Accounting Grade 12 Paper 1 KZN Prelim 2022 Question Paper

Downloaded from hlayiso.com K\NAZULU-NATAL PROVINCE EDUCATION REPUBLIC OF SOUfH AFRICA NATIONAL SENIOR CERTIFICATE [ GRADE 12 ] � �---------------------------------------------�� :: II ACCOUNTING P1 • !� II II II II II PREPARATORY EXAMINATION II II II II II 11 II II SEPTEMBER 2022 11 11 II � � � ����������������������������9�9�999��99999�_99�� MARKS: 150 TIME: 2 HOURS This question paper consists of 10 pages, a formula sheet and a 10-page Answer Book.

Downloaded from hlayiso.com NSC INSTRUCTIONS AND INFORMATION Read the following instructions carefully and follow them precisely. 1. Answer ALL the questions. 2. A special 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. VO 7. . C:,· If you choose to do so, you may use the Financial Indicator F it t:1la Sheet attached at the end of this question paper. The use of this formula s e: Is NOT compulsory. � 8. 9. Write neatly and legibly. e�"<:j- Use the information and table below as a guide when answering the question. Try NOT to deviate from it. � ?).� QUESTION MARKS MINUTES 1 Tangible/ fixed asset n , 60 50 Comprehensive lncifme 2 Notes to the a ial Statements, Cash Flow 40 30 Statement inancial Indicators 3 Inter; �ation of Financial Statements 35 30 4 0 Corporate Governance and Audit report 15 10 TOTAL 150 120 Copyright reserved Please turn over

Downloaded from hlayiso.com Acpovwnfoaded from Stanmorephysics-eortey Examination September 2022 QUESTION 1: TANGIBLE ASSETS NOTE AND STATEMENT OF COMPREHENSIVE INCOME (60 Marks; 50 Minutes) 1.1 CONCEPTS Choose the correct term from COLUMN B to match the description in COLUMN A. Write only the letter (A — E) next to the question number (1.1.1 to 1.1.3) in the ANSWER 1.2 BOOK. COLUMN A COLUMN B 1.1.1. Sets out the rights, duties and}A Matching concept responsibilities of shareholders and directors. 1.1.2 The total number of shares that a company |B International Fi ial can issue. Reporting S rds (IFRS) 1.1.3. Revenue generated during an accounting |C Memorandum of period should be in line with the expenses noe n (MOH) during the same period. D autotsed share capital ey 3x1 DUNDEE LTD of The information relates to the financial year cage February 2022. REQUIRED: PA 1.2.1. Refer to Information B (i ny Calculate the missing unts denoted by (a) to (d) on the Fixed Asset Note. 1.2.2 Complete the Staten of Comprehensive Income (Income Statement) for the year ended 28 ary 2022. Certain figure: provided in the ANSWER BOOK. Copyright reserved Please turn over (3) (19) (38)

INFORMATION: A. | EXTRACT FROM THE PRE-ADJUSTMENT TRIAL BALANCE ON 28 FEBRUARY 2022 Balance sheet accounts Loan: Triumph Bank 630 000 Fixed deposit: Wayde Bank 1 000 000 Debtors control 186 000 Trading stock ? SARS (Income tax) (Dr) 500 000 Provision for bad debts (1 March 2021) 4 830 Consumables on hand (1 March 2021) 820 Nominal accounts Sales 7 816 150 Cost of sales 2 Service fee income 350 000 Directors fees 550 000 Audit fees 88 410 Salaries and wages, 681 600 Rent income 87 465 Interest on fixed deposit 80 000 Insurance 44 700 Bad debts 6 730 Packing material 4600 Sundry Expenses ? B. Additional information and adjustments: (i) FIXED/TANGIBLE ASSETS: Buildings Vehicles | Equipment Carrying value at beginning of year 1516 400 330 000 61 100 Cost price 1 516 400 900 000 615 000 Accumulated depreciation - (570 000) (553 900) | Movements Additions (a) 411 000 (d) Disposal - (b) - Depreciation : c 66 099 Carrying value at end of year 2 946 400 Cost price Accumulated depreciation Downloaded from hlayiso.com NSC accohbawAloaded from StanmorephysicsaGOMy —rannaven copier eves e A vehicle, cost R180 000, was sold on 31 December 2021 for R70 000 cash. Accumulated depreciation on the vehicle sold was R62 400 on 1 March 2021. The new vehicle was purchased on 31 December 2021. Vehicles are depreciated at 20% p.a. on diminishing balance. New equipment was bought on 1 January 2022. Equipment is depreciated at 10% p.a. on cost. Copyright reserved Please turn over

