Accounting Grade 12 KZN March 2015 Memo

Downloaded from hlayiso.com Page 1 of 12 education Department: Education REPUBLIC OF SOUTH AFRICA | | ACCOUNTING : GRADE 12 | | FIRST QUARTERLY TEST 2015 MARKS. 2150 TIME 12 HOURS N.B. This question paper consists of _12 pages and an answer booklet of _8 pages. Please turn over

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Downloaded from hlayiso.com ‘ Page 2 of 12 INSTRUCTIONS AND INFORMATION Read the following instructions carefully and follow them precisely. 1. Answer ALL the questions. 2. ASpecial ANSWER BOOK is provided in which to answer ALL the questions. 3. Show 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 appropriate , calculations must be done to one decimal point. Please turn over

as Downloaded from hlayiso.com Page 3 of 12 7. Use the information in the table below as a guide when answering the question paper .Try NOT to deviate from it. QUESTION 1: 57 MARKS ; 45 MINUTE Topic of the question : This question integrates: Financial Statements : Balance Sheet, Interpretation and ethics Financial accounting v Balance Sheets and Notes ¥ Analysis and Interpretation of financial information v Ethics QUESTION 2 : 62 MARKS ; 50 MINUTES Topic of the question: This question integrates: Cash Flow Statements, Interpretation Financial accounting Y Cash Flow Statements v Analysis and Interpretation of financial information Managing Resources Interpretation and Report on movement of assets QUESTION 3 : 31 MARKS ; 25 MINUTES Topic of the questions : This question integrates : Interpretation and Auditing Financial accounting Y Analysis and Interpretation of Financial information ¥ Independent Audit Reports Please turn over

Downloaded from hlayiso.com . Page 4 of 12 QUESTION 1 : COMPANIES — FINANCIAL STATEMENT AND AUDITING [57 MARKS; 45 MINUTES] “Rani Ltd is a public company with an authorised share capital of 750 000 ordinary shares. The information relates to the financial year ended 28 February 2014. REQUIRED : 1.1 Calculate the interest on loan capitalised. (See Information C).. [4] 1.2 Complete the following notes to the Balance Sheet : : (Show the workings in brackets.) 1.2.1 Trade and other receivables ; [7] 1.2.2 Ordinary share capital [9] 1.2.3 Retained income [8] 1.3 Complete the Balance Sheet-on 28 February 2014. (Where notes are not required, show workings i in brackets to earn partmarks.) [23] 1.4. The intérnal auditor warned the Chief Executive Officer (CEO) that including his private entertainment expenditure under sundry expenses could cause problems for the business. 1.4.1. What GAAP / IFRS principle is the internal auditor referring to when this concern is expressed? [2] 14.2 Give TWO consequences for the business If the CEO does not take the advice of the internal auditor. (Give TWO points.) [2] 1.5 Atthe annual general meeting, the directors proposed that R250 000 be spent in uplifting the sporting facilities at three local schools. Explain why such projects are considered by big companies. (Give TWO reasons.) [2] Please turn over

Downloaded from hlayiso.com Page 5 of _12 INFORMATION : 1. Extract of the Pre-Adjustment Trial Balance on 28 February 2014 DEBITS CREDITS Ordinary share capital 2 100 000 Retained income (1 March 2013) 234 000 Loan : Sentry Bank 160 000 Fixed assets (carrying value) 2 258 000 Trading Stock 162 220 Debtors Control 63 000 Fixed deposit : Oxford Bank (7,5% pa) 125 750 Bank 190 650 SARS : Income tax (provisional payments) 170 000 Creditors control 26 000 Ordinary share dividends (paid : 31 August 2013) 120.000 . Additional Information A. Share capital : Hare (Beginning of the financial year). 400 000 | Shares were in issue on 1 May 2013. This has been correctly recorded. 100 000 | Additional shares were issued on 31 October 2013 at R5 each. B. On 31 January 2014, the business bought back 25 000 ordinary shares from disgruntled shareholders for R118 750, This transaction was not taken into account. These shareholders do not qualify for final dividends. C. The loan statement received from Sentry Bank showed the following: Closing balance Opening balance 256 600 Repayment during the year including interest 96 600 193 000 e Provide for the interest on loan. e R40 000 of the loan will be paid in the next financial year. D. Income tax for the year was calculated to be R162 800. This must be taken into account. E. A final dividend of 22 cents per share was declared on 28 February 2014. This must be taken into account. Please turn over

