2020 FS Prelim P2 QP_hlayiso.com_.pdf

Downloaded from hlayiso.com a education Department of Education FREE STATE PROVINCE PREPARATORY EXAMINATION GRADE 12 ACCOUNTING P2 SEPTEMBER 2020 MARKS: 150 TIME: 2 HOURS This question paper consists of 13 pages, a formula sheet and 11-page answer book. Copyright reserved Please turn over

Downloaded from hlayiso.com FS/September 2020 Grade 12 Prep. Exam INSTRUCTIONS AND INFORMATION: Read the following instructions carefully and follow them precisely. 1. Answer ALL questions. 2. A special ANSWER BOOK is provided in which to answer ALL questions. 3. Show ALL workings to earn part-marks. 4. You may use a non-programmable calculator. 5. You may use a dark pencil or blue/black ink to answer questions. 6 Where applicable, show ALL calculations to ONE decimal point. 7. A data (formula) sheet is attached to this question paper. You may refer to this if necessary. 8. Write neatly and legibly. 9. Use the information in the table below as a guide when answering the question paper. Try NOT to deviate from it. QUESTION 1: 35 marks; 25 minutes Topic: This integrates: Bank reconciliation Reconciliations & Age Debtors Age Analysis Analysis Creditors' reconciliation Internal control QUESTION 2: 40 marks; 35 minutes Topic: This integrates: VAT calculations Stock Valuation and VAT Inventory valuation Internal control QUESTION 3: 40 marks; 35 minutes Topic: This integrates: Factory overhead costs Manufacturing Calculations BEP and Comment QUESTION 4: 35 marks; 25 minutes Topic: This question integrates: Cash Budget Budgeting Calculations Problem-solving Copyright reserved Please turn over

Downloaded from hlayiso.com FS/September 2020 Grade 12 Prep. Exam QUESTION 1: RECONCILIATIONS (35 marks; 25 minutes) 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 An external auditor will want to inspect the Bank Reconciliation Statement at the end of each month. (1) 1.1.2 A debit balance on the Bank Statement reflects an unfavourable balance. (1) 1.1.3 An issued cheque that has been lost must be cancelled in the CRJ. (1) 1.2 BANK RECONCILIATION: Transactions from the records of AB Stores for June 2020, are provided. REQUIRED: Analyse the transactions according to the columns provided in the ANSWER BOOK. • Show amounts only for the Cash Journals and the Reconciliation Statement. • Indicate a 'No entry' with an X. (9) Example: Cheque No. 614 for R750 appeared in the Cash Payments Journal, but not on the bank statement. Bank reconciliation No entry Cash journals statement No. CRJ CPJ Debit Credit E.g. 750 INFORMATION: Transactions for June 2020: A. The bank statement showed an overdraft of R3 640 on 1 June 2020. B. A deposit of R8 500 that was made on 29 June 2020 in favour of AB Stores did not appear on the June bank statement. Copyright reserved Please turn over

Downloaded from hlayiso.com FS/September 2020 Grade 12 Prep. Exam C. A cheque for R2 640, received from a debtor S Louw, was returned by the bank marked R/D. The cheque was in settlement of her account of R2 700. D. A cheque issued to Jet-savers for R400 was reported lost. This cheque must be cancelled and replaced by cheque No. 209. E. Cheque No. 183 appeared on the June bank statement with the correct amount of R7 850. It was recorded as R8 750 in the June Cash Payments Journal. F. A cheque (No. 584) for R1 430 appeared as a payment on the June bank statement. An investigation revealed that this was a cheque issued by BC Stores, and was recorded in error on the statement of AB Stores. 1.3 DEBTORS AGE ANALYSIS Chelsey Traders sell goods for cash and on credit. REQUIRED: 1.3.1 Why is the preparation of a debtors' collection schedule and debtors' age analysis important internal control measures? (4) 1.3.2 Calculate the percentage of debtors' accounts that comply with the credit terms. (3) 1.3.3 Explain TWO measures to prevent losses due to bad debts in the future. (4) INFORMATION: Debtors' age analysis on 28 February 2018: 30–60 61–90 MORE THAN TOTAL CURRENT DAYS DAYS 90 DAYS R R R R R 600 400 72 048 48 032 312 208 168 112 The credit period is 60 days. Copyright reserved Please turn over

