Accounting Grade 12 Paper 2 FS Prelim 2023 Question Paper

Downloaded from hlayiso.com PREPARATORY EXAMINATION GRADE 12 ACCOUNTING P2 SEPTEMBER 2023 MARKS: 150 TIME: 2 HOURS This question paper consists of 14 pages, a formula sheet and a 11-page answer book. Copyright reserved Please turn over

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Downloaded from hlayiso.com Accounting P2 3 FS/September 2023 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. A Financial Indicator Formula Sheet is attached at the end of this question paper. 4. Show ALL workings to earn part-marks. 5. You may use a non-programmable calculator. 6. You may use a dark pencil or blue/black ink to answer questions. 7. Where applicable, show ALL calculations to ONE decimal point. 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 Reconciliations 1 and Age Analysis 40 35 2 Stock Valuation 30 20 3 Cost Accounting 45 40 (Manufacturing) 4 Budgeting 35 25 TOTAL 150 120 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P2 4 FS/September 2023 Grade 12 Prep. Exam. QUESTION 1: RECONCILIATIONS AND AGE ANALYSIS (40 marks; 35 minutes) 1.1 Indicate whether the following statements are TRUE or FALSE. Write only 'true' or 'false' next to the question numbers (1.1.1 to 1.1.3) in the ANSWER BOOK. 1.1.1 A Bank Reconciliation Statement should be prepared every month to assist in maintaining internal control of the cash of the business. 1.1.2 Credit card sales are regarded as cash transactions. 1.1.3 Debit interest on the bank statement must be recorded in the Cash Payments Journal as bank charges. (3) 1.2 BANK RECONCILIATION The information relates to CR Stores for August 2023. The official bank statement from TOPS Bank is closed off and published on the 27th of each month. REQUIRED: 1.2.1 Use the table provided in the ANSWER BOOK to calculate the final totals of Cash Journals on 31 August 2023. Calculate the Bank Account balance on 31 August 2023. (13) 1.2.2 Prepare a Bank Reconciliation Statement on 31 August 2023. (6) 1.2.3 The levy on credit card sales is 5% of the respective credit card sales amount. Calculate the total credit card sales for the month. (2) 1.2.4 The owner noted the warning on the bank's website that account holders should be more vigilant about using banking applications (software) due to the increase in hacking. (Process of gaining unauthorised access to confidential information to transfer money.) Provide TWO suggestions on how account holders can protect themselves against this crime. (4) INFORMATION: A. The Bank Reconciliation Statement on 31 July 2023: Unfavourable balance per bank statement R 35 380 Outstanding deposit (29 July 2023) 13 700 Outstanding EFTs: No.1243 2 840 No.1244 4 895 Balance per bank account (overdraft) 29 415 Note: EFT 1243 in favour of a creditor, dated 30 July 2023, appeared on the August bank statement with the correct amount of R2 480. Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P2 5 FS/September 2023 Grade 12 Prep. Exam. B. The provisional totals in the cash journals before comparing them against the August bank statement were:  CRJ – R365 760  CPJ – R319 790 C. Items included in the August 2023 bank statement but not in the August Cash Journals:  Outstanding deposit of R13 700 dated 29 July 2023.  EFT 1244 for R4 895  Direct deposit of R5 780 by a debtor, in settlement of account of R6 000  Interest on overdraft R636  Service fees R367  Credit card levies R1 438  Credit card sales, R7 230  Debit order for Insurance, R5 909  Cash withdrawal using the debit card of the business, R3 150  A transfer from Pet Stores of R4 500 appeared in the bank statement, but the bank has informed CR Stores that this is an error as the amount was incorrectly transferred to CR Stores. The bank will reverse this entry on 1 September 2023. D. Items that only appeared in the cash journals for August 2023:  Deposit on 30 August 2023 for R17 900  EFT No. 1280 for R11 540 E. The closing balance on the bank statement was R? Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P2 6 FS/September 2023 Grade 12 Prep. Exam. 1.3 GRASSY TRADERS You are provided with information concerning internal control over the debtors of Grassy Traders. Study the given account of Thandi Moi in the Debtors' Ledger of Grassy Traders: REQUIRED: 1.3.1 To maintain internal control over the debtors, it is important that the accountant checks at the end of the month that the balance of the Debtors' control account and the total of the Debtors' List are equal.  