Downloaded from hlayiso.com “AcBevimRiaded from Stanmorephysics?eomtcy Examination September 2022 (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xii) (xiii) Copyright reserved A credit note for R35 700 issued to a debtor for goods returned on 27 February 2022, was recorded as an invoice, in error. The business prices its goods at a mark-up of 70% on cost. Note that trade discount totaling R360 000 was allowed on invoices to certain customers. Packing Material on hand on 28 February 2022 amounted to R560. The consumable stores on hand on 1 March 2021 were not reversed. No entries were made for stock stolen at the beginning of January 2022. The insurance company deposited R32 000 into the business bank account in respect of the insurance claim. Dundee Ltd must bear the stock loss of 20%. This must still be recorded. A debtor, B Zulu, with an outstanding balance of R2 000, has left the country. His account must be written off as irrecoverable. The provision for bad debts must be adjusted to R3 630. Rent income of R8 500 per month was decreased by R850 per month with effect from 1 June 2021, due to the poor condition of the premises. The premises were upgraded, and the rent was thereafter increased by 10% p.a. effective from 1 January 2022. The tenant has not paid the rent for February 2022 An employee, S Zwane, who commenced work on 1 February 2022, was omitted from the salaries journal. Details of his salary for February 2022 is as following: Deductions Net salary Contributions 3 405 10,095 ? Note: Business contribute 13% of the gross salary All contributions are recorded-as part of salaries and wages. An insurance premium of R27 000 for company vehicles was paid on 31 May 2021 for the period of 1 June 2021 to 31 May 2022. The loan statement from Tholeni bank on 28 February 2022 reflected the following: Balance at the Beginning of the financial year R1 470 000 Repayments during the year R840 000 Interest capitalized 2? Balance at the end of financial year R750 000 Income tax for the financial year was calculated as R540 000. This is 30% of the net profit before tax. 60 Please turn over”

Downloaded from hlayiso.com acculdaynloaded From StanmorephySsics, COM, ri wr cope coe NSC QUESTION 2: NOTES TO FINANCIAL STATEMENTS, CASH FLOW STATEMENT AND FINANCIAL INDICATORS (40 marks; 30 minutes) You are provided with information relating to Ladysmith Limited, for the financial year ended 28 February 2022. REQUIRED: 2.1 Prepare the following notes to the Financial Statements on 28 February 2022: 2.1.1 Ordinary share capital (5) 2.1.2 Retained income (9) 2.2 Complete the Cash Flow Statement for the year ended 28 February 2022. Certain figures are provided in the ANSWER BOOK. (18) 2.3. Calculate the following financial indicators for the year ended 28 February 2022: 2.3.1 % operating profit on sales (2) 2.3.2 Net asset value per share (NAV) (3) 2.3.3 Debt-equity ratio (3) Copyright reserved Please turn over

