 570). Mariti Suppliers will offset this on the next statement. (e) The transaction on 24 July 2019 is for merchandise returned to Mariti Suppliers. (f) The statement reflects transactions up to 25 July 2019. ANSWER SHEET CREDITORS' RECONCILIATION 1.1 CREDITORS' LEDGER: STATEMENT OF ACCOUNT OF MARITI ACCOUNT SUPPLIERS Balance 147 820 145 060 (a) (b) (c) (d) (e) (f) 13 1.2 The internal auditor insists that direct payments (EFTs) must be used to pay suppliers. Explain ONE reason to support his decision. 2 Explain ONE internal procedure to ensure control over this system. 2 1.3 Besides dismissing Vernon, provide ONE suggestion for action to be taken against him. Provide ONE suggestion to prevent this problem in future. 4 Please turn over

KZN Accounting 65 KZN Highflyers 2020 ACTIVITY F2 (Q 5 JUN 2017) CREDITORS RECONCILIATION (35 Marks; 21 Minutes) You are presented with information from the records of MG Stores for May 2020. MG Stores buys goods on credit from NN Dealers. REQUIRED: 2.1 Use the table provided to indicate the changes that must be made to the Creditors Ledger account of NN dealers in the books of MG Stores and the statement received from the creditor. Indicate + for increase and – for decrease. (7) 2.2 The owner of MG stores is concerned that the bookkeeper could be defrauding the business through the credit system. List TWO internal control measures that can be applied in order to maintain control over creditors. (2) INFORMATION: The Creditors Ledger Account of NN Dealers in the books of MG Stores showed that R5 350 was owed to them on 31 May 2020 while the statement received from NN Dealers on 31 May 2020 reflected an outstanding balance of R12 540. An investigation revealed the following: A. Returns recorded as R820 in the creditors ledger account of NN Dealers was shown as R280 on the statement received. The amount on the statement was correct. B. An invoice for R4 200 received from NN Dealers was incorrectly recorded as a credit note by the clerk of MG Stores in the creditors’ ledger. C. An invoice received from NN Dealers was correctly recorded asR4 400 in the Creditors’ Ledger Account of NN Dealers in thebooks of MG Stores, but the statement showed this amount as R400. D. A payment of R5 000 made by MG Stores appeared on the statementreceived. The statement also reflected a discount of R250 for earlypayment. MG Stores did not record the discount in the creditors’ ledger. E. A payment of R2 500 to NN Dealers on 27 May 2014 did not appear on the statement, due to the statement being processed early. ANSWER SHEET 1 CREDITORS RECONCILIATION 2.1 No. CREDITORS LEDGER ACCOUNT STATEMENT 5 350 12 540 A. B. C. D. E. Please turn over

KZN Accounting 66 KZN Highflyers 2020 2.2 The owner of MG stores is concerned that the bookkeeper could be defrauding the business through the credit system. List TWO internal control measures that can be applied in order to maintain control over creditors. ACTIVITY F3 (Q 1 MAR 2016) CREDITORS' RECONCILIATION AND INTERNAL CONTROL (30 marks; 15 minutes) Machu Traders buys goods on credit from Pikor Suppliers. The business receiveda statement for April 2015 from the creditor. REQUIRED: 3.1 Explain how the Creditors' Reconciliation Statement can assist the business in terms of their internal control measures. State TWO points. (4) 3.2 Calculate the correct balance of Pikor Suppliers in the Creditors' Ledger Account of Machu Traders. Show the changes to the figure R116 400. (12) 3.3 Prepare a Creditors' Reconciliation Statement for Pikor Suppliers on 30 April 2019. (10) 3.4 The owner of Machu Traders is not completely satisfied with the service and quality of goods received from Pikor Suppliers. Suggest TWO factors he should consider before changing suppliers. (4) INFORMATION: A. Creditors' Ledger of Machu Traders PIKOR SUPPLIERS (CL4) Date Debit Credit Balance 2019 01 Balance 44 220 April 08 Invoice 153 54 000 98 220 10 Cheque 1449 22 500 75 720 12 Debit note 746 5 760 69 960 15 Invoice 111 27 300 97 260 17 Invoice 214 91 500 188 760 21 Invoice 273 20 250 209 010 24 Debit note 966 5 400 214 410 27 Journal voucher 490 3 600 210 810 31 Cheque 2346 93 000 117 810 Discount 1 410 116 400 Please turn over

