Accounting Grade 12 Paper 1 MP Prelim 2023 Question Paper

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE GRADE 12 ACCOUNTING P1 SEPTEMBER 2023 MARKS: 150 TIME: 2 hours This question paper consists of 10 pages, a formula sheet and a 9-page Answer Book

Downloaded from hlayiso.com Accounting/P1 2 MDE/September 2023 NSC LEAVE THIS PAGE BLANK Copyright reserved Please turnover

Downloaded from hlayiso.com Accounting/P1 3 MDE/September 2023 NSC 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. 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 1 Statement of Financial Position 60 50 2 Cash Flow Statement and Financial 40 30 Indicators 3 Interpretation of Financial Information 35 30 4 Corporate governance 15 10 TOTAL 150 120 Copyright reserved Please turnover

Downloaded from hlayiso.com Accounting/P1 4 MDE/September 2023 NSC QUESTION 1: STATEMENT OF FINANCIAL POSITION: (60 marks; 50 minutes) 1.1 CONCEPTS Choose an explanation from COLUMN B that matches a concept in COLUMN A. Write only the letter (A-E) next to the question number (1.1.1-1.1.4) in the ANSWER BOOK. COLUMN A COLUMN B 1.1.1 Shareholder A Monitors control measures to prevent mismanagement and fraud. 1.1.2 Director B Owners of the company. 1.1.3 Internal auditor C Expresses an opinion on the reliability financial statements of a company. 1.1.4 External auditor D Appointed by the shareholders to manage the company. E Founders of a company. (4) 1.2 KING LIMITED The financial year ended on 28 February 2023. REQUIRED: 1.2.1 Complete the following Notes to the Statement of Financial Position: ● Ordinary share Capital (8) ● Retained income (8) 1.2.2 Prepare the Statement of Financial Position on 28 February 2023. (40) INFORMATION: A. Extract from the records on 28 February 2023: Copyright reserved Please turnover

Downloaded from hlayiso.com Accounting/P1 5 MDE/September 2023 NSC R Ordinary share capital 9 510 000 Retained income 793 000 Loan from director ? Land and Buildings 8 532 560 Equipment at cost 600 000 Accumulated depreciation on equipment ? Fixed deposit : ABA Bank (9% p.a.) 806 000 Creditors’ control 1 441 000 Debtors’ control 1 067 800 Cash at bank 132 000 Creditors for salaries 72 000 Income receivable (accrued income) 48 000 Income received in advance 6 600 SARS: Income tax (provisional payments) 390 000 B. Share capital and dividends: Authorised share capital: 3 000 000 ordinary shares Issued share capital: 1 March 2022 40% of the authorised ordinary shares had been issued 1 September 2022 The directors paid an interim dividend of 35 cents per share 1 November 2022 40 000 shares were repurchased at 25% (R60 000) above the average price. This transaction was recorded 1 December 2022 300 000 new shares were issued 28 February 2023 The directors declared a final dividend of 7 cents per share to all shareholders on the register. C. Net profit and Income Tax: Income tax for the financial year was calculated as R408 800. This is 28% of the net profit before tax. D. Fixed assets: All the equipment was purchased on the same day, 1 October 2020. Depreciation is written off at 20% p.a. on cost price. There were no other changes in fixed assets. Current depreciation has been recorded. E. Fixed deposit: The fixed deposit is invested with ABA Bank. Note that 25% of the fixed deposit will mature on 31 August 2023, while the balance will mature in 2025. F. Loan from the director: A loan of R3 000 000 from one of the directors was originally received on 1 March 2021. This loan is to be repaid in equal monthly instalments over 5 years. All payments up to the 28 February 2023 were made. Interest is not capitalised. Copyright reserved Please turnover

Downloaded from hlayiso.com Accounting/P1 6 MDE/September 2023 NSC G. Transfer from Debtors’ Ledger: A debtor’s debit balance of R1 000 in the Debtor’s Ledger must be transferred to his account in the Creditors Ledger. 60 Copyright reserved Please turnover

