Accounting Grade 12 KZN March 2016 Memo

Downloaded from hlayiso.com Page 1 of 8 education Department: Education REPUBLIC OF SOUTH AFRICA ra. \ ( | ACCOUNTING : GRADE 12 | FIRST QUARTERLY TEST | | 2016 \ / MARKS : 160 TIME : 1% HOURS N.B. This question paper consists of _8 pages and an answer booklet of 10 pages. Please turn over

Downloaded from hlayiso.com Page 2 of 8 INSTRUCTIONS AND INFORMATION Read the following instructions carefully and follow them precisely. Answer ALL the questions. A Special ANSWER BOOK is provided in which to answer ALL the questions. Show ALL workings to earn part-marks. You may use a non-programmable calculator. You may use blue / black ink to answer the questions. Where applicable, show all calculations to ONE decimal point. Write neatly and legibly. Use the information in the table below as a guide below when answering the question paper. Try NOT to deviate from it. ONoakwn > QUESTION 1 : 75 marks; 40 minutes Topic of the Questions The question integrates : Company Financial Statements Financial Accounting Income Statement Balance Sheet and notes QUESTION 2 : 73 marks; 40 minutes Topic of the Questions The question integrates : Cash Flow Statement and Interpretations | Financial Accounting Cash Flow Statement Interpretation of Financial Information QUESTION 3 : 12 marks; 10 minutes Topic of the Questions The question integrates : Audit Report Financial Accounting "| Audit Report Managing Resources Ethics Please turn over

a QUESTION 1 - CALCULATION OF FINAL PROFIT, BALANCE SHEET AND NOTES Downloaded from hlayiso.com Page 3 of 8 (75 marks; 40 minutes) The financial year of Jai Limited ends on 30 June. The accountant of Jai Limited calculated the net profit before tax as R1 234 335. However, it was discovered that not all the adjustments were made before calculating the net profit before tax. REQUIRED : 1.1 1.2 1.3 Refer to information 2. Calculate the correct net profit after tax for the year ended 30 June 2015. Indicate a + for increase and a — for decrease. [11] Prepare the following notes to the Balance Sheet (Statement of Financial Position) on 30 June 2015 : 1.2.1 Ordinary Share Capital [11] 1.2.2 Retained Income [8] 1.2.3. Trade and other payables [10] Complete the Balance Sheet (Statement of Financial Position) on 30 June 2015. Where notes are NOT required, workings must be shown in brackets. [35] INFORMATION : . The following extract was taken from the list of balances which appeared in the ledger of Jai Limited on 30 June 2015, before any additional adjustments and information were taken into account : Ordinary Share Capital R5 200 000 Retained Income (1 July 2014) R465 000 Land and Building 4 684 000 Equipment 775 500 Accumulated depreciation on equipment : 215 000 Fixed Deposit : ZAR Bank ? Trading stock 198 500 Debtors’ control 54 000 Provision for bad debts 2475 Bank (Dr) 1 025 000 Cash float 4000 Consumables stores on hand 1100 Income Accrued 31 660 Creditors control 87 150 Loan : JSE Bank @ 15% p.a. 420 000 Profit and loss (net profit before tax) 1 234335 Please turn over