KZN Accounting 67 KZN Highflyers 2020 B. Statement received on 30 April 2019: PIKOR SUPPLIERS PO Box 249, Sabie, 8234. Tel: 013 748 0703 Machu Traders Date: 25 April 2019 PO Box 313 Credit limit: R100 000 Graskop, 8250 Payment terms: 50 days Interest on overdue accounts: 6% DATE DEBIT CREDIT AMOUNT 2019 01 Account rendered 44 220 April 05 Interest 780 45 000 08 Invoice 153 54 000 99 000 10 Receipt 491 22 500 76 500 Discount 480 76 020 12 Credit note 511 6 570 69 450 17 Invoice 214 91 500 160 950 19 Receipt 654 84 000 76 950 21 Invoice 273 50 250 127 200 24 Credit note 632 5 400 121 800 C. Additional Information: 1 The discount of R480 received from Pikor Suppliers on 10 April 2019 was omitted . erroneously in the books of Machu Traders. 2 Invoice 111 was reflected erroneously in the account of Pikor Suppliers in the Creditors' . Ledger of Machu Traders. It refers to merchandise purchased from another supplier, Lethu Suppliers. 3 Pikor Suppliers made an error in the recording of invoice 273 on the statement. . 4 Goods returned on 12 April 2019 were recorded correctly in the statement from Pikor . Suppliers. The entry in the books of Machu Traders is incorrect. 5 Receipt 654 was shown erroneously in the statement from Pikor Suppliers. This . transaction does not relate to Machu Traders and will be rectified on the next statement. 6 Pikor Suppliers also purchases goods on credit from Machu Traders. Refer to Journal . Voucher 490. Machu Traders has transferred a debit balance from the Debtors' Ledger. This entry has not been recorded by Pikor Suppliers. 7 The transaction on 24 April 2019 is in respect of merchandise returned to Pikor Suppliers. . 8 The statement shows transactions up to 25 April 2019. . Please turn over

KZN Accounting 68 KZN Highflyers 2020 ANSWER SHEET 3.1 Explain how the Creditors' Reconciliation Statement can assist the business in terms of their internal control measures. State TWO points. 4 3.2 Calculate the correct balance of Pikor Suppliers in the Creditors'Ledger Account of Machu Traders.Show the changes to the figure R116 400. 12 3.3 Creditors' Reconciliation Statement for Pikor Suppliers on 30 April 2019. Details Amount Balance per statement of account 10 Correct balance 3.4 The owner of Machu Traders is not completely satisfied with the service and quality of goods received from Pikor Suppliers. Suggest TWO factors he should consider before changing suppliers. 4 Please turn over

KZN Accounting 69 KZN Highflyers 2020 G. VALUE ADDED TAX ACTIVITY G1 (NOV 2018) 1.1 VAT Samson Traders is registered for VAT. The VAT rate is 15%. The financial year ends on 29 February 2020. REQUIRED: 1.1.1 Calculate the figures indicated by (a) to (d) in the table below. 1.1.2 You are the internal auditor. The sole owner, Samson, used a business cheque to buy a new car for R460 000 including VAT. This car is kept at home for his wife's use. Samson says the vehicle must be recorded as a business asset and R60 000 must be recorded as a VAT input in the business' books. Explain what you would say to Samson. Provide TWO points. INFORMATION: EXCLUDING VAT INCLUDING VAT AMOUNT VAT Sales returns 960 (a) 1 104 Purchase of stock 52 600 (b) Discount received (c) 720 Cash sales (d) 112 470* * This includes zero-rated goods that should have been sold for R5 500. The bookkeeper has incorrectly included VAT of R825 on these goods. This must be corrected. ANSWER SHEET 1.1 VAT 1.1.1 WORKINGS ANSWER (a) (b) (c) (d) 10 Please turn over

KZN Accounting 70 KZN Highflyers 2020 1.1.2 You are the internal auditor. The sole owner, Samson, used a business cheque to buy a new car for R460 000 including VAT. This car is kept at home for his wife's use. Samson says the vehicle must be recorded as a business asset and R60 000 must be recorded as a VAT input in the business' books. Explain what you would say to Samson. Provide TWO points. Point 1 Point 2 4 ACTIVITY G2 (JUNE 2019) 2.1 VALUE-ADDED TAX (VAT) The information relates to Longhill Traders for the VAT period ended 30 April 2020. The VAT rate of 15% applies to all goods and services. REQUIRED: Calculate the amount receivable from or payable to SARS for VAT on 30 April 2020. Indicate whether the amount is receivable or payable. (11) INFORMATION: A. Amount owed to SARS on 1 April 2020, R15 890 B. VAT transactions for April 2020: EXCLUDING VAT INCLUDING DETAILS VAT AMOUNT VAT (R) (R) (R) Returns by debtors 1 470 Drawings by owner 3 075 Debtors' accounts written off 8 700 10 005 Total purchases (cash and credit) 224 000 Total sales 396 750 Please turn over