. Downloaded from hlayiso.com AcoNMHoaded from Stanmorephysics!CeAry &emmation September 2022 INFORMATION: A Extract from the Statement of Comprehensive Income (Income Statement) for the year ended 28 February 2022: Sales : R2 660 000 Cost of sales R1 330 000 Depreciation 232 300 Interest expense 128 000 Operating profit 691 600 Net profit before tax 747 000 Income tax 224 100 B Extract from the Statement of Financial Position (Balance Sheet) on 28 February: 2022 2021 Ordinary shareholders’ equity 2 870 900 2? Ordinary share capital 2710 000 1 770 000 Retained Income 190 900 2 Non-current liabilities (15% p.a.) 892 000 1 180 000 Investment in fixed deposit ? 330 000 Cash and cash equivalent 321 500 5 000 Bank overdraft - 92 000 Fixed/Tangible assets carrying value 3 372 300 2 937 600 SARS (Income tax) 45 000 Dr 17 500 Cr Shareholders for dividends 271 000 192 000 Cc Share capital The business is registered with an authorised share capital of 800 000 ordinary shares. 1 March 2021 The issued share capital consisted of 480 000 ordinary shares. 1 March 2021 200 000 ordinary shares were issued. 1 January 2022 |2500 ordinary shares were repurchased from a_ retired shareholder at a total cost of R12 500. This transaction was recorded D Dividends The 2022 financial records reflected R348 500 paid for dividends. E Fixed assets e Part of the building was sold during the financial year, R583 000. e Equipment was purchased during the financial year. [40] Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded from Stanmorephysics.com. -—--. --r-~--- ~--- QUESTION 3: INTERPRETATION OF FINANCIAL STATEMENTS (35 marks; 30 minutes) KHOMBINDLELA LIMITED AND THANDUYISE LIMITED You are provided with information relating to two companies which operate in the same industry. Njabulo Khumalo own shares in both companies. NOTE: Where comments or explanations are required, quote financial indicators, figures and trends to support your answer. REQUIRED: 3.1 Liquidity: Identify the company that is managing its liquidity more efficiently. Quote THREE financial indicators, with figures, to support your choice. (6) 3.2 Returns, earnings and dividends: e Explain whether the shareholders of Khombindlela Ltd should be satisfied with their returns on investment. Quote figures. (2) The directors of Thanduyise Ltd changed their dividend pay-out policy. « Explain this change. Quote figures. (3) e Explain why you consider this change to be either a responsible or an irresponsible decision. Provide TWO point. (4) e Njabulo feels that the dividends he received in Thanduyise Ltd is better than that of Khombindlela Ltd. Explain why you agree with him. Quote figures. (4) 3.3 Risk and gearing: Compare the risk and gearing of each company and explain which company is managing debt more effectively. Quote TWO financial indicators, with figures. (6) 3.4 Shares and share holding: 3.4.1 Njabulo, the majority shareholder of Thanduyise Ltd, was not aware that directors issued additional shares during the financial year. Explain why he wants to maintain his position as the majority shareholder. Provide ONE point. (2) 3.4.2 Calculate the number of shares that he must purchase to achieve this objective, and the amount he will require to purchase these shares. (4) 3.4.3. What advice would you offer Njabulo about his shares in Knhombindlela Ltd? Provide TWO points. Quote figures. (4) Copyright reserved Please turn over

. Downloaded from hlayiso.com AcBownfoaded from Stanmorephysics esr Examination September 2022 INFORMATION: A. Financial indicators, interest rate and market price of shares: Khombindlela Ltd Thanduyise Ltd 2022 2021 2022 2021 Debt / equity ratio 0,5:1 02:1 0,2:1 0,6: 1 Current ratio 24:1 2,1:1 18:1 1,9:1 Acid-test ratio 0,7:1 0,8:1 4,1:1 09:1 Stock turnover rate 5,6 times | 7,4 times | 9,9 times | 9,5 times Debtors’ average collection period 42 days 38 days 34 days | 32 days Earnings per share (cents) 99 cents 112 cents | 83cents | 64 cents Dividends per share (cents) 85 cents 95 cents | 79 cents | 33 cents Dividend pay-out rate 86 % 85 % 95 % 51% % Return on average equity 8,3% 9,2% 9.4% 6,8% % Return on average capital employed 11,9% 13,4% 13,4% 9,8% Net asset value per share (cents) 1195 cents | 1192 cents | 932 cents | 943 cents B. Additional Information: Market price on stock exchange 1177 cents | 1186 cents | 945 cents | 940 cents Interest rate on loans 12,5% 12,5% 12,5% 12,5% Interest rate on fixed deposits 8,5% 8,5% 8,5% 85% C. Shares and shareholding of Njabulo Khumalo: Khombindlela Ltd Thanduyise Ltd 2022 2021 2022 2021 Total number of shares in issue in 900 000 900 000 4 040 000 850 000 each company Shares owned by Njabulo 225 000 225 000 460 000 460 000 % shareholding in each company 25% 25% ? 54,1% 35 Copyright reserved Please turn over