Downloaded from hlayiso.com FS/September 2020 Grade 12 Prep. Exam 1.4 CREDITORS' RECONCILIATION Generation Suppliers received a statement of account from a creditor, Future Traders. The balance on the statement did not agree with that on the account of Future Traders in the Creditors Ledger of Generation Suppliers. REQUIRED: 1.4.1 Although Future Traders offers credit terms of 60 days, Generations Suppliers prefers to settle their account within 30 days during certain months. Provide TWO points to indicate that it is not a good decision. (2) 1.4.2 Complete the table in the ANSWER BOOK to show how the differences must be treated to reconcile the Creditors Ledger Account balance with the statement balance. Write the amounts in the appropriate columns and indicate the increase or decrease with a (+) or (-) with each amount. Total the columns to show the correct balance at the end of February 2020. (10) INFORMATION: Balance of Future Traders in the Creditors Ledger of Generations Suppliers R21 130 Balance on the statement received from Future Traders R32 600 The following differences were identified: A. An invoice for R13 300 received from Future Traders was correctly recorded in the Creditors Ledger Account. The amount was incorrectly recorded as R11 200 on the statement. B. Generation Suppliers entered a 10% discount relating to a payment of R3 000 on 19 February 2020. Future Traders did not approve this discount stating that the payment was received late. C. Goods returned, R500, appeared on the statement received. The bookkeeper of Generation Suppliers forgot to record this transaction. D. Purchases of R3 035 from Future Traders were recorded as a debit note in the Creditors Ledger account. E. A direct transfer of R7 000 by Generation Suppliers was recorded in the Cash Payment Journal on 27 February 2020. A discount of R700 for early payment was also recorded. The statement of account from Future Traders was dated 25 February 2020. 35 Copyright reserved Please turn over

Downloaded from hlayiso.com FS/September 2020 Grade 12 Prep. Exam QUESTION 2: INVENTORY VALUATION & VAT (40 marks; 35 minutes) 2.1 INVENTORY VALUATION Battery Specialist, owned by Thabo Lefo, sells two types of AA 6-pack unit batteries, Longlast and Petcell. The business uses the periodic inventory system to record their stock. • FIFO method is used for Longlast • Weighted average method is used for Petcell REQUIRED: 2.1.1 Calculate the following for Longlast AA 6-pack units: • The value of the closing stock on 31 October 2019. (6) 2.1.2 • Calculate the average stock-holding period. Note that the cost of sales amounted to R483 750 for the year ended 31 October 2019. • Comment on your findings above. (6) 2.1.3 The owner is concerned about the sales of Petcell AA 6-pack units and is considering to discontinue this product line. Calculate the following for Petcell AA 6-pack units for the year ended 31 October 2019: • The value of the closing stock. (5) • The cost of sales of the Petcell AA 6-pack units. (3) • The stock turnover rate for the year. (5) 2.1.4 Give TWO reasons why the owner must discontinue the sales of Petcell AA 6-pack units. (4) Copyright reserved Please turn over

Downloaded from hlayiso.com FS/September 2020 Grade 12 Prep. Exam INFORMATION: A. Stock valuation methods: • FIFO method for Longlast AA 6-pack units • Weighted average method for Petcell AA 6-pack units B. Stock records showed the following balances: Longlast AA 6-pack units Petcell AA 6-pack units Date Number Price Total Number of Price Total of units per unit value units per unit value 1 Nov 2 000 R20 R40 000 800 R35 R28 000 2018 31 Oct ? ? ? 1 850 ? ? 2019 C. The following purchases and returns were reflected during the year: Longlast AA 6-pack units Petcell AA 6-pack units Number Price per Total Number Price per of Total value unit value of units unit units TOTALS: 35 000 756 000 3 000 120 200 Nov 2018 (1 000) R20 (20 000) 500 R35 R17 500 Jan 2019 17 000 R20 R340 000 - - March 2019 7 000 R22,50 R157 500 1 000 R39, 70 R39 700 June 2019 9 000 R23 R207 000 - - - June 2019 (2 000) R23 (R46 000) 1 500 R42 R63 000 Sept 2019 5 000 R23,50 R117 500 - - - D. Sales for the year were reflected as follows: Longlast AA 6-pack units Petcell AA 6-pack units Number of Selling Total value Number of Selling Total value Units price units Price 23 500 R35 R822 500 1 950 R75 R146 250 E. Due to good internal control measures, there were no missing items. Copyright reserved Please turn over