Downloaded from hlayiso.com : Page 4of 8 2. The following adjustment and additional information were not taken into account in the calculation and the net profit before tax of R1 234 335. (i) (ii) (iii) (iv) (v) An annual insurance premium of R10 800 was paid for the period 1 January 2015 to 31 December 2015. Trading stock was damaged in a fire which broke out in the storeroom. The loss due to the fire amounted to R10 500. No entry was made. The provision for bad debts must be decreased by R315. In the profit and loss account, the amount for Rent income amounted to R136 950. The accountant did not take into account that the tenant paid the rent for July 2015 in advance. The rent had increased by R1 050 per month on 1 February 2015. The auditor discovered that the profit on disposal of a vehicle, R7 000, was incorrectly shown as a loss. 3. Income Tax and Provisional Payments (i) (ii) (ii) (iv) The company paid R7 000 owing to SARS during the previous financial ( } The fst provisional tax of R250 000 was paid to SARS on 3 January The second provisional tax of R114 200 was paid to SARS on 28 June The accountant calculated the income tax for the year as R371 700. 4. Shares and Dividends () (ii) (iii) (iv) (v) On 1 July 2014, 60% of the authorised share capital of 500 000 shares were in issue, On 31 July 2014, the directors issued an additional 100 000 shares at R16 each. This was properly recorded. On 10 January 2015, the directors decided to buy back 70 000 shares from the estate of a deceased shareholder at R15 per share. This ( \ transaction was completed successfully, but no entries were made. On 1 December 2014, an interim dividend of R300 000 was declared and paid. A final dividend of 120 cents per share was declared on 30 June 2015. The shares repurchased do not qualify for dividends. 5. The bank reconciliation statement on 30 June 2015, showed an outstanding cheque of R15 000, dated 31 August 2015. This cheque was issued to a creditor. 6. Interest on fixed deposit for the accounting year amounted to R24 000, The interest rate on fixed deposit is 12% p.a. The fixed deposit amount remained unchanged for the accounting year. 7. The business intends to repay R60 000 of the loan in the next financial year. Please turn over

Downloaded from hlayiso.com Page 5 of 8 QUESTION 2 — CASH FLOW AND RATIO ANALYSIS The information below was extracted from the books of BMW Ltd. Study the (73 marks; 40 minutes) information and answer the questions that follow. REQUIRED : 21 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 Prepare the reconciliation between net profit before tax and cash generated from operations. (Show workings in brackets). Complete the ‘Cash Flow from Operating activities’ section of the Cash Flow Statement. Complete the ‘Cash Flow from Investing activities’ section of the Cash Flow Statement. Complete the ‘Cash Flow from Financing activities’ section of the. Gash Flow Statement. Calculate the following for the year ended 30 June 2014 2.5.1 Net asset value per share (NAV) 2.5.2 Debt/equity ratio 2.5.3 Return on shareholders’ equity With regards to the loan and the repayment thereof : e Do you think that it was a good idea to pay off a large portion of the loan? Briefly explain your findings with reference to. TWO relevant financial indicators. Name and quote figures in your explanation. Provide TWO comments on the net asset value per share for 2014. Make use of financial indicators or figures to support your opinion. The shareholders present at the AGM were not happy with the drop in share price on the JSE over the past two years. Provide a possible reason for the change. Suggest a possible solution to the directors to rectify this problem. One of the shareholders asks the company to repurchase her 90 000 shares from him. What question / point (ONE), should the directors consider before deciding to agree to this or not. [15] [11] [10] [10] [5] [3] [5] [7] [3] [2] [2] Please turn over

Downloaded from hlayiso.com Page 6 of 8 INFORMATION : 1, List of balance on 30 June 2014 2014 2013 Fixed assets at carrying value 1 175 328 977 760 Financial Assets 156 000 228 000 Inventories 1 350 000 1 374 000 Debtors Control 1 322 400 1 356 000 Accrued Income 15 600 10 800 SARS — Income Tax 0 4 800 (Dr) Shareholders Equity 2.999 880 1 302 120 Ordinary Share Capital 2 850 000 1 200 000 Retained Income 149 880 102 120 Creditors Control 41 252 278 1 256 760 Accrued Expenses 8 400 11 400 SARS — Income Tax 12 450 (Cr) 0 Shareholders for dividends 312 000 16 800 2. ADDITIONAL INFORMATION : 2.1 Ordinary share capital e There were 100 000 shares in issue on 1 July 2013. e 100 000 new shares were issued @ R18 each on 1 January 2014 ¢ 10000 shares were repurchased at R18 each on 30 June 2014 2.2 Depreciation ¢ Total depreciation for the year amounted to R19 974. 2.3 Sale of equipment Details of Equipment sold at carrying value : Cost price R48 000 Accumulated depreciation to date sold R24 684 Date Sold 4 April 2014 Selling price 2 2.4 Income Tax « Income tax at 28% of the net profit for the year amounted to R198 240. Please turn over