KZN Accounting 71 KZN Highflyers 2020 ANSWER SHEET 2.1 Calculate the amount receivable from or payable to SARS for VAT on 30 April 2020. Workings Answer Receivable/Payable: 11 ACTIVITY G3 (KZN SEPT 2019) 3.1 3.1.1 Calculate VAT payable to or receivable from SARS in respect of calculators on 30 June 2020. Note that sales include VAT while purchases do not include VAT. Round off your calculations to nearest rand. (8) 3.1.2 Themba Zondi intends to deliberately reduce the sales amount when completing the VAT returns so as to reduce the amount of VAT payable to SARS. What advice you provide to the owner regarding his intentions? Provide ONE point of advice. (2) INFORMATION: A. Information relating to calculators: Units Price per Total cost unit Purchases 5 500 R1 515 000 November 2019 2 500 R270 R 675 000 May 2020 3 000 R280 R 840 000 Returns to suppliers (May 2020) 300 Sales ? R391 R2 306 900 Returns by debtors 50 R391 ? ANSWER SHEET Please turn over

KZN Accounting 72 KZN Highflyers 2020 3.1.1 Calculate VAT payables to or receivable from SARS on 30 June 2020. Note that sales include VAT while purchases do not include VAT. Round off your calculations to nearest rand. VAT Inclusive VAT Exclusive VAT Purchases 1 515 000 227 250 Returns to suppliers Sales Returns by debtors 8 3.1.2 Themba Zondi intends to deliberately reduce the sales amount when completing the VAT returns so as to reduce the amount of VAT payable to SARS. What advice you provide to the owner regarding his intentions? Provide ONE point of advice. 2 Please turn over

KZN Accounting 73 KZN Highflyers 2020 H. MANUFACTURING ACTIVITY H1 (NOV 2019) Sihle Sangweni owns two separate factories that manufacture products according to orders received. There is no work-in-progress stock. The year-end is 29 February 2020. 1.1 Indicate whether the following statements are TRUE or FALSE. Write only 'true' or 'false' next to the question numbers (1.1.1 to 1.1.3) in the ANSWER BOOK. 1.1.1 Wages of factory cleaners is a direct labour cost. 1.1.2 Delivery costs of finished goods to retailers are a selling and distribution cost. 1.1.3 Depreciation on office equipment is an administration cost. (3 x 1) (3) 1.2 DESKS FACTORY REQUIRED: 1.2.1 Complete the Factory Overhead Cost Note. (8) 1.2.2 Calculate the total cost of production of finished goods. (5) 1.2.3 Sihle wants to produce an additional 1 500 desks, while maintaining the selling price and costs. Calculate the additional profit he can expect. (4) 1.3 CHAIRS FACTORY REQUIRED: 1.3.1 Provide a calculation to confirm the break-even point for 2020. (4) 1.3.2 Comment on the break-even point and the production level achieved. Quote figures. (4) 1.3.3 Raw material consists of wood only. In 2020 the cost is R120 per square metre (m2) and 1,2 m2 of wood is needed to make one chair. During the year, 22 000 m2 wood was dispatched to the factory. Sihle feels that the wood raw material was not well controlled.  Provide a calculation to support his opinion. (4)  Identify TWO possible causes of this problem. Provide a solution for EACH. (4) Please turn over

KZN Accounting 74 KZN Highflyers 2020 1.3.4 Give TWO reasons for the increase in direct labour cost. Provide a solution for EACH. Note that wages and salaries increased by 5% in the current financial year. (4) INFORMATION: A. DESKS FACTORY Extract of pre-adjustment amounts on 29 February 2020 R Indirect labour 296 500 Depreciation of factory plant 166 000 Advertising 24 500 Water and electricity 248 000 Rent expense 345 600 Insurance allocated to sales department 12 600 Factory sundry expenses 107 700 Adjustments to factory overheads for desks:  Water and electricity for February 2020, R18 000, must be taken into account. 80% is allocated to the factory. The balance is an administration cost.  Rent must be allocated according to floor area: Factory: 810 m2 Office: 180 m2 Sales department: 90 m2  75% of insurance must be allocated to the factory. The balance applies to the sales department. B. INFORMATION FOR BOTH FACTORIES DESKS CHAIRS COSTS 2020 (Unit costs) Amount Per unit 2020 2019 Direct material R3 060 000 R340 R165 R124 Direct labour ? R160 R90 R70 Variable Selling and distribution R720 000 R80 R50 R60 Total variable costs R580 R305 R250 Factory overheads R76 R75 Fixed Administration R360 000 R40 R20 R18 SELLING PRICES Per unit R750 R390 R370 UNITS Produced and sold 9 000 16 000 15 000 Break-even point 8 471 18 071 12 400 40 Please turn over

