Accounting Grade 12 Paper 2 WC Prelim 2022 Question Paper

Downloaded from hlayiso.com CAPE WINELANDS / WEST COAST EDUCATION DISTRICTS PREPARATORY EXAMINATION GRADE 12 ACCOUNTING P2 SEPTEMBER 2022 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 Accounting P2 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 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. TIME QUESTION SUBJECT MARKS (minutes) 1 Reconciliations 30 20 2 Cost accounting 50 40 3 Inventory 35 30 4 Budgets 35 30 TOTAL 150 120

Downloaded from hlayiso.com Accounting P2 3 September 2022 Grade 12 Prep. Exam. QUESTION 1: CREDITORS’ RECONCILIATION AND MANAGEMENT OF CASH (30 marks; 20 minutes) 1.1 CREDITORS’ RECONCILIATION The inexperienced bookkeeper of Pink Traders completed the creditors’ ledger account for Blue Suppliers, a major creditor of the business. The balance does not correspond with the outstanding balance according to the statement received from Blue Suppliers. REQUIRED: 1.1.1 Refer to Information A, B and C Complete the table in the answer book to reconcile the balance in the creditors ledger to the balance reflected on the statement. Show a “+” for increases and a “–” for decreases, next to each amount. (13) 1.1.2 Refer to Information D Calculate the average creditors’ payment period (in days). (5) 1.1.3 Provide TWO internal control measures which can be implemented to ensure better management over creditors. (4) INFORMATION: A Creditors’ ledger of Pink Traders: Blue Suppliers (CL12) Date Details Debit Credit Balance 01/06/22 Balance R 20 500 05/06/22 Invoice 532 7 125 27 625 10/06/22 Debit note 57 750 26 875 14/06/22 EFT 10 000 17 875 Discount 500 17 375 20/06/22 Invoice 575 7 900 25 275 23/06/22 Invoice 2 997 12 500 37 775 27/06/22 EFT 8 000 29 775 Discount 400 29 375 B Statement received from Blue Suppliers: Blue Suppliers Account of: Pink Traders Date: 25 June 2022 Date Details Debit Credit Balance 01/06/22 Balance R 20 500 05/06/22 Invoice 532 7 500 28 000 10/06/22 Debit note 57 750 28 750 14/06/22 Receipt 9 000 19 750 Discount 1 000 18 750 20/06/22 Invoice 575 9 700 28 450 20/06/22 Invoice 678 6 320 34 770

Downloaded from hlayiso.com Downloaded f rom St Accounting P2 anmorephysics. com 4 September 2022 Grade 12 Prep. Exam. C Additional information: (i) Blue Suppliers neglected to deduct a 5% trade discount on Invoice 532. (ii) Debit note 57 was handled incorrectly by Blue Suppliers. (iii) Blue Suppliers granted Pink Traders a 10% discount on the payment on 14 June 2022, because the payment was made before the 15th of the month. (iv) Pink Traders entered Invoice 575 incorrectly. (v) Invoice 2 997 was for purchases from Green Stores and not from Blue Suppliers. (vi) Pink Traders neglected to enter Invoice 678. (vii) Blue Suppliers closes its entries on the 25th of every month. D Information on 30 June 2022 (year-end): Cost of sales R1 440 000 Credit purchases for the year 832 200 Cash purchases for the year 360 000 Creditors’ Control balance (1 July 2021) 100 000 Creditors’ Control balance (30 June 2022) 128 000 1.2 MANAGEMENT OF CASH You are provided with information from the records of Together Nurseries. 1.2.1 The bookkeeper presented the owner with a Bank Reconciliation Statement on 31 May 2022 and two large outstanding deposits were noticed. On further investigation of the receipt books, it appeared that these funds were received by the manager as follows: • 15 May 2022 - R62 500 • 20 May 2022 - R50 600 Provide TWO concerns the owner should have regarding these deposits. (4) 1.2.2 Provide TWO suggestions that can be used to ensure that this does not happen again. (4) 30 4

Downloaded from hlayiso.com Downloaded f rom St Accounting P2 anmorephysics. com 5 September 2022 Grade 12 Prep. Exam. QUESTION 2: COST ACCOUNTING (50 marks; 40 minutes) 2.1 ADVANCED MANUFACTURERS You are provided with information from the records of Advanced Manufacturers for the financial year ended 30 April 2022. They manufacture coffee tables. REQUIRED: 2.1.1 Prepare the Production Cost Statement for the year ended 30 April 2022. (17) 2.1.2 Complete the abridged Statement of Comprehensive Income (Income Statement) for the year ended 30 April 2022. (10) INFORMATION: A Stock records 30 April 2022 1 May 2021 Raw material stock R175 680 R112 800 Work-in-progress stock ? R426 000 B Extract from the records on 30 April 2022 (before additional information below): Raw materials purchased R1 665 000 Raw materials returned to suppliers 63 000 Direct material cost ? Direct labour cost 2 150 880 Factory overhead 1 405 350 Selling and distribution 1 829 550 Administration cost 1 331 850 Cost of production of finished goods ? Gross profit 3 750 000 C Additional information to be taken into account: (i) The entire insurance expense of R68 250 was entered as administration cost in error. 60% of this expense should have been allocated to the factory overhead cost. (ii) Factory overhead cost includes the total amount for rent paid for the financial year, R108 900. Rent expense should have been allocated according to floor area occupied, as follows: Factory 400 m2; Shop 80 m2; Office 120 m2 D Production: Advanced Manufacturers produced 39 000 units at a cost of R135 each. 5

