Accounting Grade 12 Eastern Cape Mock 2016 Addendum

Downloaded from hlayiso.com Name: NATIONAL SENIOR CERTIFICATE GRADE 12 SEPTEMBER 2016 ACCOUNTING ANSWER BOOK MAXIMUM MARKS MODERATED QUESTION MARKS OBTAINED MARKS 1 45 2 40 3 70 4 70 5 40 6 35 300 This answer book consists of 15 pages. *ACABE*

Downloaded from hlayiso.com 2 ACCOUNTING (EC/SEPTEMBER 2016) QUESTION 1: COST ACCOUNTING 1.1 Match the terms in COLUMN A with an appropriate example/explanation from COLUMN B. Write only the letter (A–E) next to the numbers (1.1.1–1.1.5). 1.1.1 C  1.1.2 D  1.1.3 E  1.1.4 A  1.1.5 B  5 1.2 SIDDHI BASKET INC. 1.2.1 Factory Overhead Cost Foreman’s salary 198 000 Depreciation on factory plant and equipment 86 560 Rent expense 76 600  Water and electricity 88 890  Insurance 23 230  Sundry expenses 14 690  Operation One part correct 487 970  9 Production Cost Statement on 29 February 2016 Raw material cost 788 800  (42 400  + 745 500  + 38 500  – 37 600 ) One part correct Direct labour cost balancing figure 333 230  Prime cost operation 1 122 030  Factory overhead cost check Note above 487 970  Total manufacturing cost Operation (less WIP) 1 610 000  Work in process (opening balance) 27 600  Operation (add WIP) 1 637 600  Work in process (closing balance) (36 800)  Total cost of production of finished goods 1 600 800  18 400 x R87 operation 14 Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/SEPTEMBER 2016) ACCOUNTING 3 1.3 KUNAL’S SECURITY GATES 1.3.1 Calculate the break-even point. 136 800 76 800  + 60 000  . = 516,2 (517) units  One part correct R860  – (180 + 255 + 155)  590 (2 ma rks) 6 1.3.2 Compare and comment on the break-even point and the level of production achieved over the last two years. Quote figures. Comparison of the BEP with the level of production (with figures)  Comparison of the 2015 and 2016 (BEP and/or production – with figures)  General comment  The business was not able to break even during the current year (BEP: 516 units / produced 480 units). Ended up making a loss / a lower turnover than last year. The business produced less units this year compared to last year (540 in 2015 / 480 in 2016) The business was able to break-even last year by 32 (540 – 508) units. 6 1.3.3 Provide TWO reasons for the increase in direct material cost and suggest ONE way in which Kunal can control this cost. TWO REASONS: Any valid reasons   Increased cost due to inflation / transport costs / scarcity / wastage due to poor workmanship / theft of material. ONE SUGGESTION: Any valid suggestion related to the reason identified  Look for cheaper suppliers without compromising quality. Negotiate transport and delivery discounts and take advantage of bulk discounts Train and supervise workers to minimise wastage. Control stock regularly to identify shortages. 5 Q1: TOTAL 45 MARKS Copyright reserved Please turn over

Downloaded from hlayiso.com 4 ACCOUNTING (EC/SEPTEMBER 2016) QUESTION 2: RECONCILIATIONS 2.1 TRUE OR FALSE: 2.1.1 True  2.1.2 False  2.1.3 True  3 2.2 Bank Reconciliation 2.2.1 Calculate the correct bank account balance as per the General Ledger on 31 July 2016. 11 743 C11RJ : 17 680 + 23  + 522  + 189  = 18 414 (4 marks) CPJ : 12 490 + (45 + 132)  + 325  + 475  = 13 467 (3 marks) 6 553 + 18 414 – 13 467 = 11 500  One part corrccept alternative presentations such as columns/ledger account etc. 9 2.2.2 BANK RECONCILIATION STATEMENT ON 31 JULY 2016 Dr balance as per bank account 11 500  Refer 2.1.1 Dr outstanding cheques : No. 1287 675  No. 1299 810  25/07/16 2 290  Cr amount duplicated on statement 325  Cr balance as per statement 9 450  14 185 14 185  10 2.2.3 Provide ONE reason why the internal auditor expressed concern about Lucky’s job description. Valid reason  Lucky is the sole person controlling cash. This is open to mismanagement and fraud. Lucky does not have any supervision may neglect to take his tasks seriously. 2 2.2.4 Explain to Lucky why it was necessary to prepare a bank reconciliation statement each month. Provide TWO points. TWO valid points (with figures)   To check the business records against the bank records. To identify outstanding cheques and deposits To note and address errors and omissions To note stale cheques, bank charges, interest and/or debit orders. Effective cash maement / internal control mechanism Appropriate figures : late deposit of R2 120 / R1 200 outstanding cheque not discovered / errors in posting (R765 instead of R576) 4 Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/SEPTEMBER 2016) ACCOUNTING 5 2.3 Creditor’s Reconciliation 2.3.1 CREDITOR’S LEDGER NO. STATEMENT BALANCE ACCOUNT BALANCE Balance 87 320 95 400 (i) - 6 500  - 6 500  (ii) + 900  (iii) - 800  (iv) + 1 250  (v) - 4 000  (vi) + 3 530  + 2 400  (vii) - 5 000  TOTAL 84 000 * 84 000 12 Marks awarded for correct sign with amount. Accept the use of brackets for negative amounts *Operation, One part correct for both totals (does not have to be the same total) 2.3.2 As an internal auditor, what advice you offer the owner regarding the purchase of goods through the business accounts? Make reference to a GAAP principle in your explanation. Any valid explanation  Reference to the GAAP principle  The owner should not use the business accounts for private use. Private use is always recorded as drawings. The business account will be distorted and not reflect the correct information of the operation of the business. Business entity principle. 3 Q2: TOTAL 40 MARKS Copyright reserved Please turn over