Explain why the Debtors' control account balance should agree with the Debtors' List total. (2)  Explain TWO processes the bookkeeper should follow if he discovers a difference between the Debtor's control account balance and the Debtors' List total. (4) 1.3.2 Identify THREE internal control problems relating to the management of the account of debtor Thandi Moi. Quote figures for each problem. (6) Grassy Traders Statement no: 2850 Statement date: 28 February 2023 To: Thandi Moi Credit limit: R60 000 Date Transactions Debit Credit Balance 2022 1 Balance 15 700 Nov 5 EFT 14 130 1 570 Discount 1 570 NIL 10 Invoice 473 16 680 16 680 Dec 2 Invoice 491 12 560 29 240 3 Credit note 52 1 230 28 010 2023 4 Invoice 526 9 780 37 790 Jan 31 Delivery charges 118 37 908 Feb 19 Invoice 576 15 620 53 528 28 Delivery charges 152 53 680 Terms: • 5% discount if paid within 30 days of the statement date. • Debt must be fully paid within 60 days of the statement date. • Interest is charged at 2% per month on balances 90 days overdue. Amount Age 90 Days 60 Days 30 Days Current owing analysis: 16 680 11 330 9 898 15 772 53 680 40 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P2 7 FS/September 2023 Grade 12 Prep. Exam. QUESTION 2: INVENTORY VALUATION (30 marks; 20 minutes) 2.1 Choose the correct word(s) from those given in brackets. Write only the word(s) next to the question numbers (2.1.1 to 2.1.3) in the ANSWER BOOK. 2.1.1 The cost of sales must be recorded immediately with every sales transaction according to the (perpetual/periodic) inventory system. 2.1.2 The (specific identification/weighted-average) stock valuation method is best suited for smaller items purchased in relatively large quantities where prices are fairly constant for items purchased. 2.1.3 Stock valued according to the (first-in-first-out/weighted average) method would normally be applied to items of stock which are related to constant technological innovations. (3) 2.2 EDEN POTS & PEBBLES Eden Pots & Pebbles is a local business that sells garden pots and pebbles, which is situated in Clarens, a fast-growing tourist-attracting town situated in the heart of the Free State. This small business is owned by Eden. The financial year ends on 31 May each year. To promote sales, Eden attends many market exhibitions to broaden the client base. GARDEN POTS (Weighted average method): 2.2.1 Calculate the weighted-average cost per garden pot. (6) 2.2.2 Calculate the Rand value of the garden pots lost at market exhibitions during the year ended 31 May 2023. (5) 2.2.3 Advise Eden on preventing future losses of missing/stolen garden pots whilst attending market exhibitions. Provide TWO points. (4) PEBBLES (FIFO method): 2.2.4 Calculate the following for pebbles on 31 May 2023:  Value of the stock on hand on 31 May 2023. (5)  Stockholding period in days (using closing stock). (5) 2.2.5 Comment on whether Eden should be satisfied with the stock- holding period. Quote figures. Note that the stock-holding period on 31 May 2022 was 96 days. (2) Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P2 8 FS/September 2023 Grade 12 Prep. Exam. INFORMATION: The following relates to the financial year ended 31 May 2023: GARDEN POTS PEBBLES Weighted average method FIFO method Details & dates Cost Cost per Total Kilograms Total Pots per kg pot (R) (kg) (R) (R) (R) Opening stock 60 225 13 500 2 900 67 194 300 (1 June 2022) Purchases 260 53 750 8 550 616 050 September 2022 70 210 14 700 2 450 70 171 500 November 2022 110 195 21 450 4 250 75 318 750 March 2023 80 220 17 600 1 850 68 125 800 Total stock 320 67 250 11 450 810 350 Closing stock 42 2 340 (31 May 2023) 5 pots from the November 100 kg from the March Returns purchase. purchases amounted to R6 100. Total cost for the year R7 per kilogram included. amounted to R2 395. Carriage on purchases Carriage is not refunded on returns. UNITS Amount UNITS Amount Sales 265 R91 160 9 010 R1 171 300 30 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P2 9 FS/September 2023 Grade 12 Prep. Exam. QUESTION 3: COST ACCOUNTING (45 marks; 40 minutes) 3.1 WALLY WATCHES Wally Watches, a local manufacturing company, produces affordable branded watches. They use a standard