Accounting Grade 12 Paper 1 WC Prelim 2022 Question Paper

Downloaded from hlayiso.com CAPE WINELANDS / WEST COAST EDUCATION DISTRICTS PREPARATORY EXAMINATION GRADE 12 ACCOUNTING P1 SEPTEMBER 2022 MARKS: 150 TIME: 2 HOURS This question paper consists of 10 pages, a formula sheet and a 9-page answer book. Please turn over

Downloaded from hlayiso.com Accounting P1 2 September 2022 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. If you choose to do so, you may use the formula sheet at the end of the 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 Transaction analysis and audit 1 20 15 report Statement of Financial Position and 2 60 55 Notes Cash Flow Statement and Financial 3 30 20 Indicators 4 Analysis and Interpretation 40 30 TOTAL 150 120 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P1 3 September 2022 Grade 12 Prep. Exam. QUESTION 1: TRANSACTION ANALYSIS AND AUDIT REPORT (20 marks; 15 minutes) CONCEPTS 1.1 Choose the correct word from those given in brackets. Write only the word next to the question numbers (1.1.1 to 1.1.3) in the ANSWER BOOK. 1.1.1 The concept of (limited / unlimited) liability ensures that shareholders are not responsible for the debts of the business in the event of bankruptcy. 1.1.2 When preparing financial statements, creditors will be reflected as trade and other (receivables / payables / equity). 1.1.3 The separate disclosing of significant items, such as interest expenses, is an application of the (prudence / materiality) GAAP principle. (3) 1.2 CLAY-BRICK LTD REQUIRED: Analyse the transactions below according to the headings on the table provided in the ANSWER BOOK • Indicate account debited and account credited in the General Ledger and the effect on the accounting equation. Indicate an increase as +, a decrease as – and no effect as 0. Refer to the example provided. • Assume a favourable bank balance at all times. Example: Bought packing material on credit, R2 700. ACCOUNT ACCOUNT NO. AMOUNT A O L DEBITED CREDITED e.g. Packing Creditors’ 2 700 0 - + material Control TRANSACTIONS: 1.2.1 Electronic funds transfers (EFT) totalling R225 000 were made to shareholders, being the amount owing to them at the end of the previous financial year. 1.2.2 The company received R550 000 for the issue of new shares. 1.2.3 The income tax assessment for the year was received. The income tax amount, R840 000, exceeded the provisional tax payments made. (9) Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P1 4 September 2022 Grade 12 Prep. Exam. 1.3 Independent audit report: You are provided with an extract of the audit report for Clay-Brick Ltd for the financial year ended 30 June 2022. REQUIRED: 1.3.1 Identify the type of audit report that the company received. Give a reason for your answer. (2) 1.3.2 Explain why the auditor referred to: • Pages 10 to 25 (2) • International financial Reporting Standards and the Companies Act of South Africa (2) 1.3.3 Name any TWO items of audit evidence that the auditors may have used. (2) INFORMATION: Extract of the audit report: To Shareholders Basis of Opinion We conducted our audit in accordance with international standards on auditing. We are independent of the company, as applicable to performing audits, and with other ethical requirements as per the professional code of conduct. The audit evidence we obtained was sufficient and appropriate. Opinion We have audited the financial statements, as set out on pages 10 to 25. These comprise the Statement of Comprehensive Income, Statement of financial Position and the Cash Flow Statement for the year ended 30 June 2022. In our opinion, the financial statements present fairly, in all material respects, the financial position of the business as at the year ended, its financial performance and cash flows, in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa. Poobie and Piet Registered Auditors 31 August 2022 20 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P1 5 September 2022 Grade 12 Prep. Exam. QUESTION 2: ADJUSTMENTS, STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) AND NOTES (55 marks; 45 minutes) 2.1 Complete each of the following statements by choosing a word(s) from the list below. Write only the word(s) next to the question numbers (2.1.1. to 2.1.3) in the ANSWER BOOK. external auditors; directors; shareholders; internal auditors 2.1.1 The … are employed by the company to set up and monitor control processes. 