Accounting Grade 12 KZN March 2018 Memo

Downloaded from hlayiso.com Education KwaZulu-Natal Department of Education REPUBLIC OF SOUTH AFRICA : ACCOUNTING : a COMMON TEST i ' MARCH 2018 i MARKS: 100 TIME: 1 hour This question paper consists of 8 pages. Copyright Reserved Please Turn Over

Accounting Downloaded from hlayiso.com March 2018 Common Test NSC — Grade 12 INSTRUCTIONS AND INFORMATION Read the following instructions and be sure to follow them carefully: 4. This question paper consists of 9 pages. 2: A special ANSWER BOOK consisting of 8 pages is provided in which to answer all the questions. 3. Answer ALL the questions. 4. Workings must be shown in brackets in order to earn part marks. on Non-programmable calculators may be used. 6. You may use dark pencil or black / blue pen to answer the questions. 7. Marks will be deducted for missing details and foreign entries. 8. Use the information in the table below as a guide when answering the question paper. Try NOT to deviate from it. Question 1: 40 Marks, 24 Minutes The topic of this question is: Content: e Correct net profit e Retained Income Financial Statement e Ordinary share capital e Equity and liability section of the Balance Sheet Question 2: 30 Marks, 18 Minutes The topic of this question is: Content: Cash Flow Statement e Cash Flow Statements Question 3: 30 Marks, 18 Minutes The topic of this question is: Content: Ratio’s and analysis and interpretation e % return on average shareholders equity e Interpretation Copyright Reserved Please Turn Over

Downloaded from hlayiso.com Accounting March 2018 Common Test NSC — Grade 12 QUESTION 1 (40 Marks; 24 Minutes) FINANCIAL STATEMENT You are provided with information relating to Nokubonga Limited for the year ended 28 February 2018 REQUIRED: 1.1 Calculate the correct net profit after tax for the year ended 28 February 2018. Indicate a + for increase and a — for decrease. (7) 1.2 Prepare the Retained Income Note on 28 February 2018. (9) 1.3. Prepare the Ordinary share capital Note on 28 February 2018. (9) 1.4 Complete the Equity and liability section of the Statement of Financial Position(Balance Sheet) (15) INFORMATION: A. Extract of balances on 28 February 2018. Balance Sheet Account Section R Ordinary share capital ({March 2017) 4 200 000 Retained income (1 March 2017) 468 000 Mortgage loan 262 200 Fixed assets 7 000 000 Trading stock 200 000 Debtors control 150 000 Creditors control 180 000 Provision for bad debts(1March 2017) 11 400 SARS: Income tax (provisional tax payments) 48 000 Income receivable 5 200 B. The net profit before tax was calculated as R 166 800 before taking into account the following information: 1. The provision for bad debts must be adjusted to R10 400. 2. The rent for February 2018 is still outstanding. The rent from 1 March 2018 onwards will be R3 080 as the rent will be increased by 10%. 3. An annual insurance premium of R9 000 was paid and recorded in the Income Statement. This premium was for the period 1 November 2017 to 31 October 2018. 4. The auditors discovered that the profit on disposal of a vehicle, R1 200, was incorrectly recorded as a loss in the Income Statement. 5. Income tax liability for the year amounts to R51 000 Copyright Reserved Please Turn Over

Downloaded from hlayiso.com Accounting March 2018 Common Test 4 NSC ~ Grade 12 Cc. Shares: e Nokubonga Ltd is authorised to sell 4 000 000 ordinary shares. « 160 000 shares were in issue on 1 March 2017 » On December 2017 the directors decided to buy back 50 000 shares from the family of a deceased shareholder, at R30 per share. These shares are entitled to final dividends. © On1 January 2018, 100 000, shares were issued at R21 each. These shares do not qualify for final dividends. D. Dividends: e Aninterim dividend of 14 cents per share was declared and paid on 31 August 2017. e A final dividend of 10 cents per share was declared on 28 February 2018. E. A debtor with a debit balance of R2 000 in the debtors ledger must still be transferred to his account in the creditors ledger. F. Mortgage loan: The mortgage loan was obtained on 1 December 2016. This will be repaid over six years. A fixed loan repayment (excluding interest) is made at the end of each month. The first monthly loan repayment was made on 31 December 2016. All other loan repayments have been made to date. Interest is not capitalised and has been correctly recorded. | Copyright Reserved Please Turn Over