Downloaded from hlayiso.com Downloaded f rom St Accounting P2 anmorephysics. com 6 September 2022 Grade 12 Prep. Exam. 2.2 UNIT COST AND BREAK-EVEN Generation Manufacturers produces pencil cases. REQUIRED: 2.2.1 Explain the difference between fixed costs and variable costs. (2) 2.2.2 Calculate the break-even point for 2022. (5) 2.2.3 Comment on the break-even point and the level of production for 2021 and 2022. Quote figures. (6) 2.2.4 Identify the variable cost which the owner should be concerned about. Explain and provide a calculation to support your answer. (4) 2.2.5 Even though there was a decrease in the fixed costs per unit, the owner is still not satisfied with the control over fixed costs. Explain why he feels this way and provide calculations to support his concern. (4) 2.2.6 Give ONE possible reason for the decrease in the selling and distribution cost. (2) INFORMATION: A PENCIL CASE UNIT COSTS 2022 2021 Variable costs R34,80 R33,00 Direct material cost 18,09 17,40 Direct labour cost 12,15 10,50 Selling and distribution cost 4,56 5,10 Fixed costs 16,20 16,50 Factory overhead cost 10,50 10,95 Administration cost 5,70 5,55 Selling price per unit 53,40 49,50 Units produced and sold 240 000 units 195 000 units Break-even point ? 195 000 units B Additional information: Assume an inflation rate of 6% for the current financial year. 50 6

Downloaded from hlayiso.com Downloaded f rom St Accounting P2 anmorephysics. com 7 September 2022 Grade 12 Prep. Exam. QUESTION 3: INVENTORIES (35 marks; 30 minutes) 3.1 INVENTORY VALUATION You are provided with information on New Era Hats. The business sells sun hats. They use the periodic inventory system and the weighted average method to value their stock. The business is owned by Claude Petersen. Jeremy, the manager, is responsible for the day-to-day running of the business. REQUIRED: 3.1.1 Calculate the following for the financial year ended 28 February 2022: Value of closing stock (10) Gross profit (6) 3.1.2 Claude discovered that Jeremy had stopped buying from their regular supplier of hats in August 2021 without informing him about this change. He also discovered that the new supplier is Jeremy’s cousin. What advice can you offer Claude in this regard? State TWO points. (4) INFORMATION: A Stock balances UNITS TOTAL 1 March 2021 412 R63 140 28 February 2022 320 ? B Purchases during the year: UNIT CARRIAGE TOTAL MONTH UNITS COST (per unit) (including carriage) May 2021 530 R135 R10,00 R76 850 July 2021 760 R142 R16,00 R120 080 October 2021 380 R156 R18,00 R66 120 December 2021 340 R168 R24,00 R65 280 TOTAL 2 010 R328 330 C Returns for the year: (Cost price plus carriage was refunded.) FROM MONTH UNIT CARRIAGE TOTAL UNITS OF PURCHASE COST (per unit) (including carriage) July 2021 10 R142 R16,00 R1 580 October 2021 8 R156 R18,00 R1 392 December 2021 4 R168 R24,00 R768 TOTAL 22 R3 740 D Donations: 20 sun hats from the May 2021 batch were donated to a local school who took learners on an educational tour. E Sales: 1 986 hats were sold during the financial year at a selling price of R220 each. 7

Downloaded from hlayiso.com Downloaded f rom St Accounting P2 anmorephysics. com 8 September 2022 Grade 12 Prep. Exam. 3.2 STOCK MANAGEMENT (PROBLEM-SOLVING) In addition to sun hats, New Era Hats also sells sunglasses and beach bags. Information from their stock records on 28 February 2022, is provided. REQUIRED: 3.2.1 Because of problems with stock theft, Claude has installed security cameras. Despite this, he thinks that sun hats are still being stolen. Provide a calculation to verify that sun hats are being stolen. Give TWO points of advice to Claude to address this problem. (9) 3.2.2 Claude is unsure whether he is charging the correct prices for the sunglasses and the beach bags. Give him advice on EACH product. Quote figures. (6) INFORMATION: SUN SUN- BEACH HATS GLASSES BAGS (UNITS) (UNITS) (UNITS) Number of units sold 1 986 1 850 740 Opening stock 412 250 240 Closing stock 320 280 420 Purchases (less returns and donations) 1 968 1 880 920 Weighted average cost price per unit R2 750 R390 Selling price per unit R3 438 R702 Mark-up% 25% 80% Stock holding period 52 days 163 days 35 8