Downloaded from hlayiso.com 2.5 Dividends Page 7 of 8 ¢ The interim dividend of R120 000 was declared and paid on 15 January 2014. e The final dividend was declared on 30 June 2014. 2.6 The loan statement from Afrika Bank on 30 June 2014 reflected : Balance at the beginning of the financial year R1 284 000 Repayments during the year (including interest) 1 008 000 Interest capitalised (interest rate 15% p.a.) ? Balance at end of financial year 420 000 2.7 Financial indicators 2014 2013 % return on shareholders’ equity ? 59% % return on capital employed 28,4% 18% Net asset value per share ? 1195¢ Market price per share on JSE 1117c 1600c Debt / equity Ratio ? 1:1 Dividend for share 110 cents 75 cents Earnings per share 130cents 94 cents Interest rate on fixed deposit 6% 6% Please turn over

Downloaded from hlayiso.com Page 8 of 8 QUESTION 3 —- AUDIT REPORT (12 marks; 10 minutes) Extract from audit report of Company 1: In our opinion, the financial statements fairly represent, in all material respects, the financial position of this company at 31 October 2015 and the results of their operations and cash flow for the year ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa. Extract from audit report of Company 2 : We found that internal control procedures were not adhered to and that documentation did not exist for a significant portion of the transactions tested. Because of the significance of the matter described in the previous paragraph we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements for the year ended 31 October 2015. REQUIRED : 3.4. Why does the Companies Act make it a requirement for public companies to be audited? (2) 3.2 Why is it important that the audit is done in accordance with the IFRS? State one point. (2] 3.3 SAICA is one of the main professional bodies governing accountants in this country. Explain one of the main roles performed by SAICA. [2] 3.4 What type of audit report is indicated in Audit Report of Company 1 and explain your answer. [2] 3.5 What type of audit report is indicated in Audit Report of Company 2 and explain your answer. [2] 3.6 With reference to the audit report of Company 2, explain ONE consequence of this audit report for the company and the directors. [2] TOTAL MARKS : 160 Please turn over ©

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Downloaded from hlayiso.com id I page 3 of 10 4.2.2 Retained income Balance at beginning of year 465 000 g tier faoce neten tre Chee 131) sto we flennowise & Too sites nove Menage fue ot fe encu” eres Dividends on ordinary shares CEH cco) Voremn Chav) ( 400 ceo fiom Cieeonsenvn/denn) [ "feo x 30%? | € Hb cco ||_8 Balance at end of year 4S 756) 8 4.2.3 Trade and other Payables CREDITORS CONTA. (sis Sw) joa. ish J Fucone _asceres roe Chee 1s) u io Snes~ Yeni Thx (371 %0~ 364 200) . 750 SHAREHODERS HL DwinENds Chin OWiarias) Chep 1.2.2)) Bibeok? Cyenert_townos of Loni CAnwum oryame ogous veer Awe “fond bo ceo || 12 SE | 40 Please turn over Page 4 of 10 4.3 Balance Sheet (Statement of Financial Position on 30 June 2015 Non Current Assets A a yp 008 fuer /Tene Assets kt cnn Uae (466 o00 + 175.500 ~ 25 coo) 5 aRF SOLE fuawens. hesers _( 24p0* “Y) tao cco“ Current Assets asa ooo Lwewony (196 500 - 10800 + too) ; is4 reo “frane min orien agcewnates ( Stee — 2160 + S480 + 316%) YoY) Chow nat cisy EouWnvent (Ao00_) aw TOTAL ASSETS 5 Fab 500) Equity and Liability Shareholders Equity 4H FSC) Ordinary Share Capital (ee 1-24) 4 ajo ceo ©) Retained Income Cee tary 489 Fo) Non Current Liability Bho aw Loan: JSEBank (420 ecé~ to eo) to co Current Liability $9 50C} Trade and other payables Ger 123) 516 F502 Bank overdraft ( teas oe’ ~ 918ca0 ~ lof eco +15 000) loco Gi TOTAL EQUITY AND LIABILITY SP so) 36 w' foe Enea forewa eum CHA a) 75 Please turn over

