2020 KZN Prelim P1 QP_hlayiso.com_.pdf

education Department: Education PROVINCE OF KWAZULU-NATAL NATIONAL SENIOR CERTIFICATE GRADE 12 ACCOUNTING P1 PREPARATORY EXAMINATION SEPTEMBER 2020 Ceo C SESE ECE CORO RC OROC OES OCC OCC OCCOCOCOOOCOOCOeOu OT © MARKS: 150 TIME: 2HOURS This question paper consists of 10 pages and an answer booklet of 7 pages.

Downloaded from hlayiso.com Accountin mination September 2020 INSTRUCTIONS AND INFORMATION Read the following instructions carefully and follow them precisely. = Answer ALL the questions. 2. Aspecial ANSWER BOOK is provided in which to answer ALL the questions. 3. | Show workings in order to achieve part-marks. 4. You may use a non-programmable calculator. 5. You may use a dark pencil or blue/black ink to answer the questions. 6. Where applicable, show all calculations to ONE decimal point. 7. Write neatly and legibly. 8. Use the information and table below as a guide when answering the question. Try NOT to deviate from it. QUESTION 1: 60 marks; 45 minutes | Topic of the question This question integrates: Concepts Ordinary share capital Calculation of ratio’s Cash Flow Statement Cash Flow Statement and Notes QUESTION 2: 50 marks; 40 minutes Topic of the question This question integrates: Company transactions analysis Trade and other payables Balance Sheet, Notes and Balance sheet Interpretation. Note for Ordinary share capital Calculations of financial indicators Analysis and interpretation QUESTION 3: 40 marks; 35 minutes Topic of the question This question integrates: Concepts Notes and Interpretation Retained income Analysis and interpretation Copyright reserved Please turn over

, « - Downloaded from hlayiSO.COM), sectember2020 QUESTION 1 CASH FLOW STATEMENT AND NOTES (60 marks, 45 minutes) 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. capital employed; inflow of cash; interest on loan; outflow of cash; depreciation; working capital 1.1.1 An increase in creditors will indicate a/an ... 1.1.2 Shareholders’ equity added to the non-current liabilities is referred to as 1.1.3... is regarded as a non-cash item. 1.1.4 An increase in trading stock will indicate a/an ... (1x4) = (4) 1.2 NKANDLA LIMITED You are provided with information for the financial year ended 30 June 2020. REQUIRED: 1.2.1 Prepare the ‘Ordinary share capital’ note. (8) 1.2.2 Complete the Cash Flow Statement for the year ended 30 June 2020. (32) 1.2.3. The Cash Flow Statement reflects some important decisions taken by the directors. Apart from the dividends, identify TWO good decisions. Explain the effect of each decision on the company. Quote figures. (4) 1.2.4 Calculate the following for 2020: e Net asset value per share (NAV) (3) e Return on average shareholders’ equity (ROSHE) (5) 1.2.5 The directors are pleased that the operating efficiency of the business has improved. Quote and explain TWO financial indicators to support their opinion. (4) Copyright reserved Please turn over

Downloaded from hlayiso.com Accountin¢ nination September 2020 INFORMATION: A. Extract from the Income Statement on 30 June 2020: _ (R) Depreciation 61 000 Interest on loan 82 000 Net profit before tax 257 400 Income tax 75 600 B. Extract from the Balance Sheet on 30 June: 2020 2019 (R) (R) Fixed assets (at carrying value ) 1.505 400 1.201 500 Financial assets 195 000 185 000 Shareholders’ equity 7 683 200 4 495 400 Ordinary share capital 7 644 000 4 200 000 Retained income 39 200 295 400 Loan 400 000 560 000 SARS : income tax Cr 12 500 Dr 8 000 Shareholders for dividends 174 000 210 000 Cash and cash equivalent 2 922 000 2 000 Bank overdraft - 17 100 Cc. Shares: e Authorised share capital is 2 000 000 ordinary shares. e On 30 June 2019, 1 200 000 ordinary shares had been issued. e On 1 January 2020, 40 000 shares were repurchased at R4.10 e On 30 June 2020, all shares that were un-issued as at 30 June 2019 were issued. D. Dividends: e Interim dividends of 20 cents per share were declared and paid on 31 December 2019. e Final dividends were declared on 30 June 2020. E. Fixed assets: e Anold vehicle was sold at its book (carrying) value of R23 500 during the financial year. e Additional fixed assets were purchased during the financial year. F. Financial indicators: 30 June 2020 30 June 2019 Solvency 3.351 2.1:1 % gross profit on cost of sales 63% 51% % operating expenses on sales 31.5% 39.2% % operating profit on sales 12.7% 6.5% Copyright reserved Please turn over