KZN Accounting 75 KZN Highflyers 2020 ANSWER SHEET 1.1 1.1.1 1.1.2 1.1.3 3 1.2 DESKS FACTORY 1.2.1 Factory Overhead Cost Note Indirect labour R 296 500 Depreciation on factory plant 166 000 8 1.2.2 Calculate the total cost of production of finished goods. Workings Answer 5 1.2.3 Sihle wants to produce an additional 1 500 desks. Calculate the additional profit he can expect. Workings Answer 4 Please turn over

KZN Accounting 76 KZN Highflyers 2020 1.3 CHAIRS FACTORY 1.3.1 Provide a calculation to confirm the break-even point for 2020. Workings Answer 4 1.3.2 Comment on the break-even point and the production level achieved. Quote figures. 4 1.3.3 Sihle feels that wood raw material was not well controlled. Provide a calculation to support his opinion. 4 Identify TWO possible causes of this problem. Provide a solution for EACH. POSSIBLE CAUSES SOLUTION FOR EACH Cause 1 Cause 2 4 1.3.4 Give TWO reasons for the increase in direct labour cost. Provide a solution for EACH. REASONS SOLUTION FOR EACH Reason 1 Reason 2 4 Please turn over

KZN Accounting 77 KZN Highflyers 2020 ACTIVITY H2 (JUNE 2019) 2.1 Choose the correct term from those given in brackets. Write only the term next to the question numbers (2.1.1 to 2.1.4) in the ANSWER BOOK. 2.1.1 Wages paid to the factory cleaner is considered to be (direct/indirect) labour. 2.1.2 Bad debts must be shown as a (selling and distribution/ factory overhead) cost. 2.1.3 Rent paid for the factory building is regarded as a (fixed/variable) cost. 2.1.4 Carriage on purchases of raw materials is regarded as a/an (direct material/indirect material) cost. (4) 2.2 ZINZI MANUFACTURERS Information is provided for the financial year ended 31 December 2020. The business manufactures leather jackets according to orders received. There is no work-in- progress stock. REQUIRED: 2.2.1 Raw material stock: Calculate:  The value of the closing stock using the first-in-first-out stock valuation method (5)  The direct material cost (4) 2.2.2 Refer to Information C. Calculate the correct factory overhead cost for the year. (8) 2.2.3 The owner is concerned about the increase in the following:  Total fixed cost per unit  Direct labour cost per unit Provide evidence (figures) to justify his concern. In each case, also give a possible reason for the increase in EACH unit cost, apart from normal inflation. (6) 2.2.4 Break-even:  Calculate the break-even point on 31 December 2020. (4)  Explain whether or not there was any improvement in the trends of the level of production and the break-even point from one year to the next. Quote figures. (4)  The owner cannot understand why he is making a better profit this year. Explain how this happened. Provide TWO points. Quote figures. (5) Please turn over

KZN Accounting 78 KZN Highflyers 2020 INFORMATION: A. Raw material: Stock balance: Metres Cost per metre Total amount 1 January 2020 920 R65 R59 800 31 December 2020 1 195 ? ? B. Purchases for the year: Date Metres Cost per metre Total amount February 2020 5 200 R75 R390 000 May 2020 2 480 R80 R198 400 September 2020 930 R90 R83 700 TOTAL 8 610 R672 100 C. Factory Overhead Costs: The bookkeeper calculated the factory overhead cost at R84 330. He did not take into account the following expenses: Insurance R31 200 Rent expense R114 000 Water and electricity for the administration section R7 110  60% of the insurance relates to the factory.  The rent must be allocated between the factory, sales and administration in the ratio 5 : 2 : 1.  15% of the water and electricity expense relate to the office. 50% must be allocated to the factory. D. 2020 2019 TOTAL PER PER UNIT UNIT AMOUNT Fixed costs: R264 000 R44 R36 Factory overheads R26 Administration R10 Variable costs: R165 R150 Direct materials R94 Direct labour R330 000 R50 R38 Selling and distribution R18 E. Additional information: 2020 2019 Number of jackets produced and sold 6 000 units 7 560 units Break-even point ? 3 888 units Selling price per jacket R300 R220 Inflation rate 5% 40 Please turn over