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Downloaded from hlayiso.com Ad page 7 of 10 25.3 Retum on Shareholders. Equity -Tos oa 9g 240 Yo Casiswes f aoeno + ioe 10 Wo a7 i O° i = —SeH Ho x od - . BUST oD tf a : ah 7 5 2.6 With regards to the loan and repayment thereof : e Do-you think that it was a good idea to pay off a large portion of the loan? ° Briefly explain your findings with reference to TWO relevant financiat indicators. Name and quote figures in your explanation. Yes// No / DEDT EQUITY RATIC > Lyprowen Caeceeasa) Fro 3.1 mh 2012 To Op) Pe TT ay doy “7 Losi] GEARED, Low BISiG. vy 7 Copensy Is WoT RELIG o8 beRROWED CAP . Rome Y » Raymeve Chxcnencen) Proq Ifo wh 201 To 23,7 %o m Romp “7 Rome 2 The 1s weKER thay THe F¥Teveer pate oy woaud (SZ — Vooentes & tose GeRng eF £77 (23,7%,—- isp 5) ° WV x 7 277 Provide TWO comments on the NAV for 2014. Make use of financial indicators or figures to support your opinion. NAY ckcnsase Fray HOS ceuts i) 2013 To IS FF centrs im oie Get frost arta THR Ditcheasen) Nol oF 1579 caiTs Is Moke Tha THE Hhnwer mice Sone Tse oF WW7eenTs Cruoue || ZB. DOES KoT HAVE CoxfoEne Wd coHDANY y CHVESTIGATE REASONS) 3 Please turn over o~ ae Page 8 of 10 28 The shareholders present at the AGM were not happy with the drop in share price on the JSE over the past two years. Provide a possible reason for the change. Suggest a possible solution to the directors to rectify this problem. REASON SOLUTION ¥ Bune Qeoor ¥ binerrons Hust Ensure Tree THE NAKCIAL SiRteas) IFA\eLy PRESadT THE FisiANCAL Postaca: IN AU RESHEC n/ kace oF Conitnacce t4| THe Dineereas CHANAREHUOE CF ConPRET> imeove WE THRGE OF THE CoupanY THROUGH Pysticit - JS VRC oF PRETATION IN CORPORKTE Soci Asib ENVIRON HEAL Peters VbipEcropl wou Have To ENEAGE Wh ENNIRoNHesTAL /SOCiAL PeonaS O% ADVERTISE AT WocAL RES To prose THE COMDUIY ./ a ¢ DiRECTOLE CONCERTRATO Thaw eFfons ww auuning [APPonoT A Puokic RELA FECAL teRT WOULD HE COHPANY EFficiedTey AWD Via Hl To Reus [tpPose THE Penfornsice oF Coup To VorastiAt| Of PuBiscirt. ~ [INVEST 7 PueiesE WHI. 2 (acy 1 Rexsos'fSousnot ) 2 One of the shareholders asks the company to repurchase her 90 000 shares from him. What question / point (ONE), should the directors consider before deciding to agree to this or not. V witkt Pace Wilk te Accerr Fok The stares? -/ Dh tHe Pelee is siquiricanrey MGKED, THAN Te HACKET Paice AMD The AewnGE sue {i Basted Siacioaets wil BE akan. BeCASEE ina ieee? wy 2 DOES THE COMP vide SUFFLCLETT CASI To Phy FOR “TMESE Stinnes Wintour NEGATWELY AffECTIS Tee Wow ¢ sowadey ef -tte coupe 2 Gar Pry #. 73 Please turn over

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