2.1.2 … are appointed to give an unbiased opinion on the financial statements. 2.1.3 … are appointed by the owners of the company to perform key management functions. (3) 2.2 RIZPAH LTD The information relates to the financial year ended 28 February 2022. 2.2.1 Calculate the correct net profit after tax by accounting for the adjustments with information C and D. (11) 2.2.2 Complete the following Notes to the Statement of Financial Position (Balance Sheet): • Ordinary Share Capital (8) • Retained Income (8) 2.2.3 Prepare the Statement of Financial Position (Balance Sheet) on 28 February 2022. (30) INFORMATION: A. Extract from the accounting records on 28 February: 2022 2021 Balance Sheet Accounts R R Fixed deposit 733 500 ? Ordinary Share Capital 11 931 000 ? Retained Income 1 794 000 ? Loan: CW-Loans ? ? SARS: Income tax (provisional tax) 675 000 Creditors’ control 926 170 Shareholders for dividends 320 100 243 000 Debtors’ control 1 312 500 Provision for bad debts ? 35 460 Trading stock (balancing figure) ? Petty cash 7 500 7 500 Bank overdraft (balancing figure) ? Nominal accounts Audit fees 72 000 Rent income 153 600 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P1 6 September 2022 Grade 12 Prep. Exam. B. Share Capital and Dividends DATE DETAILS 1 March 2021 75 % of the authorised share capital of 1 200 000 ordinary shares were in issue. 30 August 2021 80 000 shares were repurchased from a retired shareholder. He was paid 20% (R204 000) above the average share price and would no longer qualify for dividends. 31 August 2021 An interim dividend of 42 cents per share was paid. 1 December 2021 An additional 150 000 shares were issued. 28 February 2022 A final dividend was declared. C. The following adjustments were not considered with the calculation of the net profit before tax of R2 226 840 in the Statement of Comprehensive Income (Income Statement): • The provision for bad debts must be increased by R3 740 • Only half the audit fees were paid. The balance will be paid in March 2022. • The tenant occupies part of the premises from 1 May 2021. He has not paid the rent for January and February 2022. Rent remained constant for the accounting period. D. Income tax for the year is calculated at 30% of the net profit: E. R360 000 of the fixed deposit will mature on 1 April 2022. F. A debit balance of R26 920 from the Debtors’ Ledger must be transferred to the Creditors’ Ledger. G. The following figures and financial indicators were calculated on 28 February 2022, after all adjustments were processed: Current Assets R3 120 000 Current ratio 1,6 : 1 Debt-equity ratio 0,4 : 1 H. The loan from CW-Loan will be reduced by a capital portion of R342 000 in the 2023 financial year. 60 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P1 7 September 2022 Grade 12 Prep. Exam. QUESTION 3: CASH FLOW STATEMENT AND FINANCIAL INDICATORS ( 30 marks; 20 minutes) 3.1 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 (3.1.3 to 3.1.3) in the ANSWER BOOK, e.g. 3.1.4 D. A Statement of Financial Position (Balance Sheet) B Statement of Comprehensive Income (Income Statement) C Cash Flow Statement 3.1.1 Profit on sale of a fixed asset 3.1.2 Amount due to shareholders for final dividends payable 3.1.3 Total amount spent on the repurchase of shares (3) 3.2 SUNRISE LTD The financial year ended on 28 February 2022. 