Accounting Grade 12 Paper 1 KZN Prelim 2023 Question Paper

Downloaded from hlayiso.com KWAZULU-NATAL PROVINCE EDUCATION REPUBLIC OF SOUTH AFRICA ,.�-------------------- " ,.��----------------- ,, --------------� #,, MARKS: 150 TIME: 2 Hours This question ges, a formula sheet ages. Co ri ht Reserved Please Turn Over

Downloaded from hlayiso.com September 2023 Preparatory Examination INSTRUCTIONS AND INFORMATION Read the following instructions carefully and follow them precisely. 3. Show ALL 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. 7. A Financial Indicator Formula Sheet is attached at the end of this question paper. 8. Write neatly and legibly. 9. Use the information and table below as a guide when answering the question paper. Try NOT to deviate from it. QUESTION TOPIC MARKS MINUTES Statement of Comprehensive Income and 1 60 50 Section of Statement of Financial Position 2 Cash Flow Statement and Financial Indicators 40 30 3 Interpretation of Financial Statements 35 30 4 Corporate Governance and Audit Report 15 10 TOTAL 1ilJ 120 r � Copyright Reserved Please Turn Over

Account} QUESTION 1: COMPANY FINANCIAL STATEMENTS Downloaded from hlayiso.com September 2023 Preparatory Examination éwnloaded from Stanmorephysics.com (60 marks; 50 minutes) The information relates to Ixopo Ltd for the financial year ended on 28 February 2023. REQUIRED: 1.1 Calculate thertotal depreciation for the year. (10) 1.2 Complete the Statement of Comprehensive Income for the year ended 28 February 2023 (35) 1.3. Complete the Current Liabilities section of the Statement of Financial Position. (15) Note: Some information and figures are provided in the ANSWER BOOK. INFORMATION: A. EXTRACT: PRE-ADJUSTMENT TRIAL BALANCE ON 28 FEBRUARY Balance sheet accounts 2023 2022 R R Ordinary share capital 8 700 000 6 900 000 Retained Income 2 850 000 Loan: Triumph Bank 2 850 000 3 100 000 Vehicles 2 800 000 Accumulated depreciation on vehicles 2 415 000 Equipment 910 000 2 Accumulated depreciation on ? 782 000 equipment Provision for bad debts 2 8 135 Fixed deposit 2? Creditors control 112 755 Debtors control 135 300 SARS (Income tax) (Dr) 500 000 Nominal accounts Sales 2 Cost of sales 4 809 000 Service fee income 550 000 Rent income 62 800 Directors fees 625 000 Audit fees 188 410 Salaries and wages 526 855 Insurance 14 700 Advertising 87 000 Sundry expenses 2 Interest on fixed deposit 2 Ordinary share dividends 210 000 Copyright Reserved Please Turn Over

Account} dwnloaded from Stanmorephysics.com Downloaded from hlayiso.com September 2023 Preparatory Examination Trade discounts of R360 000 was allowed on invoices to certain customers. The business prices its goods at a mark-up of 70% on cost. The provision for bad debts must be adjusted to R7 515. Rent has;been received until 31 May 2023. The monthly rent increased by 10% on;November 2022. Directors’ fees were paid to two directors. One director requested that his fees for March 2023 be paid in February 2023, due to his financial problems. The committee agreed. The two directors receive the same monthly pay. Advertising of R57 700 consists of a monthly contract with a local radio station. Advertising was paid for 13 months. The contract rate was decreased by R200 per month from 1 December 2022. Vehicles: e Anold delivery vehicle, with a carrying value of R170 000 on 1 March 2022, was sold for R150 000 cash on 1 December 2022. e Depreciation for vehicles at 20% on a diminishing balance. Equipment: * New equipment costing R50 000 was purchased on 1 November 2022 for cash. Transaction was properly recorded. e Equipment is depreciated at 15% p.a. on cost. Two debtors with credit balances totaling R15 000 must be transferred to the Creditors Ledger. Loan: The repayments on the loan are fixed at R40 000 per month (including capitalised interest). Interest for the next financial year will decline by 5% from the 2023 interest on loan. After taking all the adjustments above into account, the;following were correctly calculated: ¢ Operating profit R2 030 000 e Total dividends for the year R380 000: Income tax for the financial year was calculated as R600 000. This is 30% of the net profit before tax. 60 Copyright Reserved Please Turn Over