KZN Accounting 79 KZN Highflyers 2020 ANSWER SHEET 2.1 2.1.1 2.1.2 2.1.3 2.1.4 4 2.2.1 Calculate: The value of the closing stock using the first-in-first-out stock valuation method Workings Answer 5 Calculate: Direct material cost Workings Answer 4 2.2.2 Factory overhead cost TOTAL b/f 84 330 8 Please turn over

KZN Accounting 80 KZN Highflyers 2020 2.2.3 Provide evidence (figures) to justify his concern. In each case, also give a possible reason for the increase in EACH unit cost, apart from normal inflation. COST EVIDENCE REASON Total fixed cost per unit Direct labour cost per unit 6 2.2.4 Calculate the break-even point on 31 December 2020. Workings Answer 4 Explain whether or not there was any improvement in the trends of the level of production and the break-even point from one year to the next. Quote figures. 4 The owner cannot understand why he is making a better profit this year. Explain how this happened. Provide TWO points. Quote figures. 5 Please turn over

KZN Accounting 81 KZN Highflyers 2020 ACTIVITY H3 (NOV 2017) 3.1 GEVEN MANUFACTURERS The business produces wooden tables. REQUIRED: Prepare the following for the year ended 29 February 2020: 3.1.1 Production Cost Statement (14) 3.1.2 Abridged Income Statement (14) INFORMATION: A. Stock on hand: 29 FEBRUARY 2020 1 MARCH 2019 Work-in-process ? R160 000 400 tables, 1 200 tables at R280 Finished goods valued using = R336 000 FIFO method B. Production and sales for the year:  7 200 tables were produced at a unit cost of R330 each.  8 000 tables were sold for R4 080 000. C. Costs (before adjustments): Administration R148 400 Factory overheads R487 200 Direct materials R1 050 000 Direct labour ? Selling and distribution R422 000 Adjustments:  Payment to EZ Transport, R102 000, was incorrectly allocated to Selling and Distribution. This was actually meant for delivering wood to the factory.  The cleaning contract for the year, R126 000, was shared between Factory and Administration in the ratio 2 : 1. However, 80% should have been allocated to Factory. D. Prime cost: R1 800 000 (after adjustments) Please turn over

KZN Accounting 82 KZN Highflyers 2020 3.2 GYMWEAR MANUFACTURERS Gymwear Manufacturers is owned by Jan Fiks. They produce shoes and shirts for gym training. Jan requires assistance in interpreting his 2020 results. Note that one pair of shoes comprises one unit. REQUIRED: 3.2.1 Shirts:  Calculate the break-even point for shirts. (4)  Jan is not satisfied with the variable costs per unit, even though the total variable costs per unit decreased by R6. - Identify ONE variable cost (with figures) that has not been well controlled. Give TWO possible reasons for this problem. (4) - Explain why Jan might be concerned about the large decreases in the other TWO variable costs. (4)  Jan does not understand why the unit cost of production has increased when neither his fixed costs nor the variable costs have increased. Explain why this is so. State ONE point (with figures). (4) 3.2.2 Shoes:  Calculate the % increase in the selling price of shoes. (3)  Jan decided to improve the quality of the shoes and to export them. Explain how the direct material costs and the selling and distribution costs were affected by this decision. Provide figures. (4)  Jan was concerned that the increase in price would have a negative impact on the business. Explain whether his concern was justified. State TWO points. (4) Please turn over

KZN Accounting 83 KZN Highflyers 2020 INFORMATION: SHIRTS SHOES 2020 2019 2020 2019 Break-even point ? 11 522 3 842 4 317 Units produced and sold 16 100 25 000 7 750 6 500 Net profit R500 400 R620 000 R2 379 750 R1 183 000 Selling price per unit R302 R290 R1 640 R1 260 Selling price of competitors R310 R290 R1 100 R1 250 Total fixed costs (factory R530 000 R530 000 R2 340 000 R2 340 000 overhead and administration) Total fixed cost per unit ? ? R302 R360 Total variable costs per unit R238 R244 R1 031 R718 Direct material costs per R92 R116 R456 R330 unit Direct labour costs per unit R131 R100 R381 R360 Selling and distribution R15 R28 R194 R28 costs per unit Unit cost of production R242 R228 R1 100 R1 004 55 Please turn over