Downloaded from hlayiso.com Accounting/P1 7 MDE/September 2023 NSC QUESTION 2: CASH FLOW STATEMENT AND FINANCIAL INDICATORS. (40 minutes; 30 minutes) POSH LTD The information relates to the financial year ended 28 February 2023. REQUIRED: 2.1 Complete the section of the Cash Flow Statement for ‘Cash Effects of Operating Activities’. Show all workings. (9) 2.2 Calculate the following amounts for the Cash Flow Statement: 2.2.1 Proceeds on disposal of fixed assets. (5) 2.2.2 Funds used to repurchase shares. (5) 2.2.3 Repayment of loan. (2) 2.2.4 Net change in cash and cash equivalents. Complete the table in the Answer Book. (4) 2.3 Calculate the following financial indicators on 28 February 2023: 2.3.1 % Net profit after tax on sales. (4) 2.3.2 Debt/equity ratio. (3) 2.3.3 Net asset value per share (NAV) (3) 2.3.4 Return on average shareholders’ equity (ROSHE) (5) INFORMATION: A. Extract: Statement of Comprehensive Income on 28 February 2023: Sales R 4 050 000 Cost of sales 2 700 000 Depreciation 540 560 Interest expense 246 000 Income tax 253 500 Profit before income tax 845 000 B. Extract: Information from the Statement of Financial Position on 28 February: 2023 2022 R R Fixed assets (carrying value) 9 868 900 7 986 780 Ordinary shareholders equity 8 750 500 6 270 000 Ordinary share capital 8 235 000 6 000 000 Retained income 515 500 270 000 Non-current liabilities 1 500 000 2 600 000 Trade debtors 636 000 508 000 Trade creditors 574 000 734 000 Cash and cash equivalent 5 000 490 000 Bank(unfavourable) 55 000 - Copyright reserved Please turnover

Downloaded from hlayiso.com Accounting/P1 8 MDE/September 2023 NSC SARS: Income tax (Cr) 10 400 (Cr) 6 780 Shareholders for dividends 196 000 100 000 C. Fixed assets: ● Old equipment was sold for cash at the carrying value. ● Fixed assets to the value of R2 617 880 were purchased during the year. D. Share capital and dividends: ● The company is registered with an authorised share capital of 2 000 000 ordinary shares. ● On 1 March 2022 there were 1 000 000 shares in issue. A further 400 000 shares were issued on this date. ● An interim dividend of R140 000 was paid on 31 August 2022. ● On 28 February 2023, 50 000 ordinary shares were repurchased from the estate of a deceased shareholder at R10 000 more than the average price per share. ● On 28 February 2023 there were 1 350 000 shares in issue. 40 Copyright reserved Please turnover

Downloaded from hlayiso.com Accounting/P1 9 MDE/September 2023 NSC QUESTION 3: INTEPRETATION OF FINANCIAL INFORMATION (35 marks; 30 minutes) BLUE LTD AND MOON LTD Lee Khan owns shares in Blue limited. Both companies are in the same industry. The financial year of each company ends on the last day of February each year. NOTE: Provide figures, financial indicators or calculations in each case to support your comments and explanations. REQUIRED: 3.1 BLUE LTD 3.1.1 Liquidity: Explain why Lee Khan should be satisfied on the liquidity position of Blue Ltd. Quote TWO financial indicators with figures. (6) 3.1.2 Risk and gearing: Explain whether the company is managing risk and gearing efficiently. Quote TWO relevant indicators (with figures and trends) to support your comment. (6) 3.1.3 Dividend pay-out policy: As a shareholder you are concerned about the dividend pay-out policy. ● Calculate the dividend pay-out rate for this current year. (2) ● Provide ONE reason for your concern about the current dividend pay-out policy. (2) 3.2 MOON LTD 3.2.1 Returns on Investment: Explain whether the shareholders should be satisfied with the returns on their investment or not. Quote ONE financial indicators (with figures) to support your opinion. (4) 3.2.2 Re-purchase of shares: Explain whether the company paid a fair price for the shares repurchased. Provide TWO financial indicators (with figures) in your comment. (4) 3.3 Shareholding of Lee Khan: Lee Khan has R800 000 and intends to invest in new shares. Both companies have decided to issue additional shares on 1 March 2023, at the existing market price on 28 February 2023. 3.3.1 Calculate Lee’s % shareholding in Blue Ltd and comment on your findings. (5) 3.3.2 Lee wants to maintain his % shareholding in Blue Ltd after the issue of additional shares. Calculate the minimum number of shares he should buy in Blue Ltd and the amount he would have to spend. (4) Copyright reserved Please turnover