Downloaded from hlayiso.com Page 6 of 12 F, The following adjustments must be considered for the Balance Sheet only: e The rent for February 2014 was not yet received. The vacant storage space was rented out since 1: December 2013. (The rent income amount.in the Trial Balance — R17 300.) e An additional insurance policy on plant and equipment was taken ‘out on 1 October 2013. The annual premium of R6 720 was paid. « The provision for bad debts was adjusted to 3% of the debtors’ control. ’ « Audit fees of R4 500 were still outstanding on 28 February 2014. G. The net profit aftertax is R380 000 (Note that point F has been taken into account.) : Please turn over ©

Downloaded from hlayiso.com Page 7 of 12 QUESTION 2: CASH FLOW STATEMENT AND RATIOS [62 MARKS; 50 MINUTES] You are provided with information relating to Phoenix Limited, a public company listed on the JSE. The financial year ends on 28 February 2015. REQUIRED: 2.1 2.2 2.3 2.4 2.5 Prepare the Note to reconcile the net profit before tax with the cash generated from operations. [11] Calculate the missing figures indicated by A, B, C, D, E, F, G, H in the Cash Flow Statement for the year ended 28 February 2015. (See Information 4.) [23] Note : Indicate amounts in brackets (_), wherever applicable on answer sheet. Calculate the following financial indicators for the year ended 28 February 2015. Show all calculations to one decimal place. 2.3.1 Acid Test Ratio [4] 2.3.2 Debt/ Equity Ratio [3] 2.3.3 Earnings per share [3] 2.3.4 Return on Shareholders’ Equity [5] Comment on the Liquidity position (working capital) of the company. Quote and explain THREE financial indicators (with figures) to support your opinion. [9] The company wants to expand their operation in the next financial year and therefore they will need more tangible assets such as land and buildings. How do you suggest should they finance this? Give TWO options and explain the reasons for your suggestion. [4] Please turn over

Downloaded from hlayiso.com INFORMATION : Page 8 of 12 4. Extract from the Income Statement for the year ended 28 February 2015 Depreciation 160 000 Interest_ Expenses 96 000 Income Tax 336.000 Net Profit After Tax 864 000 2. Information extracted from the Balance Sheet (Statement of financial position) on 28 February 2015 2015 2014 | Tangible Assets 5 415 000 | 5 140 000 Financial Assets : Fixed Deposit: 100 000 400 000 Inventories _ 732 000 620 000 Trade and other Receivables (See Information 3.1) 564 000| 518 000 Cash and Cash Equivalents 128 000 - Ordinary Share Capital 4646 000 | 3678 000 Retained Income 798 000| 690000 Non-Current Liabilities (10% pa) 720,000 | 1200 000 Trade and other Payables (See Information 3.2) 775:000| 736000] Bank Overdraft : - 374 000 3. Notes and Additional Information 3.1 Trade and Other Receivables includes : 2015 2014 SARS — Income Tax 22 000 : 3.2 Trade and Other Payables includes : | } 2015 2014 Accrued Expenses — Interest on Loan 7 000 9 600 SARS — Income Tax_. - 41 400 Shareholders for dividends 372 000 340 000 3.3 Tangible Assets Y Old equipment was sold at Book Value during the financial year, R62 000. ¥ Tangible Assets were purchased during the year. . Please turn over

Downloaded from hlayiso.com 3.4 Ordinary Share Capital vy The company has an authorised share capital of 1 500 000 shares. Y The Directors issued 130 000 new shares on {March 2014. The issue of the new shares was recorded. ¥ 12000 shares were bought back by the company on 2 February 2015 at R9 each. The shares were originally issued at R6 each. v The total number of shares in issue on 28 February 2014 was 775 000. 3.5 Dividends v Interim Dividends of R348 000 were paid out on 1 September 2014. v Final Dividends were declared on 28 February 2015 but not paid. 4. Cash Flow Statement for the year ended 28 February 2014 Cash effects of operating activities Cash generated from operations Interest paid BP) [> Taxation paid Dividends paid (688 000) Cash effects of investing activities ? Purchase of tangible assets Cc D ‘| Disposal of tangible assets Decrease in fixed deposit 300 000 Cash effects of financing activities ? Proceeds from the issue of shares E Funds utilized for share buy-back F Loans G Net change in Cash and cash equivalents H Cash and cash equivalents at beginning of year (374 000) Cash and cash equivalents at the end of the year 128 000 5. The following financial indicators were calculated for the past two financial years 28 February 2014 | 28 February 2013 Current ratio 1,8: 1 1:1 Acid-test ratio 2 0.5:4 Stock turnover rate 9,4 times 6,8 times Debt equity ratio ? 02:1 Return on total capital employed 22,1% 18,3% (ROTCE) Interest rate on loans 10% 10% Earnings per share (EPS) ? 102 cents Dividends per share (DPS) 93 cents 85 cents Return on average shareholders’ equity ? 15,1% Please turn over