A QUESTION 2 Downloaded from hlayiso.com ry Examination September 2020 BALANCE SHEET, NOTES AND INTERPRETATION (50 marks; 40 minutes) 2.1. COMPANY TRANSACTIONS The following information was extracted from the accounting records of Sizwe REQU Limited on 30 June 2020, the end of the accounting period. IRED: Analyse each transaction according to the headings provided. An example is com pleted for you. Example: EFT payment for audit fees due, R25 000. No. Account debited Account credited Amount 1Eg Audit fees Bank R25 000 TRANSACTIONS: A. On the 1 June 2020, the company board of directors authorised the Copyright reserved buy- back of 45 000 of the company’s shares from existing shareholders. A repurchase price of R5,00 above the average share price. An electronic transfer of R405 000 was made to shareholders for shares repurchased. (Two entries) There were two directors at the start of the accounting period. They earn the same directors fees. Directors fees, totaling R360 000, have been paid for the first half of the accounting period only. On 1 January 2020, a third director was appointed. His remuneration 10% lower than the other directors. Provide for the outstanding directors fees. Bright Sophie, the debtor who originally owed R32 000, has been declared insolvent. His estate paid 40 cents in a Rand. The balance must be written off as irrecoverable. No entries have as yet been made. (Two entries) (13) Please turn over

| i i Downloaded from hlayiso.com Accountin: nination September 2020 2.2 BERGVILLE LIMITED You are provided with information for the financial year ended 29 February 2020. REQUIRED: Prepare the Statement of Financial Position (Balance Sheet) on 29 February 2020. Show all workings. (28) INFORMATION: A. List of balances extracted on 29 February 2020, the end of the financial year. (R) Ordinary share capital 2 Retained income 280 000 Loan from Iniwe Bank ? Fixed assets at carrying value 2 Fixed deposit: Khula Bank 200 000 Trading stock 2 Creditors control 440 000 Bank (unfavourable) 25 000 Accrued expenses (expenses payable) 11 500 Net trade debtors ? SARS -— income tax (provisional tax payments) 525 000 Shareholders for dividends 2 Petty cash and cash float 2 B. Extract from the Bank Reconciliation Statement on 29 February 2020: Item Reason Amount Outstanding cheque Post-dated for 31 March 2020 R5 000 Cc. Loan : Iniwe Bank The loan statement received reflected the following: Balance on 1 March 2019 R920 000 Total repayment including interest R153 600 Interest capitalised R65 400 Balance on 29 February 2020 ? NOTE: The capital repayment will remain the same in the next financial year. Copyright reserved Please turn over

Acc D . ownloaded from hlayisg.ce IN eeptember 2020 D. Net profit and taxation: e After taking into account all relevant information, the net profit before tax was accurately calculated to be R1 800 000 e Income tax at the rate of 30% must still be brought into account. E. The following information/financial indicators were calculated after all adjustments had been taken into account: Current ratio 4.5:1 Trade and other receivables 58% of the current assets Acid test ratio 0.9:1 Debt/equity ratio 0.65 : 1 2.3. AUDIT REPORT You are provided with an extract of the independent auditor's report of Ekuvukeni Limited for the financial year ended 29 February 2020. REQUIRED: 2.3.1 What type of audit report did Ekuvukeni Ltd receive? Give a reason for your answer. (2) 2.3.2 To whomis an audit report addressed? Give a reason for your answer. (3) 2.3.3 Explain why the auditor mentioned the following in the report: e IFRS (2) « Companies Act (Act 71 of 2008) (2) INFORMATION: Extract from the audit report: In our opinion, the financial statements fairly present in all material respects the financial position of the company at 29 February 2020 as well as the financial results of its operations and the cash flows for the year ended. This is in accordance with the International Financial Reporting Standards (IFRS) and the manner required by the Companies Act (Act 71 of 2008) in South Africa. 50 Copyright reserved Please turn over