markup of 150% on the cost price. The financial year ends on 28/29 February each year. REQUIRED: 3.1.1 Calculate the value of raw materials issued to the factory for production. (8) 3.1.2 Calculate the depreciation on factory equipment. (6) 3.1.3 Prepare the Factory Overhead Cost Note for the year ended 28 February 2023. (14) 3.1.4 Determine the total sales for the year ended 28 February 2023. (5) INFORMATION A. Balances extracted from the financial records of the business: 28 February 2023 1 March 2022 R R Raw materials stock 672 020 513 500 Work-in-process stock 628 900 546 700 Finished goods stock 201 300 229 800 Factory equipment 1 179 000 964 000 Accumulated depreciation on factory ? 454 720 equipment B. Direct material:  Raw materials to the value of R2 100 000 were purchased during the year. 7,5% of the purchases were returned to suppliers as they were not to specification.  Carriage on the purchases of raw materials amounted to R94 500.  Additional R240 000 worth of raw materials were purchased from Destiny Traders in the USA. A 5% trade discount was received from Destiny Traders. Import duties are charged at 2% of the final invoice total. Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P2 10 FS/September 2023 Grade 12 Prep. Exam. C. Depreciation of factory equipment:  Depreciation on the factory equipment is calculated at 20% p.a. on the diminished-balance method.  The old equipment that was originally purchased for R124 000 was sold at its book value on 31 July 2022. On 1 March 2022, it had accumulated depreciation of R34 720. No entries have been made in this regard.  New equipment was purchased for R215 000 cash on 1 September 2022. It was recorded.  Depreciation on the remaining old equipment on 28 February 2023 was calculated correctly, R84 000. D. Factory overhead cost: Extract of expense accounts: R Rent expense 227 500 Indirect materials 170 800 Indirect labour 74 742 Sundry expenses 83 100 Insurance: Administration 28 560 Water & electricity ?  85% of all indirect materials are used in the production process.  The rent for March 2023 was paid in advance. Rent is a fixed monthly amount and has remained unchanged during the year. Rent is allocated according to the floor space: factory 900 m², administration 150 m², sales & distribution 150 m².  80% of the total Sundry Expenses account is allocated to the production process. The telephone account for February 2023 has been received and has not yet been paid, R6 300. Telephone is considered a Sundry Expenses.  The bookkeeper divided the total insurance amount equally amongst the factory, administration and sales & distribution departments, but only posted to the administration cost account. The correct distribution should be 3 : 1 : 1.  Information relevant to calculate factory water and electricity for the year: Annual usage Monthly fees Units of water & Cost per Account service electricity used unit & sundry fees Workstation A 16 250 R0.80 R450 Workstation B 20 900 R0.90 R0 Total 37 150 E. The total cost of production for the year amounted to R3 313 086. Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P2 11 FS/September 2023 Grade 12 Prep. Exam. 3.2 JOZY PENS The business manufactures one type of pen and is owned by Jozy Malinga. The financial year ended on 28 February 2023. Production is based on orders received. Therefore, there are no work-in-process balances. REQUIRED: 3.2.1 Calculate the break-even point for the year ended 28 February 2023. (3) 3.2.2 Explain whether the level of production achieved is satisfactory or not. Quote figures to support your opinion. (4) 3.2.3 Jozy is generally satisfied with the management of variable costs but is not pleased with the control over direct labour costs.  Justify his concern by quoting figures.  Provide TWO suggestions he can implement to address this problem. (3) 3.2.4 Jozy is considering using computerised machinery as an alternative to manual labour. It may result in some workers losing their jobs. Explain TWO points that he should consider before taking this step. (2) INFORMATION: EXTRACTED FROM THE RECORDS OF JOZY PENS: 28 FEBRUARY 2023 28 FEBRUARY 2022 UNIT UNIT COST TOTAL (R) TOTAL (R) COST (R) (R) Fixed costs 2 442 375 58,50 2 346 000 55,20 Variable costs: 1 507 175 36,10 1 576 750 37,10 Direct material cost 705 575 16,90 539 750 22,70 Direct labour cost 613 725 14,70 416 500 9,80 Selling and distribution 187 875 4,50 199 500 4,60 cost Selling price per unit R104,10 R95,70 Contribution per unit R68 R58,60 Number of units 41 750 units 42 500 units produced and sold Break-even point ? 