Downloaded from hlayiso.com Accounting March 2018 Common Test NSC — Grade 12 QUESTION 2 (30 Marks; 18 Minutes) CASH FLOW STATEMENT 2.1 State whether each of the following statements is True or False. Write only ‘True’ or ‘False’ next to the question number (2.1.1-2.1.4) in the answer book. 2.1.1. The external auditor prepares relevant control measures for accounting procedures and ensures that they are followed. (1) 2.1.2 The directors are responsible for preparing the financial statements of a company. (1) 2.1.3. Depreciation is added back into the Cash Flow Statement, as it is regarded as a non-cash expense. (1) 2.1.4 Interest expense is recorded under operating expenses in the Income Statement. (1) 2.2 You are provided with information relating to Alwande Limited, a public company. REQUIRED: 2.2.1 Complete the note to show the cash generated from operations. (8) 2.2.2 Calculate the following amounts that will appear in the Cash Flow Statement for the year ended 28 February 2018: (a) Taxation paid (4) (b) Dividends paid (4) (c) Fixed assets purchased (4) 2.2.3 Calculate the % return on total capital employed (ROTCE) (6) Copyright Reserved Please Turn Over

Downloaded from hlayiso.com Accounting 6 March 2018 Common Test NSC — Grade 12 INFORMATION: A. Extract from the Income Statement Depreciation 178 000 Interest expense 52 000 Income tax 93 520 Net profit after income tax 240 480 B. Figures obtained from the Balance Sheet and notes on 28 February 2018 2017 Fixed asset (carrying value) 2 568 730 | 2 174 390 Financial assets 150 000 230 000 Current assets 413 600 496 810 Inventories 194 600 262 000 Trade debtors 214 000 198 000 SARS-Income tax - 2110 Cash and cash equivalent 5 000 34 700 Shareholders’ equity 2 392 480 | 1 848 000 Ordinary share capital 2016 000} 1.520 000 Retained income 376 480 328 000 Non-current liabilities 500 000 800 000 Current liabilities 239 850 253 200 Trade creditors 124 800 165 200 Shareholders for dividends 96 000 88 000 SARS -— income tax 6 300 - Bank overdraft 12 750 - Cc Share capital e 400 000 shares were issued before 28 February 2017 e On1 March 2017 an additional 200 000 shares were issued. e On 1 September 2017 the company repurchased 120 000 shares from a dissatisfied shareholders at 30 cents above the average price. D. Fixed assets e Extensions to the existing buildings were undertaken during July 2017. * There were no other movements of fixed assets during the financial year. E. Dividends * Aninterim dividend of R60 000 was paid on 30 September 2017. e The final dividend was declared on 28 February 2018. 30 Copyright Reserved Please Turn Over

Downloaded from hlayiso.com Accounting 7 March 2018 Common Test NSC ~ Grade 12 QUESTION 3 (30 Marks; 18 Minutes) 3.1 MBIZENI LTD AND SIVUKILE LTD You have R100 000 to invest in a listed company. You have two companies in the same industry to choose from Note: When answering the question below, compare the information given and quote the relevant financial indicators of both companies(percentages, ratio’s and/or amounts) REQUIRED: 3.1.1 Comment on the value of the shares of the two companies on the (5) Johannesburg Securities Exchange (JSE). Explain how this will influence your choice of company. 3.1.2 Compare and comment on the dividend pay-out policies of the two (5) companies. 3.1.3. Comment on the degree of risk and gearing. Explain how this will influence (5) your choice of company. INFORMATION: MBIZENILTD | SIVUKILE LTD Current ratio 4.3:1 1.5:2 Acid-test ratio 2.8:1 0.8:1 Stock turnover rate 4 times 6 times Stock-holding period 90 days 62 days Average debtors collection period 54 days 26 days Average creditors payment period 59 days 62 days Debt-equity ratio 0.5:1 2.5:1 Return on total capital employed (ROTCE) 17.6% 11% Retur on shareholders’ equity (ROSHE) 19.2% 9.1% Earnings per share (EPS) 400 cents 1000 cents Dividend per share (DPS) 360 cents 500 cents Net asset value per share (NAV) 440 cents 970 cents Market price of shares on JSE 500 cents 850 cents Interest rate on loans 12% 12% Copyright Reserved Please Turn Over