Account} Downloaded from hlayiso.com dwnloaded from Stanmorephysics.com QUESTION 2 September 2023 Preparatory Examination CASH FLOW STATEMENT AND FINANCIAL INDICATORS (40 marks; 30 minutes) You are provided withlinformation related to Ladysmith Limited, a public company, for the financial year-ended 30 June 2023. REQUIRED: 2.1. Prepare the Retained income Note on 30 June 2023: (9) 2.2 Calculate the following amounts for the Cash Flow Statement. Show workings. 2.2.1. Dividends paid (3) 2.2.2 Income tax paid (4) 2.3. Complete the following sections of the Cash Flow Statement. 2.3.1 Investing activities (8) 2.3.2 Financial activities (5) 2.4 Calculate the following financial indicators for the year ended 30 June 2023: 2.4.1. % Operating expenses on sales (3) 2.4.2 Current ratio (4) 2.4.3 Net asset value per share (NAV) (4) INFORMATION: A. Shares and dividends: 1 July 2022: 30 September 2022: 31 December 2022: 1 January 2023: 30 June 2023: Copyright Reserved 800 000 shares were in issue 30 000 ordinary shares were repurchased from a retired shareholder at R9,80. Interim dividend of 40 cents per sharelwas paid. 100 000 new shares were issued at R13,12. Final dividends were declared to all shareholders in the shares register. Please Turn Over

Downloaded from hlayiso.com Account} B. Extract from the Statement of Comprehensive Income for the year ended dwnloaded from Stanmorephysics.co 30 June 2023: R Sales 6 000 000 Cost of salés. 4 000 000 Depreciation 56 000 Operating-expenses 1500 000 Net profit before tax 1 400 000 Net profit after tax 980 000 Cc. Extract from the Statement of Financial Position on 30 June: 2023 2022 Ordinary shareholders’ equity 2? Ordinary share capital 7 395 000 6 320 000 Retained Income 2 811 800 Non-current liabilities (15% p.a.) 2 549 950 1 782 950 Total Liabilities 4500 100 2 868 200 Current assets 3.900 000 2 200 000 Investment in fixed deposit 4 100 000 1 900 000 Fixed/Tangible assets 5 000 000 5 900 000 SARS (Income tax) Dr 50000 Cr 30000 Shareholders for dividends 321 900 250 000 D. Fixed assets © The building was sold at carrying value during the financial year, R2 000 000. e Equipment was purchased during the financial year. Copyright Reserved September 2023 Preparatory Examination m 40 Please Turn Over

Account} Downloaded from hlayiso.com September 2023 Preparatory Examination dwnloaded from Stanmorephysics.com QUESTION 3 INTERPRETATION OF FINANCIAL STATEMENTS (35 marks; 30 minutes) 3.1. Choose a tetm=from the list below that answers the specific following questions. 3.2 Write only the-term next to the question numbers (3.1.1 to 3.1.3) in the ANSWER BOOK. Return on capital employed; return on equity; solvency; liquidity; profitability 3.1.1. Is the business able to pay off all its debts? 3.1.2 Can the business pay off short-term debts in the next financial year? 3.1.3 Will shareholders be satisfied with the benefit that they receive for investing in the company? (3x1) (3) CHATSWORTH LTD You are provided with information relating to Chatsworth Ltd, a public company, for the financial year ended 31 August 2023. REQUIRED: NOTE: Provide figures, trends, financial indicators or calculations in EACH case to support your comments and explanations. 3.2.1 Profitability: Quote and explain TWO financial indicators to show that the company is managing its expenses more efficiently. (4) 3.2.2 Liquidity: The directors are satisfied with the liquidity of the company. Quote THREE financial indicators to support this statement. (6) 3.2.3 Dividends, Returns and Earnings: e Comment on the dividend pay-out policy. Provide ONE-point. (2) e Ashareholder wants to sell her shares to invest in a 3+year fixed deposit account at her bank. Explain whether this is aqwise decision. (4) 3.2.4 Risk and gearing: One of the directors believes that the company could increase loans in the new financial year. Quote TWO financial indicators (with figures) and explain each indicator to support her opinion. (6) Copyright Reserved Please Turn Over