KZN Accounting 84 KZN Highflyers 2020 ANSWER SHEET 3.1 GEVEN MANUFACTURERS 3.1.1 PRODUCTION COST STATEMENT FOR THE YEAR ENDED 29 FEBRUARY 2020 Direct material cost Direct labour cost Prime cost Factory overhead cost Total cost of production 14 3.1.2 ABRIDGED INCOME STATEMENT FOR YEAR ENDED 29 FEBRUARY 2020 Sales Cost of sales Gross profit Administration cost Selling and distribution cost Net profit 14 3.2 GYMWEAR MANUFACTURERS 3.2.1 Shirts: Calculate the break-even point for shirts. 4 Please turn over

KZN Accounting 85 KZN Highflyers 2020 Identify ONE variable cost (with figures) that has not been well controlled. Give TWO possible reasons for this problem. ONE VARIABLE COST REASONS WITH FIGURES Reason 1: Reason 2: 4 Explain why Jan might be concerned about the large decreases in the other TWO variable costs. 4 Jan does not understand why the unit cost of production has increased when neither his fixed costs nor the variable costs have increased. Explain why this is so. State ONE point (with figures). 4 3.2.2 Shoes: Calculate the % increase in the selling price of shoes. 3 Jan decided to improve the quality of the shoes and to export them. Explain how the direct material costs and the selling and distribution costs were affected by this decision. Provide figures. 4 Please turn over

KZN Accounting 86 KZN Highflyers 2020 Jan was concerned that the increase in price would have a negative impact on the business. Explain whether his concern was justified. State TWO points. Point 1: Point 2: 4 Please turn over

KZN Accounting 87 KZN Highflyers 2020 I. BUDGETING ACTIVITY I1 (NOV 2017) You are provided with information relating to Lamba Traders, a business owned by Larry Lamba. The business sells cleaning materials for cash and on credit. They deliver goods free of charge to local customers. REQUIRED: 1.1 Explain the main purpose of a Cash Budget and a Projected Income Statement. (2) 1.2 Debtors: Refer to Information A and Information B. The credit terms allow debtors to settle accounts by the end of the month following the sales transaction month. No discount is allowed. However, based on past experience, Larry expects debtors to pay according to the Debtors' Collection Schedule. 1.2.1 Use the November figures to calculate the following:  % of debtors that are expected to comply with the credit terms  % of bad debts expected (9) 1.2.2 Larry does not believe that his debtors' control clerk, Shirley, deserves a bonus on 31 October 2020. Provide evidence to support his opinion. Offer Larry advice to improve debtors' collections (TWO points). (4) 1.3 Projected Income Statement: Refer to Information C and Information D. 1.3.1 Calculate:  The fixed % of sales used by Larry to budget for delivery expenses (2)  The amount of the loan to be repaid on 31 December 2020 (4) 1.3.2 Refer to variances in Information D. Explain why Larry would feel that all these variances are problems for his business. (9) INFORMATION: A. Debtors' Collection Schedule for the period ending 29 February 2020: CREDIT COLLECTIONS SALES NOV. 2019 DEC. 2019 JAN. 2020 FEB. 2020 R R R R R September 112 000 16 800 October 134 400 75 264 20 160 November 224 000 56 000 125 440 33 600 December 358 400 89 600 200 704 53 760 January 179 200 44 800 100 352 February 112 000 28 000 148 064 235 200 279 104 182 112 Please turn over

KZN Accounting 88 KZN Highflyers 2020 B. The debtors' clerk presented the following age analysis at the end of October 2019: CURRENT TOTAL 1 MONTH 2 MONTHS 3 MONTHS + MONTH 100% 18% 40% 23% 19% C. Extract from the Projected Income Statement: NOV. 2019 DEC. 2019 JAN. 2020 FEB. 2020 Interest on loan R2 975 R2 975 R2 465 R2 465 (rate 8,5% p.a.) D. Figures provided by the accountant on 31 October 2019: PROJECTED ACTUAL VARIANCE Total sales 320 000 290 000 –30 000 Cash sales 96 000 50 000 –46 000 Credit sales 224 000 240 000 +16 000 Advertising 5 000 1 000 –4 000 Packing material 4 800 4 800 0 Delivery expenses 12 800 12 500 –300 30 Please turn over

KZN Accounting 89 KZN Highflyers 2020 ANSWER SHEET 1.1 Explain the main purpose of a Cash Budget. Explain the main purpose of a Projected Income Statement. 2 1.2.1 Larry expects debtors to settle accounts by the end of the month following the sales transaction month. Use the November figures to calculate the % of debtors that are expected to comply with the credit terms. Use the November figures to calculate the % of bad debts expected. 9 1.2.2 Larry does not believe that his debtors' control clerk, Shirley, deserves a bonus on 31 October 2019. Provide evidence to support his opinion. Offer Larry advice to improve debtors' collections (TWO points). Point 1: Point 2: 4 Please turn over