Downloaded from hlayiso.com Accounting March 2018 Common Test NSC — Grade 12 3.2 JANGAZA LTD You are provided with information relating to Jangaza LTD for the financial year ended 28 February 2018. REQUIRED: 3.2.1 Calculate the % return on average shareholders’ equity (ROSHE) (3) 3.2.2 Zibani is the CEO of the company his shareholding is as follows: Number of shares Date purchased % shareholding 420 000 January 2016 46.7% (a) Calculate Zibani’s % shareholdings on 1 September 2017 after the repurchased of shares. (The shares were repurchased on of Jangaza LTD). (3) (b) Explain how Zibani has benefitted from the decision to repurchase the shares. (2) (c) |The independent auditor discovered that Zibani had made the decision to repurchase the shares without informing the board of directors. Why should the independent auditor be concerned about this? (2) (d) | Calculate the number of shares that Zibani must purchase to regain the control after the issued shares on 1 January 2018. (5) INFORMATION: A. Extract from Income Statement and Balance Sheet on 28 February: 2018 2017 Income tax 750 000 900 000 Net profit after tax 1 750 000 2 100 000 Current assets 1015 000 456 000 Shareholders’ equity 10 050 750 9 540 000 Loan 8000000} 4500000 Current liabilities 635 200 1.479 300 B. Shares e 900 000 shares were in issue on 1 March 2017. e 75 000 ordinary shares were repurchased from the estate of a deceased shareholder on 1 September 2017. e The company issued 125 000 shares on 1 January 2018. 30 TOTAL MARKS: 100 Copyright Reserved

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rom auise.com —____ Basic Education KwaZulu-Natal Department of Education REPUBLIC OF SOUTH AFRICA ry | : ACCOUNTING : MEMORANDUM : } « MARCH 2048 : | NATIONAL SENIOR CERTIFICATE | | MARKS: 100 | MARKING PRINCIPLES: 1. Penalties for foreign items are applied only if the candidate is not losing marks elsewhere in the question for that item. No double penalty applied. 2. In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect. 3. Where penalties are applied, the marks for that section of the question cannot be a final negative. 4 Codes: f=foreign item; p=placement i This memorandum consists of 6 pages.

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Downloaded from hlayiso.com Accounting 2 March common test 2018 QUESTION 1 1.1 | Calculation of the correct net profit after tax Accept brackets instead of - ifno sign assume + __ positive effect and figure must be correct Incorrect net profit 166 800 Provision for bad debts adjustment ¥+1 000 Rent Income ¥+2 800 | Insurance a - ¥+6 000 Profit on sale of an asset v¥ +2 400 Correct net profit before tax Operation, one part correct 1179 000 7 7 Income tax v(51 000) Net profit after tax Check operation, NP- tax | (1128 000 1.2 _RETAINED INCOME NOTE ON 29 FEBRUARY 2016 Balance at beginning of year : 468 000 Repurchase of shares (50 000 X R 3.75”) Y (187 500) | Net profit after tax (see 1.1) M1128 000 Dividends _ Operation, one part correct M(38 400) Interim (160 000 X 0.14) two or nothing : v¥¥22 400 Final (160 000 X 0.10) two ornothing ¥¥16 000 9 Balance at end of year Operation, one part correct 1370 100 9 1.3 ORDINARY SHARE CAPITAL 160 000 shares @ R26.25 4 200 000 (50 000)’ buy — back of shares @R26.25Y ¥ (1312 500) 9 100 000Y shares @ R21v ¥2 100 000 | 9 210 000 shares @ R23 .75v v4 987 500 1.4 EQUITY AND LIABILITIES Shareholders’ equity Operation, one part accurately correct 15 357 600 Ordinary share capital (see 1.3) M14 987 500 Retained income (see 1.2) (71370 100 Non-current liabilities Operation, one part correct M207 000 Loan ( 262 200V — 55 200v) ¥207 000 Current liabilities Operation, one part correct 1252 200 Creditors (180 000V - 2 000v’) ¥178 000 Current portion of loan check non-current liabilities M155 200 SARS-Income tax (51 000 - 48 000) ¥3 000 15 Shareholders for dividends (see 1.2) 16 000 15 Total equity and liabilities Operation, one part correct 15 609 800 TOTAL MARKS 40 Consider the above information if the candidate used rent income Copyright reserved Please turn over