Downloaded from hlayiso.com nage 10 of 12 QUESTION 3 : INTERPRETATION OF FINANCIAL INDICATORS AND AUDIT REPORTS [31 MARKS; 25 MINUTES] De Villiers Limited and Amla Limited are two relatively new companies quoted on the JSE. Both deal in sportswear. A friend of yours, Leah, wants to buy shares in one of them. She has studied their latest results and presents you with the following financial indicators of the two companies. REQUIRED : Explain your answer to the following questions. In each case compare and quote financial indicators of both companies (actual figures, ratios or percentages) to support your answer. , 3.1.1 You have decided to purchase 10 000 ordinary shares in Amla Limited on the JSE at the beginning of the new financial year. If the dividend for share remain the same next year, what is the amount of dividend you can n expect from the company? [3] 3.1.2 Which company hasa better dividend pay-out policy? Explain and quote figure or financial indicators to support your opinion. [4] 3.1.3 Comment on the % return to shareholders, gearing (debt / equity) and degree of risk (ROTCE) of each company. ; [12] 3.1.4 The shareholders of the two companies hold different opinions of the © current market value of their shares, Which shareholders are happy with the market value? Explain. [4] Please turn over © a

Downloaded from hlayiso.com Page 1 of 9 education Department: Education REPUBLIC OF SOUTH AFRICA 150 ACCOUNTING : GRADE 12 FIRST QUARTERLY TEST : 2015 — ee ANSWER BOOKLET NAME: GRADE 12: QUESTIONS MARKS MOD 1. 2. 3. TOTAL N.B. This answer book consists of 9 pages. Please turn over

om hlayiso.com 1.2 115 om J lossny siraes wm tove ow ax Feigoiny tore Ay hice = Rateo ved] So 000 Stites > Ry, 20. 4 1.2.3 Retained income 1995 co ZY) | % loouns exvenituces oy LEARNERS Page 2 of 9 f QUESTION 1 1.1 Interest on loan Yoo J @ ‘* 193000 + ULbeo - 25% bop = 3heco & 4 1.2.1 Trade and other receivables Debtors control 63 000 ( ) Provision for pan aeors C4fve b4eeo ) (1 890) |v NET Trae negtons. : ar freon cxoenses Chusmances Tae 879) s g920 |v Accausn fuoone Rene fricane 9 73°79 > 9650 vee Honmi) + $650 $uis- |nepwe Thx C']o ep0 = 42.900) 1104) T 0 390 @ | 7 4.2.2 Ordinary share capital . apo coo ~ Joaswany stanza us fosue ow iMancn toi (atecoco~ seoend)|* | teo cco 100 60 ——_foroingoy stapes Youur gueme ME Yenn athe exca eo cop = (as coo) Jonna staves ge-eyncuasen aT Avernae toxe of A420 ¥* | ( tog eco i 9 Freer he = hectic bice ~ Ay huce = GTS . OS ct Syne = Re, 20 2 = Ry, Woo hy, ado J aL 4 Re SS Please turn over Opening balance — ; 234 000 Aer snort arsed pha € ; 380 cco |v Sunes ac-ruacansen _ (aS cod A 0,98) eaLug7so - los &o] (13 s0\vO ORDINARY SHAME HyVIDENDS — ( 24 sa) @ TATERIN _DeviDENa Cee )¥ Fist Diytnems (475 008%/v0): *| Clorsoy| 8 375 740