Downloaded from hlayiso.com Downloaded from Stanmorephysics..com. Sone nceeets pepeeniees eee QUESTION 4 CORPORATE GOVERNANCE AND AUDIT REPORT (15 Marks; 10 Minutes) 4.1. CORPORATE GOVERNANCE REQUIRED: 4.1.1 Explain what is meant by good corporate governance and explain why it is important to the shareholders. (3) 4.1.2 Provide ONE possibie reason why Freedom Book says he will vote against the proposal by Mngoma Ltd. (2) 4.1.3 Provide TWO points of advice on how the other directors should handle this matter. (4) INFORMATION LUTHULI LIMITED: This information relates to the financial year ended on 28 February 2022. Freedom Book is the CEO of the company, there are two other executive directors. Mngoma Ltd, a respected company with a reputation for good corporate governance, has made an offer to purchase the remaining 2 550 000 of the 6 000 000 shares in Luthuli Limited at a price which is considerably more than the current market value. One company director has been suspected by media houses of irregular activities/ decisions in the past. Whilst other directors feels that this is a very generous offer and are in favour of accepting it, Freedom indicated that as a majority shareholder, he would use his status to vote against this proposal and succeed. 4.2, AUDIT REPORT REQUIRED: 4.2.1 Choose the correct word from those given in brackets. Give a reason. Zululand Ltd received a /an ( qualified/unqualified/disclaimer) audit report. (2) 4.2.2 Explain TWO consequences of this audit report for the company and/or the CEO. (4) EXTRACT FROM REPORT OF THE INDEPENDENT AUDITORS Basis for our opinion The company's procurement policy states that purchases over R250 000 must be approved by the board of directors and supported by three quotations from independent suppliers. During the year under review the company purchased two vehicles at a cost of R900 000. This was approved by the CEO without reference to the Board. Only one quotation was received. Audit opinion Because of the significance of this matter, we have not been able to obtain sufficient audit evidence to provide a basis for an opinion. Accordingly, we do not express an opinion on the financial statements of Zululand Ltd for the year ended 30 June 2022. Zibani & Myeza Associates. CA (SA) 15 TOTAL MARKS: 150 Copyright reserved Please turn over

Downloaded from hlayiso.com acotngtoaded from Stanmorephysicsreenry Examination September 2022 GRADE 12 ACCOUNTING FINANCIAL INDICATOR FORMULA SHEET Gross profit X 100 Sales 4 Gross profit X 100 Cost of sales 1 Net profit before tax X 100 Sales 4 Net profit after tax X 100 Sales 1 Operating expenses X 100 Sales 1 Operating profit X 100 Sales 1 Total assets : Total liabilities Current assets : Current liab ilities (Current assets — Inventories) : Current liabilities Non-current liabilities : Sharehold ers’ equity (Trade and other receivables + Cash and cash equivalents) : Current liabilities Average tradingistock Xx 365 Cost of sales Cost of sales 4 Average trading stock Average debtors*X 365 Average creditors X 365 Credit sales 4 Cost of sales 4 Net income after tax xX 100 Net profit after tax X 100 ; A Number of issued shares 1 Average shareholders’ equity 1 (*See note below) x 100 Net income after tax + Interest on loans Average Shareholders’ equity + Average non-current liabilities 1 Earnings per share 1 Shareholders’ equity X 100 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 Dividends per share X 100 Dividends for the year _ X 100 Net income after tax 4 Total fixed costs Selling price per unit — Variable costs per unit NOTE In this case, if there is a change in the number of issued shares during a financial year, the weighted-average number of shares is used in practice. Copyright reserved