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Downloaded from hlayiso.com Accounting 3 March common test 2018 Consider the below information if the candidate used rent expenses. 1.1 1.2 1.4 Calculation of the correct net profit after tax Accept brackets instead of - ifno sign assume + positive effect and figure must be correct Incorrect net profit 166 800 Provision for bad debts adjustment ¥ +1 000) | Rent Expenses - ¥-2 800 Insurance ¥+6 000 Profit on sale of an asset ¥ +2 400 Correct net profit before tax Operation, one part correct M173 400 Income tax ¥(51 000) Net profit after tax Check operation, NP- tax 1122 400 RETAINED INCOME NOTE ON 29 FEBRUARY 2016 Balance at beginning of year 468 000 Repurchase of shares (50 000 X R 3.75v’) ¥ (187 500) | Net profit after tax (see 1.1) i122 400 Dividends _ Operation, one part correct M(38 400) Interim a 60 000 X 0.14) two or nothing ¥v22 400 Final (160 000 X 0.10) — twoornething ¥v¥16 000} L_2 Balance at end of year Operation, one part correct M1364 500 9 EQUITY AND LIABILITIES Shareholders’ equity Operation, one part accurately correct M5 352 000 Ordinary share capital (see 1.3) M4 987 500 Retained income (see 1.2) M1364 500 Non-current liabilities Operation, one part correct M207 000 Loan ( 262 200v — 55 200”) ¥ 207 000 Current liabilities Operation, one part correct M252 200 Creditors (180 000 - 2 000v) ¥178 000 Current portion of loan check non-current liabilities M155 200 SARS-Income tax (51 000 - 48 000) ¥3 000 15 Shareholders for dividends (see 1.2) M16 000 15 Total equity and liabilities Operation, one part correct VI5 811 200 Copyright reserved Please turn over

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Downloaded from hlayiso.com QUESTION 2 2.1 State whether each of the following statements is True or False. Write only ‘True’ or ‘False’ next to the question number (2.1.1-2.1.4) in the answer book. Indicate 2.1.1} False~ 2.1.2 | Truev” 2.1.3 | True” 4 2.1.4| False” 4 2.2 2.2.1_Cash generated from operation M1575 000 Net profit before tax (240 480 + 93 520) ¥334 000 Depreciation ¥178 000 Interest expense ¥52 000 Net profit before changes in working capital 564 000 Changes in working capital 11 000 Inventory (262 000 — 194 600) (inflow) ¥67 400 Debtors (198 000-214 000) (outflow) ¥ (16 000) 8 Creditors (165 200 — 124 800) (outflow) ¥ (40 400) 8 2.2.2 (a) | Tax paid 93 520V —2 110Y —6 300 Y_ orone part correct | M185 110 2 110 + 6 300 — 93 520 (b) | Dividends paid 60 000 v+ 88 000Y Or_one part correct MI“ 148 000 88 000 + 156 000 — 96 000 or 96 000 — 88 000 — 156 000 (c) | Fixed assets purchased 2 568 730V + 178 000Y — 2174 390 or M572 340 12 2 174 390 - 178 000 — 2 568 700 one part correct 12 2.2.3] Calculate the % return on total capital employed (ROTCE) 386 000V Vv X 100 2770 240 vv 1 6 13.9%” M1 14 % one part correct 6 The calculation of R386 000 is 240 480 +93 520 + 52 000 The calculation of R2 770 240 is % (2 392 480 + 1 848 000 + 500 000 + 800 000) TOTAL MARKS 30 30

