Accounting Grade 12 Paper 1 MP Prelim 2022 Question Paper

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE GRADE 12 ACCOUNTING P1 SEPTEMBER 2022 MARKS: 150 TIME: 2 hours This question paper consists of 10 pages, 1 formula sheet and a 11-page answer book. Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 2 MDE/September 2022 NSC Question paper INSTRUCTION AND INFORMATION Read the following instruction 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 pert-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. If you choose to do so, you may use the Financial Indicator Formula Sheet; attached at the end of this question paper. The use of this formula sheet is NOT compulsory. 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 TOPIC MARKS MINUTES 1 Statement of Financial Position 50 40 Cash Flow Statement and Financial 2 35 28 Indicators 3 Interpretation of Financial Information 45 36 Corporate governance and audit of the 4 20 16 company TOTAL 150 120 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 3 MDE/September 2022 NSC Question paper KEEP THIS PAGE BLANK Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 4 MDE/September 2022 NSC Question paper QUESTION 1: NOTE AND STATEMENT OF FINANCIAL POSITION. (50 marks; 40 minutes) KELLY LTD REQUIRED: Refer to information A – F 1.1 Prepare the Retained Income Note on 28 February 2022. (11) 1.2 Complete the Statement of Financial Position (Balance Sheet) for the year ended 28 February 2022. (27) NOTE: Show workings, Certain figures are provided in your answer book. 1.3 The CEO, Paul Joe, owns 42% of the issued shares on 28 February 2022. The board of Directors wants to issue the unissued shares in the next financial year. 1.3.1 Calculate the number of shares that Paul must buy to gain control of the company. (4) 1.3.2 Paul wants to buy shares at the current Net asset value without advertising them to the public. As an existing shareholder, why would you not be satisfied with this arrangement? Explain. Provide TWO points. (4) 1.4 Kelly Ltd is planning to spend R500 000 on staff development and training over the next two years. Explain where this amount should be shown in the published annual report, and provide a reason for your answer. (4) INFORMATION: A. The following balances were extracted from the records of KELLY LTD on 28 February 2022: R Ordinary share capital ? Retained income (1 March 2021) 57 480 Fixed assets at carrying value 3 940 900 Fixed Deposit: Dube Bank 415 000 Loan from director: J France 1 155 000 Inventory (all trading stock) 222 600 Trade and other payables 231 920 SARS: Income tax (provisional tax payment) 280 000 Cash in bank 212 400 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 5 MDE/September 2022 NSC Question paper B. Share Capital and Dividends: ● Authorised shares: 800 000 ● On 1 March 2021, 80% of the authorised share capital was in issue. ● Interim dividends of 28 cents per share was paid on 30 August 2021. ● On 28 February 2022, the company repurchased 40 000 shares at R1,25 above the average share price of R6,00. The full amount for this transaction was paid by EFT, but the EFT has not yet been entered in the CPJ. ● A final dividend of R210 000 was declared on 28 February 2022. C. Profit and tax: Income tax at 31% of the net profit for the year amounted to R306 280. D. Fixed deposit: R165 000 of the fixed deposit matures on 30 June 2022. The rest matures in 2025. E. Loan from Director J France: ● The loan was originally received on 1 December 2019. ● This loan is to be repaid over 5 years in equal monthly instalments with effect from 31 December 2019. All payments have been made. ● Interest is not capitalised and has been paid in full. F. Financial indicators on 28 February 2022: Current ratio 1,5 : 1 Net asset value (NAV) 650 cents Market price (Security Exchange) 710 cents 50 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 6 MDE/September 2022 NSC Question paper QUESTION 2: CASH FLOW STATEMENT AND FINANCIAL INDICATORS (35 marks; 28 minutes) The information relates to Castro Ltd for the financial year ended 30 June 2022. REQUIRED: 2.1 Complete the Note for Reconciliation between net profit