Downloaded from hlayiso.com Page 3 of 9 1.3 BALANCE SHEET AS AT 28 FEBRUARY 2014 ASSETS | NON-CURRENT ASSETS 2383 750 2) frien Assets 2358 cco | func Assets (Eien berosir) tas 7s «| CURRENT ASSETS 3g coo OD Lviven tony Ka dao |v ‘ennz Aub CTHED RECziVA BLES wo Ree Geaad 80 $80 s ASK min cast Keuwavenrs (19 uso — ¢7ap )* 14 |@ | TOTAL ASSETS abs Jso |O EQUITY AND LIABILITIES | SHAREHOLDERS EQUITY 23 joo DB | CON IRARY SHARE _CADITAL, Rey Ca.) 1995 coo [A Retawen Lucove. fer (i.a.3) 375 750 KA) NON-CURRENT LIABILITIES ts . 153 coo Vv Lowi: Seumy bau (4aece - ho oro ) 1§3 oo |S CURRENT LIABILITIES ~~ eco © ‘ore sun_emvea_thiapizs( Abcan+ 4500 ++ 104 S00 + 4de00) ize xo | QR. TOTAL EQUITY AND LIABILITIES 266 750 ()) 23 1.4 The internal auditor warned the CEO that including his private entertainment expenditure under sundry expenses could cause problems for the business. 1.4.1. What GAAP / IFRS principle is the internal auditor referring to when this concern is expressed? Business Enriry Ww (THe OWNER AMD BUSINESS ARE SEPARATE Ewrities) Please turn over

" Page 4 of 9 Downloaded from hlayiso.com 1.4.2 Give TWO consequences for the business if the CEO does not take the advice of the internal auditor. (Give TWO points.) Ruy Two vAun Atsponges NM v tite EXTEONAL AUdITOR woul QUAWEY THe AUdiT Revoes Y¥ the Phofir oF tHe ausiniess Well) Be UNDERSTATED, SHAREWLAERC WiOLiLD Nor BE HADI VY faves: woura wor se cavtiemt w mye Business Cfereanny] Tawisersenict) JV Cheniinty oF Ceo, 1.5 At the annual general meeting, the directors proposed that R250 000 be spent in uplifting the sporting facilities at three local school., Explain why such projects are considered by big companies. (Give TWO reasons.) "' Any Fw VAUD Restoncee = VOY Y Copponate come Reseowsianiry J YivestHevt i THE coNMURIN To EMHANCS EcoDWIRL: - v CRERTE A Gyon/iatwe THAGE OF THE ccHOAY, V PRORGHING BACK Tp THE CoNMURIE -Faoy welicd ww Gaus fapFits thy Urnaeriaz Vo bee fonts fe develooet © sf 57 Please turn over ©

Downloaded from hlayiso.com Page 5 of 9 QUESTION 2 2.1Reconciliation between Net Profit before tax and the cash generated from operations Net Profit before Tax Cssteco + 336 cco) 1 ee cop |" Adjustments for : Depaeerarions ibo coo | hrrenest _exeaice % wo |/ Operating profit before changes in working capital 146 coo Net change in working capital Cg ce) H+ Havesiremes nicrcnsen (132 ee = 60000) Cua eco) | 4/ HF fexnerain ona ascennaizs weneasey (56a ~ 22000) - (516000) FC a#ao) IM “ae sain onion PrIRBLES hienzagty. (775.0 ~ Toco ~ Bhcer) - (Tapeep~ Seo We] yao WI [Gst Genenaven een ofenatysns Wacco (11 9 . 2.2. ne Yavicave Oureiowe i Beacces, as pen Cast Fiowd Stareneuir, CALCULATION [AMOUNT A | "cod + 360 ~ Too ( We) G B BALYo + nado + qLcop en (=33b @0~ too - are) R (369 ED) eC C | Sion = oS cc «bic = SHScOO ® | C7 eo) O D ap W E | Becca X83 2 (4644 coe 472.000 ~ 367 S000 ) [on coo VA | F | ia ceo ¢ RG (103 coo) | [GS [iase op . Jap cow | (40 coo) 7 ag. | LH | @tpe0) + 138 coo | S02 oo ¥/ || 23 2.3. 2.3.1 Acid-test ratio (¥Ra4 oto = 732000) + TF 000 | b4lece } TIE eco ——— PA | tb QD Auocate Honiton yaaw. BNI IF ONE Paar is Coenen LT | 4 | t 2.3.2 Debt / Equity ratio | Tap ceo” + § Sep do yt A AUOCATE Hemite HARK ONLY IF OWE ARTIS Copper. 3 Please turn over