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Downloaded from hlayiso.com Accounting 2 March common test 2018 QUESTION 3 3.1.1 | Comment on the value of the shares of the two companies on the Johannesburg Securities Exchange (JSE). Explain how this will influence your choice of company. Financial indicators or Explanation, must involve a choice explanations thereof; Do not accept comparison of JSE with figures prices only v Mbizeni Ltd | would invest in Mbizeni Ltd as the shares seem to be in good demand JSE price 500 cents > OR YNAV 440 cents. ¥ | would not invest in Mbizeni Ltd as the shares might be overpriced. Sivukile Ltd OR : | would invest in Sivukile Ltd as the JSE price 850 cents < shares seem to be under-valued. ¥ NAV 970 cents. ¥ OR | would not invest in Sivukile Ltd as the shares might be in low demand. 5 5 3.1.2 | Compare and comment on the dividend pay-out policies of the two companies. Award part-marks for incomplete answers Financial indicators Comparison and comments or explanations Do not accept comparison thereof; with figures of the DPS only must mention both companies” Mbizeni DPS 360 cents” Mbizeni Ltd is distributing a LTD EPS 400 centsv higher percentage of Or 2 marks income earned; Sivukile Ltd Distributes 90% of has decided to retain half of earnings EPS. OR Sivukile DPS 500cents” Mbizeni Ltd appears to keep Ltd EPS 1 000 cents” shareholders satisfied by Or 2 marks giving them good dividends: Distributes 50% of Sivukile Ltd appears to have earnings plans for growth. 5 5 Copyright reserved Please turn over

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Accounting 3.2 3.1.3 3.2.1 Downloaded from hlayiso.com 3 March common test 2018 Comment on the degree of risk and gearing. Explain how this will influence your choice of company. Financial indicators or explanations thereof with figures. Must use D/E and ROTCE Mbizeni Ltd D/E ratio 0.5: 1” ROTCE 17.6% > 12% interest ratew Sivukile DIE ratio 2.5: 1” ROTCE 11% < 12% interest rate.” ROTCE must be compared to interest rate. Comparison, must involve a choice. Accept valid alternatives “ | choose Mbizeni Ltd as financial risk is low and gearing is positive (ROTCE exceeds interest) OR | choose Mbizeni Ltd for its positive gearing (ROTCE exceeds interest) but they are not making effective use of loans OR | do not choose Sivukile Ltd as there is high financial risk and negative gearing / too much money borrowed and not able to use the funds effectively OR | choose Sivukile Ltd as there is high use of loans and, if they can improve efficiency (ROTCE), profit would improve significantly. 5 5 Calculate the % return on average shareholders’ equity (ROSHE 1 750 000 X 100 (10 050 750 + 9 540 000) 1 1750 000Y X 100 9 795 375 v 1 17.9% or 18%0ne part correct 3 3 Copyright reserved Please turn over

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Downloaded from hlayiso.com Accounting 4 March common test 2018 3.2.2 | Calculate Zibani’s % shareholdings on 1 September 2017 after the repurchased of shares. Do not award this mark if another figure added 420000Y xX 100 825 000V 1 50.9%M 3 Explain how Zibani has benefitted from the decision to repurchase the shares. Explanation vv Part-mark for unclear / incomplete answer Zibani became the majority shareholder The independent auditor discovered that Zibani had made the decision to repurchase the shares without informing the board of directors. Responses for two marks: ¥v Part-mark for unclear / incomplete answer e Not good corporate governance / Not in accordance with King Code e CEO cannot make these decisions without getting board approval 2 e Considered to be insider trading / Abuse of position for 2 personal benefit Responses for one mark: Not good / not right / King Code / Corporate governance / Could have outvoted other shareholders or directors/ Unethical / Not transparent Calculate the number of shares that Zibani must purchase to regain the control after the issued shares on 1 January 2018. 825 000 SharesY + 125 000Y Shares = 950 000 Total shares issued After buy back 950 000 X 51% = 484 500Y shares — 420 000 share 484 500 shares — 420 000Y shares = he must purchase 64 500 for 51%Mione part correct OR 5 950 000 X 50% = 475 000 shares + 1 share 5 475001 shares — 420 000 shares = 55 001 shares TOTAL MARKS 30 30 Copyright reserved Please turn over

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