Downloaded from hlayiso.com Accounting/P1 10 MDE/September 2023 NSC 3.3.3 Would you advise Lee to buy the additional shares in Blue Ltd or to rather invest in Moon Ltd. Provide ONE point, with reason. (2) INFORMATION: A. Financial indicators on 28 February: BLUE LTD MOON LTD 2023 2022 2023 2022 Current ratio 1,3:1 0,9:1 1,9:1 2,5:1 Acid-test ratio 1,1:1 0,6:1 0,8:1 0,8:1 Average debtors collection period 34 days 42 days 60 days 30 days Debt-equity ratio 0,1:1 0,2:1 0,8:1 0,4:1 % return on shareholders’ equity 13,3% 9,0% 8,8% 7,9% % return on total capital employed 15,6% 14,0% 12,5% 11,3% Net asset value per share 848 cents 790 cents 1050 cents 978 cents Earnings per share 72,5 cents 60 cents 80 cents 78 cents Dividends per share 32 cents 25 cents 55 cents 75 cents Market price of shares (JSE) 830 cents 800 cents 1120 cents 1100 cents Re-purchase price (120 000 shares) 1000 cents Interest rate on loan 13% 13% Interest on fixed deposit 9% 9% B. Shares and shareholding of Lee Khan: BLUE LTD MOON LTD Number of shares in issue 1 700 000 2 000 000 Shares owned by Lee Khan 900 000 0 % shareholding in each company ? 0% Number of shares that each company plans to issue on 1 March 2023 (at a market price on 28 February 2023) 250 000 300 000 35 Copyright reserved Please turnover

Downloaded from hlayiso.com Accounting/P1 11 MDE/September 2023 NSC QUESTION 4: CORPORATE GOVERNANCE (15 marks; 10 minutes) Use the information presented and your knowledge on companies to answer the questions. REQUIRED: 4.1 Sponsorship and other parties: Refer to paragraph 1. ● Provide a reason why trade unions would want to be interested in the financial records and the performances of companies. (2) ● Explain why listed companies like Mzansi Hotels Ltd might want to spend money to sponsor such projects. (2) 4.2 Directors: Refer to paragraph 2. Explain the difference between an executive and a non-executive director. (2) 4.3 Concerns of shareholders: Refer to paragraphs 1, 2 and 3. As a concerned shareholder, what questions would you ask at AGM? Provide THREE different questions. In EACH case explain an appropriate reason. (9) INFORMATION: MZANSI HOTELS LIMITED SLAMMED FOR INAPPROPRIATE DECISIONS [By Helen Brown, Daily Views, 24 Nov 2022] adapted Paragraph 1 The decision by Mzansi Hotels Ltd to sponsor the Highveld Rugby tournament to the amount of R10 million at a time when the company is seeking extra loans and finance from investors has been criticised by shareholders and trade unions. Paragraph 2 One of the shareholders, Gary Grey, said this week that the business made a loss of R166 million during the 2021/2022 financial year. He said that one of the non-executive director, Joyce Louw, needed to be held accountable and action taken against her at a special board meeting. Mzansi Hotels Ltd is the main sponsor and owns hotels in South Africa. In response Ngomane DV, who is the executive director of the company, said Mzansi Hotels had reduced its sponsorships from more than 40 to only 5 sporting events and had budgeted for 8% salary and wage increases for their employees in the next financial year. Paragraph 3 “We are taking our strong South African brand to the rest of the country with this sponsorship and we are also making our presence felt”, said Louw. Copyright reserved Please turnover

Downloaded from hlayiso.com Accounting/P1 12 MDE/September 2023 NSC 15 TOTAL: 150 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 Please turnover

Downloaded from hlayiso.com Accounting/P1 13 MDE/September 2023 NSC 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 Please turnover