Downloaded from hlayiso.com FS/September 2020 vlaue 12 riep. Cxaill 2.2 VAT Battery Specialist is a registered VAT vendor and uses the invoice basis to record VAT. The standard VAT rate of 15% is applicable where necessary. The information relates to the VAT period ended 31 August 2020. REQUIRED: 2.2.1. Calculate the VAT amount payable/receivable to/from SARS. (9) 2.2.2 The internal auditor discovered that two large credit sales transactions for R598 000 during August 2020 were not recorded in the respective journal. The owner insists that these will be recorded during September, due to current cash flow problems. e Give ONE reason why the auditor would not be satisfied with this explanation. (2) INFORMATION: ; . VAT VAT Details of transactions exccusive) VAT linctusive Invoices issued to credit sales customers R1 415 880 Invoices received from suppliers | R952 000 Credit notes received from . RQ 240 suppliers Discount allowed to debtors for R5 520 early payments of accounts Debtors accounts written off as R15 600 R17 940 bad debts Trading stock taken by owner for R252 personal use. Copyright reserved Please turn over

Downloaded from hlayiso.com FS/September 2020 Grade 12 Prep. Exam QUESTION 3: MANUFACTURING (40 marks; 35 minutes) 3.1 SOS MANUFACTURERS The business specialises in the production of security alarms. The financial year ended on 30 September 2019. REQUIRED: Calculate and complete the following on 30 September 2019: 3.1.1 Direct materials issued to the factory for the year. (7) 3.1.2 The production cost of finished goods for the year. (5) 3.1.3 Factory Overhead Cost Note for the year. (13) 3.1.4 Complete the Production Cost Statement for the year. (7) INFORMATION: A. The following balances appeared in the stock accounts: 30 September 1 October 2019 2018 Raw materials stock R69 700 R54 700 Indirect materials stock R2 730 R14 100 Work-in-progress stock ? R65 050 Finished goods stock R79 500 R100 450 B. Purchases of raw materials during the year amounted to R1 135 000. Returned raw materials valued R4 700, has not been recorded. C. These invoices were omitted in connection with deliveries: • To SOS Manufacturers R3 500 • From SOS Manufacturers R53 080 D. Trade discount of R3 800 on raw materials had not been granted. SOS Manufacturers was entitled to this discount. E. Monthly insurance has remained constant for the last two years. Insurance paid for the year amounted to R121 520 and this included insurance paid in advance for October and November 2019. Insurance for the current year to be allocated to the selling and distribution department is R44 640 and R22 320 for the administration department and the rest for the factory. Copyright reserved Please turn over

Downloaded from hlayiso.com FS/September 2020 Grade 12 Prep. Exam F. Indirect material bought during the year was R250 400. Indirect material used is divided between the factory, administration, and selling and distribution department in the ratio of 1 : 1 : 3. G. Sales for the year were R6 282 375. The business make use of 150% mark-up on cost price. H. The rent for the selling and distribution department amounts to R171 500 for the current financial year. Rent is distributed between the departments: factory, administration, and selling and distribution as follows: 60% for the factory, 5% for administration and the balance for selling and distribution. I. The following salary and wage expenses were incurred: Description Gross Contributions salaries/ Medical wages UIF aid Factory indirect labour R312 800 R6 352 R3 128 Administration clerks R80 000 R1 650 R1 600 Direct labour R790 000 including contributions (production) Copyright reserved Please turn over

Downloaded from hlayiso.com FS/September 2020 Grade 12 Prep. Exam 3.2 H2O MANUFACTURES H2O is a small manufacturing business that produces plastic water bottles. Owned by Wally. REQUIRED: 3.2.1 Calculate the break-even point for H2O on 29 February 2020. (4) 3.2.2 Explain why Wally should be concerned about the profitability and sustainability of the business. Give TWO points with figures to support your answer. (4) INFORMATION: 29 February 2020 Total Per unit Variable costs: R11,75 Direct materials costs R607 750 R5,50 Direct labour costs R508 300 R4,60 Selling & distribution costs R182 325 R1,65 Fixed costs: R795 900 Factory overheads cost R548 400 Administration costs R247 500 Selling price per unit R18,85 Every year they sell all the goods they produced: 29 February 28 February 2020 2019 Units produced and sold 110 500 98 000 units units Break-even point ? 78 000 units 40 Copyright reserved Please turn over