KZN Accounting 90 KZN Highflyers 2020 1.3.1 Calculate the fixed % of sales used by Larry to budget for delivery expenses. Calculate the amount of the loan to be repaid on 31 December 2017. 6 1.3.2 Refer to variances in Information D. Explain why Larry would feel that all these variances are problems for his business. COMMENT ON VARIANCES Sales Advertising Packing materials Delivery expenses 9 Please turn over

KZN Accounting 91 KZN Highflyers 2020 ACTIVITY I2 (JUNE 2019) You are provided with information relating to Cimpiwe Clothing Shop. REQUIRED: 2.1 Refer to Information A. Identify TWO items in the Cash Budget that will not appear in a Projected Income Statement. (2) 2.2 Calculate the missing amounts indicated by (i) to (iii) in the Cash Budget for June and July 2020. (7) 2.3 Calculate the total purchases for April 2020. (2) 2.4 Complete the Debtors' Collection Schedule for July 2020. (8) 2.5 Refer to Information F. 2.5.1 Comment on the following:  Effect of the advertising on sales (3)  Payment to creditors (2) 2.5.2 Sales strategy:  Identify TWO strategies (except advertising) that the business used to achieve sales targets for May 2020. Quote figures. (4)  Explain whether these were good strategies, or not. Provide ONE point with figures. (2) INFORMATION: A. Extract from the Cash Budget JUNE 2020 JULY 2020 CASH RECEIPTS Cash sales 186 000 285 000 Cash from debtors 533 430 ? Rent income (i) 9 180 Interest on fixed deposit 1 800 2 200 CASH PAYMENTS Salaries and wages 73 400 73 400 Fixed deposit: Protea Bank 0 (ii) Cash purchases of trading stock ? (iii) Payment to creditors 192 000 ? Insurance 3 250 3 250 Drawings 21 600 21 600 Sundry expenses 96 360 98 700 Please turn over

Accounting 92 DBE/November 2019 NSC B. Cash sales are 25% of total sales. Collections from debtors:  30% in the month of sales less 5% discount  65% in the following month  Provision is made for 5% bad debts. C. Budgeted purchases of trading stock: April ? May R484 000 June R496 000 July R760 000  40% of trading stock is bought on credit.  Creditors are paid two months after the transaction month. D. Rent increased by 8% in July 2020. E. The business has a fixed deposit of R360 000. An additional amount is budgeted to be invested on 1 July 2020. Interest (not capitalised) at 6% p.a. is receivable at the end of each month. F. Cimpiwe is concerned about the following items for May 2020: BUDGETED (R) ACTUAL (R) VARIANCE (R) Cash sales 172 000 140 000 – 32 000 Credit sales 516 000 552 000 + 36 000 Collection from debtors 475 000 380 000 – 95 000 Advertising 36 000 64 800 + 28 800 Payments to creditors 180 000 105 000 – 75 000 Delivery expenses 0 19 000 – 19 000 Packing materials 3 000 2 500 – 500 30 Copyright reserved Please turn over

KZN Accounting 93 KZN Highflyers 2020 ANSWER SHEET 2.1 Identify TWO items in the Cash Budget that will not appear in a Projected Income Statement. 2 2.2 (i) Calculate: Rent income, June 2020 Workings Answer (ii) Calculate: Fixed deposit: Protea Bank, July 2020 Workings Answer (iii) Calculate: Cash purchases of trading stock, July 2020 Workings Answer 7 2.3 Calculate the total purchases for April 2020. Workings Answer 2 Please turn over

KZN Accounting 94 KZN Highflyers 2020 2.4 DEBTORS' COLLECTION SCHEDULE CREDIT SALES JUNE JULY MAY 576 000 374 400 JUNE 159 030 JULY 855 000 TOTAL 533 430 8 2.5.1 Comment on the following (provide figures): Effect of the advertising on sales 3 Payment to creditors * 2 2.5.2 Identify TWO strategies (except advertising) that the business used to achieve sales targets for May 2019. Quote figures. 4 Explain whether these were good strategies, or not. Provide ONE point with figures. 2 Please turn over