3.2.1 Calculate the following figures for the 2022 Cash Flow Statement: • Income tax paid (4) • Dividends paid (4) • Proceeds of shares issued (5) • Fixed assets purchased (5) 3.2.2 Calculate financial indicators for the year ended 28 February 2022: • % operating profit on sales (3) • Net asset per share (3) • Debt-equity ratio (3) Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P1 8 September 2022 Grade 12 Prep. Exam. INFORMATION FOR SUNRISE LTD: A. Information from Statement of Comprehensive Income on 28 February 2022: Sales 4 362 500 Gross Profit 1 762 500 Depreciation 204 000 Operating profit 1 016 950 Interest expense 220 500 Income tax 238 950 Net profit after tax 569 000 B. Information from Statement of Financial Position on 28 February 2022 2022 2021 Fixed assets (carrying value)* R5 917 550 R5 329 000 SARS: Income tax 9 000 (Cr) 31 500 (Dr) Shareholders’ equity 4 312 500 5 032 500 Ordinary share capital 3 862 000 4 650 000 Loan: UOME-Bank 1 750 000 1 400 000 Shareholders for dividends 186 000 97 500 *NOTE: Fixed assets were sold at carrying value, R245 000 C. Share capital and dividends: NUMBER OF SHARE CAPITAL DETAILS OF SHARES SHARES 1 March 1 500 000 In issue at R3,10 per share 2021 30 April 300 000 Repurchased at R3,45 per share 1 January 40 000 New shares issued 2022 28 February 1 240 000 In issue DIVIDENDS PER DIVIDENDS SHARE Final 2 March 2021 Paid 6,5 cents Interim 31 August 2021 Paid 17,5 cents Final 28 February 2022 Declared 15 cents 30 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P1 9 September 2022 Grade 12 Prep. Exam. QUESTION 4: ANALYSIS AND INTERPRETATION ( 40 marks; 20 minutes) 4.1 KIM LTD AND CHEVY LTD Refer to Information D to F Mike Tyson owns shares and is a director in both these companies. He recently invested another R840 000 in each company by buying shares on the JSE at market value as follows: KIM LTD CHEVY LTD R16,80 R8,00 REQUIRED: NOTE: Provide figures, financial indicators or calculations in EACH case to support your comments and explanations. 4.1.1 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 KIM Ltd that Mike was able to buy on the JSE in 2022. (3) • Comment on the price that Mike paid for these shares and give TWO reasons why he might have been satisfied to pay his price. (6) 4.1.2 Dividends and earnings: • Explain your opinion on which company has the better dividend pay-out policy. (6) • Compare and comment on the % return on equity earned by EACH company. (4) • Mike feels that the earnings per share (EPS) of CHEVY LTD is much better that that of KIM LTD. Explain why he feels this way. (5) 4.1.3 Refer to the Cash Flow Statements: The poor economy has negatively affected KIM LTD more than CHEVY LTD. • Explain TWO decisions taken by the directors of KIM LTD in response to the state of the economy, and how these decisions (6) will affect the company in future. • Explain TWO decisions taken by the directors of CHEVY LTD that affect risk and gearing. Quote and comment on TWO (8) financial indicators. Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P1 10 September 2022 Grade 12 Prep. Exam. D. Shareholding of Mike Tyson in two companies KIM LTD CHEVY LTD Number of shares bought in 2019 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 28 February 2022: KIM LTD CHEVY LTD Earnings per share (EPS) 194 cents 166 cents Dividends per share (DPS) 130 cents 160 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) 1 500 cents 890 cents Additional information: Interest on loans 12,0 % 12,0 % Interest on investments 6,5 % 6,5 % F. Extracts from the Cash Flow Statements for the year ended 28 February 2022: KIM LTD CHEVY LTD Cash flow from investing activities R5 400 000 (R5 460 000) Purchase of fixed assets 0 (3 160 000) Sale of fixed assets 3 600 000 0 Change in investments 1 800 000 2 300 000 Cash flow from financing activities (5 340 000) 8 000 000 Proceeds of new shares issued 0 400 000 Shares repurchased (2 140 000) 0 Cash effects of long-term loan (3 200 000) 7 600 000 40 TOTAL MARKS: L 150 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P1 September 2022 Grade 12 Prep. Exam. 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. Please turn over