Downloaded from hlayiso.com FS/September 2020 Grade 12 Prep. Exam QUESTION 4: CASH BUDGETS (35 marks; 25 minutes) You are provided with the Cash Budget of Rian Traders for three months ended 31 December 2019. The business is owned by Rian Green. REQUIRED: 4.1 Explain why a business needs to prepare a Cash Budget every year. (2) 4.2 Calculate the expected receipts from debtors for November 2019. (5) 4.3 Calculate the amounts indicated by A–D in the Cash Budget. (4) 4.4 The rent income was increased by 9% on 1 November 2019. Calculate the rent income amount for October 2019. (3) 4.5 In your opinion, is Rian's capital contribution in November sufficient to support this business venture? Give ONE reason with figures to support your answer. (3) 4.6 Refer to the salaries and wages in the Cash Budget. • Calculate the percentage increase granted to the employees on 1 November 2019. (3) • In your opinion, will the employees be satisfied with this increase? Briefly explain. (3) 4.7 As the internal auditor you discover that the actual motor vehicle expenses for December 2019 were R9 600. Give TWO points that you would include in your internal auditors' report to Rian. (4) 4.8 A new vehicle will be purchased for R240 000 on 30 November 2019. The business will pay a deposit of 15% and the balance will be financed by Wesrand Bank. Rian will repay the capital portion to Wesrand Bank in equal monthly instalments over four years from 31 December 2019. Interest will be paid monthly to Wesrand Bank on the outstanding balance at a rate of 11% p.a. • Calculate the interest payable to Wesrand Bank in December 2019. (5) • Calculate the monthly repayments of the capital portion of the loan to Wesrand Bank. (3) Copyright reserved Please turn over

Downloaded from hlayiso.com FS/September 2020 Grade 12 Prep. Exam INFORMATION EXTRACT FROM CASH BUDGET 2019 2019 2019 October November December EXPECTED RECEIPTS Cash sales (75% of total sales) 180 000 150 000 175 000 Debtors (30 days less 5%) 52 500 ? 47 500 Rent income ? 10 464 ? Fee Income 2 000 ? ? Interest on fixed deposit ? ? Capital 100 000 247 100 325 000 C EXPECTED PAYMENTS Drawings 17 500 12 500 12 500 Motor vehicle expenses 6 500 6 500 6 500 Fixed deposit 60 000 Deposit on vehicle purchased ? Sundry expenses ? ? ? Monthly repayments to Wesrand ? Interest paid to Wesrand ? Salaries and wages 108 000 110 160 110 160 245 000 320 000 380 000 Cash surplus/-deficit 2 100 5 000 (143 500) Cash at the beginning of the month 92 000 A B Cash at the end of the month 94 100 B D 35 TOTAL: 150 Copyright reserved Please turn over

Downloaded from hla Ulaue 12 riep. Cxaim yiso.com FS/September 2020 GRADE 12 ACCOUNTING FINANCIAL IN DICATOR FORMULA SHEET Gross profit X 100 1 Sales Gross profit. X 100 Cost of sales 1 Net profit before tax X 100 Net profit aftertax X 100 Sales 1 Sales 1 100 Operating profit X 100 1 Operating expenses X Sales =| Sales Total assets : Total liabilities Current assets : Current liabilities (Current assets — Inventories) : Current liabilities Non-current liabilities : Shareholders’ equity (Trade & other receivables + Cash & cash equivalents) : Current liabilities Average trading stock X 365 Cost of sales 1 Cost of sales Average trading stock Average debtors X 365 Average creditors X 365 Cost of sales 1 Credit sales 1 Net income after tax X 100 Net income aftertax xX 100 Average shareholders’ equity 1 Number of issued shares 1 Net income before tax + Interest on loans X 100 Average shareholders’ equity + Average non-current liabilities 1 Shareholders’ equity X 100 a = Dividends forthe year_ X 100 Number of issued shares 1 Number of issued shares 1 Interim dividends X 100 Final dividends X 100 Number of issued shares 1 Number of issued shares 1 X 100 Dividends forthe year X 100 1 Dividends per share 1 Net income after tax Earnings per share Total fixed costs Selling price per unit — Variable costs per unit Copyright reserved