KZN Accounting 95 KZN Highflyers 2020 ACTIVITY I3 ( NOV 2019) The financial year-end of Carpets Galore (Pty) Ltd is 31 October 2020. Thembi Tsomi is the sole shareholder and director. 3.1 Indicate amounts in the appropriate blocks for the Cash Budget and Projected Income Statement for three months ending 31 January 2021.  A printer costing R40 800 will be bought for cash on 30 November 2020. Depreciation will be R680 per month.  On 1 January 2020, R48 000 will be paid for a 12-month insurance contract.  A loan of R100 000 will be received from Viva Bank on 31 December 2020. This will be repaid in equal instalments over 20 months, commencing on 31 January 2021. Interest at 12% p.a. is paid monthly and is not capitalised. (11) 3.2 Refer to Information A: Debtors' Collection Schedule. Thembi is preparing projections for the period commencing 1 November 2020. Thembi does not grant discount for early payment. Calculate the % of debtors: (3)  Who settle their accounts in the 2nd month following the credit sales transaction month  Written off as bad debts at the end of the 3rd month following the credit sales transaction month (4) 3.3 Refer to Information B: Projected Income Statement for September and October. 3.3.1 Office workers are unhappy with the increase that Thembi gave them on 1 October 2020. Explain what she should say to them. Provide TWO points. Quote figures or a calculation. (6) 3.3.2 Thembi pays her son, Jacob, to deliver and install carpets for customers. She budgets R2,80 per metre for this. Comment on the control of this expense. Quote figures or a calculation. (4) 3.3.3 A new competitor commenced trading in the area on 1 September 2020.  Provide figures to illustrate the impact on sales in September. (2)  Explain THREE decisions that Thembi took in October in response to the new competitor. Quote figures or a calculation. (6) Please turn over

Accounting 96 DBE/November 2019 NSC – Answer Book 3.3.4 Stock sold is replaced in the same month. 50% of the stock is bought on credit. Creditors are paid in the month following the purchases month to receive a 5% discount. Calculate the actual amount payable to creditors in November 2020. (4) INFORMATION: A. Debtors' Collection Schedule for the period ending 31 January 2021: CREDIT COLLECTIONS SALES NOV. 2019 DEC. 2020 JAN. 2021 August R80 000 R17 600 September 90 000 67 500 R19 800 October 100 000 75 000 R22 000 November 120 000 90 000 R94 800 R112 000 B. Information identified from the Projected Income Statement: SEPTEMBER 2020 OCTOBER 2020 Projected Actual Projected Actual Metres sold 5 000 m 3 800 m 5 000 m 6 000 m Selling price per metre R100 R100 R100 R88 Cost price per metre R60 R60 R60 R60 Sales: cash R400 000 R310 000 R400 000 R132 000 : credit 90 000 70 000 100 000 396 000 Total sales 490 000 380 000 500 000 528 000 Cost of sales (300 000) (228 000) (300 000) (360 000) Gross profit 190 000 152 000 200 000 168 000 Director's fees 50 000 50 000 50 000 40 000 Wages: Office workers 9 200 9 200 9 200 11 040 Salary: Salesperson 20 000 20 000 20 000 0 Commission: Salesperson 0 0 0 52 800 Advertising 5 000 5 000 5 000 5 000 Packing materials 2 500 1 900 2 500 2 550 Delivery and installation of 14 000 14 000 14 000 16 800 carpets Staff training 15 000 0 15 000 40 000 40 Copyright reserved Please turn over

KZN Accounting 97 KZN Highflyers 2020 ANSWER SHEET 3.1 CASH BUDGET PROJECTED INCOME STATEMENT Nov. Dec. Jan. Nov. Dec. 2020 Jan. 2021 2020 2020 2021 2020 Printer bought Depreciation Insurance Loan received Loan repayments Interest 11 3.2 Thembi is preparing projections for the period commencing 1 November 2020. Thembi does not grant discount for early payment. Calculate the % of debtors who settle their accounts in the 2nd month following the credit sales transaction month. Workings Answer 3 Calculate the % of debtors written off as bad debts at the end of the 3 rd month following the credit sales transaction month. Workings Answer 4 3.3.1 Office workers are unhappy with the increase that Thembi gave them on 1 October 2020. Explain what she should say to them. Provide TWO points. Quote figures or a calculation. Explanations Figures/Calculations Point 1 Point 2 6 Copyright reserved Please turn over

KZN Accounting 98 KZN Highflyers 2020 3.3.2 Thembi pays her son, Jacob, to deliver and install carpets for customers. She budgets R2,80 per metre for this. Comment on the control of this expense. Quote figures or a calculation. 4 3.3.3 A new competitor commenced trading in the area on 1 September 2020. Provide figures to illustrate the impact on sales in September. ** 2 Explain THREE decisions that Thembi took in October in response to the new competitor. Quote figures or a calculation. Explanation (with figures) Decision 1 Decision 2 Decision 3 6 3.3.4 Calculate the actual amount payable to creditors in November 2020. Workings Answer 4