before tax and cash generated from operations for the year ended 30 June 2022: (4) 2.2 Calculate the following figures in the 2022 Cash Flow Statement: 2.2.1 Taxation paid (4) 2.2.2 Fixed assets purchased (6) 2.2.3 Shares issued (2) 2.2.4 Funds used for the repurchased shares (2) 2.2.5 Net change in cash and cash equivalents (4) 2.3 Calculate the following: 2.3.1 Earnings per share (4) 2.3.2 Debt-equity ratio (3) 2.3.3 Return on average capital employed (6) INFORMATION: A. Information from the financial statement on 30 June: 2022 2021 R R Depreciation 16 645 22 000 Interest expenses 120 000 123 000 Fixed assets (carrying value) 1 541 940 944 800 Financial assets 130 000 190 000 Shareholders’ equity 2 499 900 1 117 500 Ordinary share capital 2 375 000 1 000 000 Retained income 124 900 117 500 Loan 350 000 1 070 000 Inventory 1 125 000 1 145 000 Trade and other receivables 1 115 000 1 143 000 Cash and cash equivalent 88 900 2 500 Trade and other payables 1 150 940 1 070 800 Bank overdraft - 153 000 Total capital employed 2 849 900 2 187 500 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 7 MDE/September 2022 NSC Question paper B. NOTES TO THE BALANCE SHEET: 2022 2021 R R TRADE AND OTHER RECEIVABLES 1 115 000 1 143 000 Debtors Control 1 102 000 1 130 000 Accrued Income 9 000 6 000 Prepaid Expenses 4 000 3 000 SARS: Income Tax 0 4 000 TRADE AND OTHER PAYABLES 1 150 940 1 070 800 Creditors Control 1 043 565 1 047 300 Accrued expenses 7 000 9 500 SARS: Income Tax 10 375 0 Shareholders for dividends 260 000 14 000 ADDITIONAL INFORMATION: A. Share capital and dividends. ● The company is registered with an authorised share capital of 300 000 ordinary shares. ● On 30 June 2021 there were 100 000 shares in issue. ● 100 000 additional shares issued at R15 on 1 January 2022. ● On 30 June 2022, 10 000 shares were repurchased from the estate of a deceased shareholder at R3,50 above the average price. ● The interim dividends of 20 cents per share was declared and paid on 15 December 2021. The final dividends were declared on 30 June 2022. B. Sale of equipment. Cost price R40 000 Accumulated depreciation to date sold R20 570 Date sold 1 April 2022 Selling price (at carrying value) ? C. Income tax. ● Income tax for the year amounted to R197 600. ● Net profit after tax; R322 400. 35 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 8 MDE/September 2022 NSC Question paper QUESTION 3: INTERPRETATION OF FINANCIAL INFORMATION (45 marks; 36 minutes) 3.1 Complete the following sentences using the word (s) in the list below. Write only the word next to the question number (3.1.1 – 3.1.5) in the ANSWER BOOK. liquid; profitable; solvent; return; risk/gearing 3.1.1 A company with total assets exceeding total liabilities is … 3.1.2 A company that relies heavily on loans will have high … 3.1.3 A company that controls its income and expenses properly will be … 3.1.4 The percentage net income on equity indicates the … earned by shareholders 3.1.5 A company that is able to settle its immediate debts is … (1 x 5) (5) 3.2 FINANCIAL INDICATORS OF TWO COMPANIES: Your friend, Jack, has bought shares in both companies. He asks you for your opinions on the financial results. The companies are the same size. REQUIRED: Explain your answer to the following questions. In each case compare and quote financial indicators of both companies (actual figures, ratios or percentages) to support your answer. 3.2.1 Jack is of the opinion that KAT Ltd is handling its working capital more effectively and is in a better liquidity situation than KIT Ltd. Explain and quote THREE financial indicators to support his opinion (9) 3.2.2 The operating efficiency of KIT Ltd are better than that of KAT Ltd. Quote and explain ONE financial indicator to support your opinion. (2) 3.2.3 Which company uses more loans? Explain whether this is a good idea or not. In each case, quote a financial indicator to support your answer. (6) 3.2.4 Compare and comment on the dividends pay-out policies of both companies. (8) 3.2.5 KIT Ltd has a better percentage return, earnings and dividends than KAT Ltd. Explain by quoting THREE financial indicators to support this