Downloaded from hlayiso.com Downloaded f rom St Accounting P2 anmorephysics. com 9 September 2022 Grade 12 Prep. Exam. QUESTION 4: BUDGETS AND INTERNAL AUDIT PROCESSES (35 marks; 30 minutes) 4.1 Indicate whether the following statements are TRUE or FALSE. Write only ‘TRUE’ or ‘FALSE’ next to the question numbers (4.1.1 to 4.1.3) in the ANSWER BOOK. 4.1.1 Bad debts are an example of a payment in a Cash Budget. 4.1.2 A Projected Income Statement estimates the expected profit or loss for a specified period. 4.1.3 A decrease in a fixed deposit will be shown as a receipt in the Cash Budget. (3x1) (3) 4.2 FOURIE (PTY) LTD Karin Fourie is the majority shareholder and CEO. You are provided with information for the period ending 31 July 2022. There are five other shareholders. Refer to Information A 4.2.1 Calculate the missing amounts indicated by (i) and (ii) in the Debtors' collection schedule. (4) Calculate the percentage discount allowed to debtors who settle in the month of the sales transactions. (5) 4.2.2 Calculate the following budgeted amounts: Total sales for July 2022 (3) Payment to creditors during June 2022 (4) Additional loan to be acquired on 1 June 2022 (4) 4.2.3 The directors did not adhere to the Cash Budget during May 2022. Identify TWO overpayments in May 2022. Provide figures. Give a valid reason for EACH overpayment identified, to support their decisions. (6) Refer to Information E. 4.2.4 Why are the auditors concerned that the agreement with Tradecor is unethical or possibly a crime? Explain THREE points. (6) INFORMATION A. Sales and debtors' collection: Estimates of total sales for 2022: April R150 000 May R165 000 June ? 25% of all sales are on credit. The rest is for cash Debtors are expected to settle as follows: 60% within the same month of sale, subject to a cash discount allowed. 38% in the month following the month of sale. 2% of debts are written off in the 2nd month following the month of sale. 9

Downloaded from hlayiso.com Downloaded f rom St 10 Accounting P2 anmorephysics. com September 2022 Grade 12 Prep. Exam. Partially completed Debtors' Collection Schedule: CREDIT SALES MAY JUNE JULY May R41 250 R23 760 (i) June (ii) R25 056 R16 530 July R48 000 R27 648 R44 178 B. Purchases of merchandise and payments to creditors: The business uses a fixed-stock base with stock sold being replaced monthly. The business uses a mark-up of 50% on cost. 20% of all merchandise is purchased for cash. Creditors are paid in full in the month following the month of purchase. C. Loan and interest: The loan from Bokke Bank will be increased on 1 June 2022. Interest at 20% p.a. is not capitalised and is payable at the end of each month. D. Extract from the Cash Budget for the three months ending 31 July 2022: MAY JUNE JULY Budgeted Actual Budgeted Budgeted RECEIPTS R R R R Cash sales 123 750 142 400 130 500 144 000 Collection from debtors 38 010 26 000 44 178 Loan ? Sale of property 0 320 000 Sale of old vehicle 40 000 95 000 PAYMENTS Cash purchase of stock 22 000 18 000 23 200 ? Payment to creditors 80 000 80 000 ? ? Salaries 28 000 28 000 28 000 42 000 Advertising 5 600 8 400 5 600 5 600 Staff training 30 000 Interest on loan 6 000 6 000 7 500 7 500 Vehicle maintenance 12 200 36 350 5 800 5 800 Purchase of vehicle 235 000 235 000 - - Rent expense 0 0 0 0 Security personnel 8 000 6 500 8 000 8 000 E. Agreement with Tradecor: The CEO, Karin Fourie, decided to sell one of the company's properties at book value. This property was originally bought for R320 000 in 1980. According to the sale agreement, the purchaser, Tradecor, would rent the property back to Fourie (Pty) Ltd for R26 000 per month with effect from 1 June 2022. The auditors of Fourie (Pty) Ltd discovered that the sole owner of Tradecor is Karin Fourie’s' husband. They regard this agreement as unethical and possibly a crime. 35 TOTAL: 150 10

Downloaded from hlayiso.com Downloaded f rom St 11 Accounting P2 anmorephysics. com 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 liabilities Non-current liabilities : Shareholders' 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. 11