Accoun*-~ ~* QUESTION 3 Downloaded from hlayiso.com xamination September 2020 NOTES AND INTERPRETATION (40 marks; 35 minutes) 3.1 CONCEPTS Choose a description in COLUMN B that matches the user of financial Statements in COLUMN A. Write only the letters (A to D) next to the question numbers (3.1.1 to 3.1.3) in the ANSWER BOOK. COLUMN A COLUMN B 3.1.1] Trade unions A. | want to be assured that their investment in the 3.1.2] SARS B. | use the financial statements to make decisions 3.1.3 | Shareholders C. | monitor whether their members are paid fairly company is used wisely to manage the company D. | need to be assured that income tax is levied on the net profit correctly 3.2 MAHLABATHINI LIMITED: The information relates to the financial year ended 30 June 2020. REQUIRED: 3.2.1 Prepare the Retained Income note. 3.2.2 The company intends issuing an additional 100 000 shares in the next financial year. The directors proposed that a fair issue price would be R10.20 per share. As an existing shareholder what factors/ financial indicators would you assess in determining whether R10.20 per share is a fair issue price? Provide reasons for your choices. A shareholder, Khethiwe, owned 43% of the shares in issue on 30 June 2019. Calculate the minimum number of shares she must purchase in order to become the majority shareholder in the company. Koos Trimp (the CEO) has suggested that Khethiwe should be given the first option to purchase the additional shares before they are advertised to the public. What advice would you offer to the directors concerning this proposal? 3.2.3 Companies buy back shares from time to time. Explain TWO benefits of share buy-backs. Copyright reserved 3.2.4 3.2.5 3.2.6 Quote TWO financial indicators (with figures and trends) that indicate an improvement in the liquidity position of the business. The company paid back a large portion of the loan. Explain why this was a good decision. Quote TWO financial indicators (with figures). Calculate the dividend pay-out policy over the past two years. Provide a possible reason for the policy adopted. Quote figures. (3) (11) (4) (2) (4) (4) (4) (5) Please turn over

Accou Downloaded from hlayiso.co Examination INFORMATION: A. Extract from the Income Statement on 30 June: ID tember 2020 2020 2019 Interest on loan R17 000 R12 000 Income tax (30% of the net profit before tax) R90 000 R81 000 Shares: e The company is authorised to sell 400 000 shares. e 300 000 shares were in issue on 30 June 2019. e On 1July 2019 30 000 shares were repurchased at R9,00 per share. The average share price was R7,00. These shares did not qualify for any interim and final dividends during the financial year. e 270000 shares were in issue on 30 June 2020. Financial indicators on 30 June: 2020 2019 Current ratio 1.9.1 1.4.1 Acid test ratio 07:1 0.8: 1 Average debtors collection period 38 days 57 days Average creditors payment period 30 days 63 days Debt/equity ratio 0.2: 1 0.5: 1 Earnings per share (EPS) 84 cents 63 cents Dividends per share (DPS) 34 cents 52 cents Return on shareholders’ equity (ROSHE) 11% 9% Return on capital employed (ROTCE) 20.8% 22.3% Net asset value per share (NAV) 4 033 cents} 490 cents Market price on JSE 850 cents | 485 cents Interest on investment 7% 5% Interest rate on loans 11% 10% 40 TOTAL MARKS : 150 Copyright reserved Please turn over

Accoistin~ 94 Downloaded from hlayiso.com GRADE 12 ACCOUNTING FINANCIAL INDICATOR FORMULA SHEET Gross profit X 4100 Sales 1 Gross profit X 100 Cost of sales 1 Net profit before tax X 100 1 Sales Net profit after tax X 100 Sales 41 Operating expenses X 100 Sales 1 Operating profit x 100 4 Sales Total assets : Total liabilities Current assets : Current liabilities Average trading stock Xx 365 (Current assets — Inventories) : Current liabilities Cost of sales 1 (Trade and other receivables + Cash and cash equivalents) : Current liabilities Cost of sales Average trading stock Average debtors X 365 1 Credit sales Trading stock xX 365 Cost of sales 1 Average creditors X 365 Credit purchases 1 Average creditors X 365 1 Cost of sales Long-term liabilities : Shareholders’ equity Net profit after tax X 100 1 Number of issued shares Net income after tax X 100 Average shareholders’ equity 1 Net income after tax + Interest on loans x 100 Average Shareholders’ equity + Average Long-term liabilities 1 Shareholders’ equity Xx 1400 Dividends forthe year X 100 Dividends per share xX 100 Number of issued shares 1 Number of issued shares 1 Earnings per share 41 Copyright reserved