Downloaded from hlayiso.com September 2023 Preparatory Examination dwnloaded from Stanmorephysics.com Account} 3.2.5 Share capital and % shareholding: Refer to information C. The CEO, Stanley Foster, currently owns 46% of the issued shares after the repurchasing of shares on 31 October 2022. The board of directors has decided to issue all the unissued shares in April 2023. e (Calculate the minimum number of shares that Stanley must buy in April’ 2023 to gain control of the company. (6) e Stanley wants to purchase the additional shares at R9,00 without advertising the shares to the public. Give TWO reasons why you would not support him. (4) INFORMATION: A. Financial Indicators calculated on 31 August: 2023 2022 % operating expenses on sales 13.8% 19.5% % Operating profit on sales 24.5% 22.8% % Net profit on sales 20.9% 21.8% Current ratio 24:1 1.9:1 Acid-test ratio 1:1 0.8:1 Stock turnover rate 6 times 3 times Total assets to total liabilities 3.0:1 5.0; 1 Earnings per share 158 cents 130 cents Dividends per share 169 cents 90 cents Dividend payout rate 107% 69% Net asset value per share 1 050 cents 950 cents Debt-equity ratio 06:1 0.8:1 % Return on average capital employed 17.2% 12.7% % Return on average shareholders’ equity 18.9% 18% B. Additional information on 31 August: 2023 2022 Market price of shares on stock exchange 1 590 cents 1 340 cents Interest on loan 13% 13% Interest on alternative investment 11% 7.5% Cc. Issue and repurchase of shares: NO. OF SHARES Authorised share capital 3 000 000 Number of shares in issue on 1 September 2022 2 050 000 Number of shares repurchased on 31 October 2022 260 000 Number of shares in issue on 31 August 2023 ? None of Stanley’s shares were repurchased on 31 October 2022. 35 Copyright Reserved Please Turn Over

Downloaded from hlayiso.com September 2023 Preparatory Examination dwnloaded from Stanmorephysics.com Account} QUESTION 4 CORPORATE GOVERNANCE AND AUDIT REPORT (15 Marks; 10 Minutes) 4.1. Choose the-correct term from COLUMN B to match the description in COLUMN A--Write only the letter (A — D) next to the question number (4.1.1 to 4.1.3) in the: ANSWER BOOK. COLUMN A COLUMN B 4.1.1. Guidelines for the preparation of financial }A = Memorandum of statements to ensure consistency. Incorporation 4.1.2 Sets out the rights, duties and B IFRS responsibilities of shareholders and . directors. C Matching concept 4.1.3 Revenue generated and related D Going concern concept expenses are recognised in the same accounting period. (3x1) (3) 4.2. CORPORATE GOVERNANCE REQUIRED: 4.2.1 According to the Companies Act, 2008 (Act 71 of 2008), a company must have a remunerations committee. e Explain the role/responsibility of this committee. (2) e Give one reason why this committee is necessary in a public company. (2) 4.2.2 Explain why it should be company policy that directors must declare all gifts, donations or favours received from suppliers. Provide TWO points. (4) 4.3. AUDIT REPORT REQUIRED: Internal auditors should be appointed in private and public companies. Explain TWO roles/responsibilities of internal auditors in companiés. (4) 15 TOTAL MARKS: 150 Copyright Reserved Please Turn Over

Downloaded from hlayiso.com Account} dwnloaded from Stanmorepkysics.com September 2023 Preparatory Examination GRADE 12 ACCOUNTING FINANCIAL INDICATOR FORMULA SHEET Gross profit X 100 Gross profit X 100 Cost of sales 1 Sales 4 Net profitibefore tax X 100 Sales 1 Net profit after tax X 100 Sales 1 QOperatingexpenses X 100 Sales 1 Operating profit X 100 Sales 1 Total assets : Total liabilities Current assets : Current liabilities (Current assets — Inventories) : Current liabilities Non-current liabilities : Shareholders’ equity (Trade and other receivables + Cash and cash equivalents) : Current liabilities Average trading stock X 365 Cost of sales 1 Cost of sales Average trading stock Average debtors X 365 Credit sales 4 Average creditors X 365 Cost of sales 1 Net income after tax X 100 Average shareholders’ equity 1 Net profit after tax X 100 Number of issued shares 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 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 4 Dividends pershare X 100 Dividends forthe year_ X 100 Earnings per share 1 Net income after tax 1 Total fixed costs Selling price per unit — Variable costs per unit NOTE e 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