40 035 units (units) 45 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P2 12 FS/September 2023 Grade 12 Prep. Exam. QUESTION 4: BUDGETING (35 marks; 25 minutes) You are provided with information relating to Super Smashers Panel Beaters for the budget period 1 August 2023 to 30 September 2023. The business is owned by Sparky Brite. The financial year ends on 30 September each year.  The business operates on a strict cash basis.  Nature of business:  Repairs damages on the body of vehicles to earn service fee income.  Sale of spare parts used in repairs as well as to over-the-counter customers.  Other consumables used during repair services are recorded as Service Fee Expenses. These costs are charged thereafter to clients' accounts. REQUIRED: 4.1 State ONE difference between a Projected Statement of Comprehensive Income (Income Statement) and a Cash Budget. (2) 4.2 Provide TWO possible reasons why Sparky does not allow credit to customers and indicate whether this is a good decision or not. (4) 4.3 Calculate the following: 4.3.1 The markup percentage maintained for the sale of spare parts. (2) 4.3.2 The percentage decrease in service fee income expected in September 2023. (3) 4.3.3 The additional space (in square metres) which the business plans to rent from September 2023. (3) 4.3.4 The interest rate on the fixed deposit. Note that the interest rate is expected to remain constant over the budget period. (4) 4.4 Recent trends show that the stock of spare parts is not well controlled. Comment on the control of stock and explain how Sparky intends to correct this. Quote specific items and figures from the Projected Statement of Comprehensive Income provided. (4) 4.5 Sparky offered customers free delivery of spare parts but discontinued this service on 31 July 2023. State TWO points to support this decision. (2) 4.6 Refer to information D. Budgeted and actual figures for certain items for July 2023 are provided. Quote figures in your explanation in EACH case. 4.6.1 Comment on the control over:  Service fee expenses (4)  Water and electricity (3) 4.6.2 Sparky's decided not to use the full budget for advertising. Explain whether this was beneficial to the business or not. (4) Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P2 13 FS/September 2023 Grade 12 Prep. Exam. INFORMATION: A. Extract from the Projected Statement of Comprehensive Income (Income Statement) for the period 1 August 2023 to 30 September 2023: AUGUST SEPTEMBER R R Service fee income from customers 224 000 203 840 Profit on sale of spare parts 34 350 50 625 Sales 80 150 118 125 Cost of sales (45 800) (67 500) Other operating income Profit on disposal of the delivery 12 000 0 vehicle Gross operating income Operating expenses Rent expense (see note B) 9 000 13 800 Water and electricity 7 800 7 800 Motor vehicle expenses 11 250 2 250 Security expenses 7 500 13 800 Advertising 7 050 7 050 Consumable stores (Used for repair service) 45 000 45 000 Repairs and maintenance of 22 500 0 equipment Depreciation 6 750 15 750 Trading stock deficit 21 000 2 100 Operating profit Interest on fixed deposit (see note C) 8 550 4 050 Net profit Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P2 14 FS/September 2023 Grade 12 Prep. Exam. B. Rent expense is calculated on a fixed amount per square metre. The business currently rents 75 square metres. On 1 September 2023, additional floor space will be rented at the same rate due to expansion. C. A fixed deposit of R675 000 will mature on 31 August 2023. D. Budgeted and actual figures for July 2023: BUDGETED ACTUAL R R Service fee income 225 000 191 250 Service fee expenses 45 000 54 675 * Water and electricity 6 750 7 500 Advertising 7 050 2 700 Sale of spare parts 193 050 145 800 Cost of sales 117 000 81 000 Profit on sale of spare parts 76 050 64 800 Mark-up percentage (on cost) 65% 80% *NOTE: The water and electricity tariff unexpectedly increased by 15% from 1 July August 2023. 35 TOTAL: 150 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting P2 15 FS/September 2023 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 Copyright reserved