opinion. (9) Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 9 MDE/September 2022 NSC Question paper 3.2.6 The existing shareholders of the TWO companies hold different opinions of the current market value of their shares. ● Explain why the existing shareholders of KIT Ltd are happy with this. Quote a financial indicator /figure to support your answer. (3) ● Explain why the existing shareholders of KAT Ltd are very disappointed with this. Quote a financial indicator/figure to support your answer. (3) INFORMATION: KIT LTD KAT LTD Market price per share on the JSE 750 cents 885 cents Net asset value per share 609 cents 939 cents Earnings per share 410 cents 176 cents Dividends per share 240 cents 185 cents % return on shareholders’ equity 21,3% 11,2% % return on total capital employed 32,6% 13,6% % interest rate on loan 15,0% 15,0% Debt/equity ratio 0,3 : 1 2,0 : 1 Current ratio 6,0 : 1 1,5 : 1 Acid-test ratio 2,8 : 1 0,9 : 1 Period for which stock is on hand 150 days 88 days Average debtors’ collection period 53 days 25 days % Gross profit on cost of sales 62,2% 58,3% % Operating expenses on sales 37,9% 44,5% % Operating profit on sales 10,1% 7,3% 45 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 10 MDE/September 2022 NSC Question paper QUESTION 4: CORPORATE GOVERNANCE AND AUDIT OF THE COMPANY (20 marks; 16 minutes) You are provided with the following extract for Don Ltd from the report of the independent auditors. REQUIRED: 4.1 Explain what is meant by Corporate Governance. (2) 4.2 Provide TWO examples of corporate governance that would occur in a company. (4) 4.3 Refer to the underlined words in paragraph 2. ● Give TWO examples of audit evidence. (4) 4.4 Explain why an independent auditor would want to see that the following GAAP principles that are applied: ● Matching (2) ● Going concern (2) 4.5 Refer to paragraph 3. Explain why you would be satisfied with this audit report opinion. (3) 4.6 To whom is an audit report addressed? Give reason for your answer. (3) INFORMATION: EXTRACT FROM THE REPORT OF THE INDEPENDENT AUDITORS Paragraph 1 We have audited the annual financial statements of Don Ltd set out on Pages 10 to 19 for the year ended 31 May 2022. These financial statements are the responsibility of the company’s directors. Our responsibility is to express an opinion on these financial statements based on our audit. Paragraph 2 An audit includes: ● Examining, on a test basis, evidence supporting the amounts in the financial statements ● Assessing the accounting principles used and significant estimates made by management; ● Evaluating the overall financial statement presentation. Paragraph 3 Audit opinion: In our opinion, the financial statements fairly present, in all material respects, the financial position of the company at 31 May 2022 and the results of their operations and cash flow for the year ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act,1973 (Act 71 of 1973) in South Africa. Bob & John, Chartered Accountants (SA) 20 TOTAL :150 Copyright reserved Please turn over

Downloaded from hlayiso.com GRADE 12 ACCOUNTING FINANCIAL INDICATOR FORMULA SHEET Gross profit x 100 Gross profit x 100 Sales 1 Cost of sales 1 Net profit before tax x 100 Net profit after tax x 100 Sales 1 Sales 1 Operating expenses x 100 Operating profit x 100 Sales 1 Sales 1 Total assets : Total liabilities Current assets : Current liabilities (Current assets – Inventories) : Current Non-current liabilities : Shareholders' liabilities equity (Trade & other receivables + Cash & cash equivalents) : Current liabilities Average trading stock x 365 Cost of sales . Cost of sales 1 Average trading stock Average debtors x 365 Average creditors x 365 Credit sales 1 Cost of sales 1 Net income after tax x 100 Net income after tax x 100 Number of issued shares 1 Average shareholders' equity 1 (*See note below) Net income before tax + Interest on loans x 100 Average shareholders' equity + Average non-current liabilities 1 Shareholders' equity x 100 Dividends for the 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 Earnings per share 1 Net income after tax 1 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