2.5. erTion one/| May CAR Jee ious Stans ~ They Mav 19st4eD only 118 000 OF THE “Veepqeo Aunieessa smees."4 , S| Titi Chu that our moka THAD Seprieauty Ratio is 0,4 he’ iti AMD fee 22,1 sweat is aPTion To Hee Tea The Wnrevest RATE ON Sr wh " ih / ae Downloaded from hlayiso.com mage 6 of 9 2.3.3 Earnings per share (EPS) 94 00” Jeo W500; 4 ceure iy, G Cents AceePy ONLY IF K 100 M8 e88t8, @) [ Onty IF OR om daw Ait. 16 NOT YIP ALLOCATE HETHOD HiRK OMI IP OME PALT 19 CopRECT. 2.3.4 Return on average shareholders’ equity the coo VY x ioe i "(am opo 4 HSH pee ) a fe on $64 eo xX wey, A966 ceo. I7, 6 1 Qnrert HETION HAL ONLY IF ONE PAUT Ig copReCt ay 2.4 Comment on the liquidity position of the company. Quote and explain THREE financial indicators (with figures) to support your opinion. Financial Indicators : V v Caoncur Ratio Y WRENS FooW ts) T1909 ¥ dein Test Ratio” INeRERSe Fait 51) To 0/924 / Wue Tuenever RATEY INCREAS fey b)/¢ TrhES To 9,4 Times ¥ General Comments : Vv i Resex coval” THe Cunaer Lapin sdRQuaTELY . J ° ; Lenin Assets CepCHtviKG A Vette) CoveL THE Cura Laoiy AbeQuATELY LY Grok ABE Seyund AT A FAST. DATE 7 Les WORKING CAPM REOUlWA wo bt | 62 Please turn over

Now Downloaded from hlayiso.com Page 7 of 9 QUESTION 3 3.1 3.1.1 Dividend amount you can expect next year. J : feoce times % R4 / * f 40 coo ; 3.1.2 Better dividend pay-out policy De Villiers Ltd : 85h 5 2 oh Amla Ltd : i 15, Conclusion : V De Views Lop is A BET Pontcy BECAUSE ‘iLY ARE RETHIMING fuior fou fanine ; EXCAiSioW > LEAD To BETTER RETIN Carwidenps) IW future. / = 4% 3.1.3. % Return on shareholders BE Vines la fs iba, v Auta tis 13,94 v Comment J Sant conpmites mde ehowing ReTUeis THT ARE HIGKEL Than ALTEWWATIVE ENVestae - Gearing (Debt/Equity Ratio) de Via Lm ots 13:1 ¥ Ada Uy 4g 0,281 v Comment JS de Vide Lip 19 HEHE GERD > RELIING Teo MUCH ON BoEZOWaY CAPITAL MUCH Mone RiGAy Simatic’ v Avy tay ts Lowi} Gee > Not RELY Ie OW BorRowa CAPUL y Mot aISKY 4 Degree of Risk (ROTCE) DE Vine is 13,44, Aula an is Comment J / Boru COMPANIES ARE Postiwe iy Geren AS Aorez UPCERM irekEst RATE On Con ash, i2 Ry Please turn over

Downloaded from hlayiso.com Page 8 of 9 Shareholders happy with market price ‘Tie stantipeoes & Anta tn fae tory wins Te HARWET VAN of bo CENTS PEE Sites Because ir 1S iH Thani THe ler Asser Ve CF Gof ceuzs a a Tis funickTes THAT Tite PuBLiC HtaS ComFIDENcCE iW THe Funwe oF THe CoHPADY Aud Wik. Pay 3.2. 3.2.1 3.2.2 IFRS and Companies Act Hole THAN THE Sites ALE AcTuAWY WORT. Vv uy 4 De Villiers Ltd : ( HAS BEEN Gived AN UN CUAUFiED Tits Hennig Tier te Audie? OID Wor FIND any MIssrarEHayT 2k His Repacsw ration © IN THE Flunatial GomenwiTe PREVA BY THE didEcrORE / tet M2 Not Fiud ANY FeALLD of Goss ERLORS Witt) CONDUCTING THE AUDIT, Lexi weurd Be tty to Buy sthaes; // Amla Ltd: J WAS BEEN Gal A SUAieen Ever. Te unten FEEL fiat Tee Fyin Asser rive Bee! ovetvALUD ~9 THis HERNS ‘THE’ J NET ASE VAWe of Stans Is oVeusTATED « Lent Wours Wor pe winaale wo Buy stapes V _— IFRS : Conpiuy finmice Stanywiry Hur coy OHPLy WIT LER S Tha? Thee 1s A CHE wiht of dole Tei ACROSS THE WORLD Ce euniMAte CEM ALSIon) Companies Act : piuy hie fo Ceuy win THE AC onfeRuises THe ompectmac. CouLd BE fet y Guiry of A CRIKWAL OCFCE N Please turn over al