Downloaded from hlayiso.com 6 ACCOUNTING (EC/SEPTEMBER 2016) QUESTION 3: FIXED ASSETS AND COMPANIES – FINANCIAL STATEMENT 3.1.1 GENERAL LEDGER OF MICAILA LTD ASSET DISPOSAL ACCOUNT (N12) Accumulated Depreciation 2015 31 Equipment 66 200 * 2015 31 of Equipment 51 500  Dec Dec One part correct (43 225  + 8 275 ) Profit on sale of 800  15 000  Bank assets Balancing figure * 67 000 67 000 6 3.1.2 Calculate the total depreciation on equipment. 5 3.1.3 Calculate the carrying value of equipment. 5 Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/SEPTEMBER 2016) ACCOUNTING 7 3.2 Income Statement for the year ended 29 February 2016 Sales 3 402 000 Cost of sales (1 832 000  + 30 000 ) (2 280 000)  Gross profit 1 122 000 * Other income 165 450 Rent income ( 98 523 + 9 523 ) 108 046  Commission income (60 281  – 5 577 ) 54 704  Profit on sale of asset 800  Decrease in provision for bad debts 1 900  Gross income 1 287 450  16 Operating expenses (1 057 005) Audit fees 27 500 Sundry expenses 76 120 Municipal fees 215 800 Salaries and wages 235 820  Directors fees (316 100  + 10 900 ) 327 000  Discount allowed (6 330 – 180 ) 6 150  Consumable stores (24 770  – 1 970 ) 22 800  Trading stock deficit 2 540  Operating profit 230 445 * 14 Interest income (220 000 x 8,5% x 9/12) 14 025  Profit before interest expense 244 470 Interest expense (1 064 000 – 975 400) (88 600)  Net profit before income tax 155 870 Income tax 340 – 3 570) (46 770)  Net profit after tax 109 100 * 38 Copyright reserved Please turn over

Downloaded from hlayiso.com 8 ACCOUNTING (EC/SEPTEMBER 2016) 3.3 TRADE AND OTHER RECEIVABLES Debtors control (280 200 + 3 600  + 1 200 ) 285 000  Provision for bad debts (2,5% of debtors control) (7 125)  Net trade debtors (this step is not necessary) 277 875 Accrued Income (9 523 + 4 675) 1 mark each 14 198  SARS : Income tax 3 570  Operation, one part correct 295 643  8 3.4 Extract: CURRENT ASSETS section of the Balance Sheet CURRENT ASSETS 739 255  Inventories (415 400 – 2 540) 412 860  Trade and other receivables check 3.3 295 643  Cash and cash equivalents ( 34 172  – 3 420 ) 30 752  8 Q3: TOTAL 70 MARKS Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/SEPTEMBER 2016) ACCOUNTING 9 QUESTION 4: FINANCIAL STATEMENTS, CASH FLOW AND INTERPRETATION 4.1 SHARE CAPITAL Authorised share capital 1 200 000 ordinary shares Issued share capital 820 000 Ordinary shares (1 July 2015) 7 134 000 180 000 Shares issued at 920 each Operation 1 656 000  Shares repurchased One part correct; in brackets (75 000)  (average share price 8,79 each ) (659 250)  925 000  Ordinary shares (30 June 2016) Operation 8 130 750  Operation 7 4.2 CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2016 CASH EFFECTS OF OPERATING ACTIVITIES Cash generated from operations Interest paid (675 000) Income tax paid (606 000)  – 15 500  + 656 100 – 34 600  * Dividends paid (1 164 400)  369 000  + 795 400  * CASH EFFECTS OF INVESTING ACTIVITIES Fixed assets purchased (856 450) Proceeds from disposal of fixed assets 28 200  - 11 935 460  + 856 450  + 12 363 550  - 1 256 340  * Increase in fixed deposit 330 000 CASH EFFECTS OF FINANCING ACTIVITIES (231 500)  Proceeds from shares issued 1 656 000  Funds used to re-purchase shares (75 000 x 9,30) (697 500)  Decrease in loan (5 300 000 – 4 110 000) (1 190 000)  NET CHANGE IN CASH AND CASH 442 670  EQUIVALENTS Cash and cash equivalents (1 July 2015) (48 370)  Cash and cash equivalents (30 June 2016) 394 300 22 Copyright reserved Please turn over

Downloaded from hlayiso.com 10 ACCOUNTING (EC/SEPTEMBER 2016) 4.3 4.3.1 Calculate the percentage operating profit on total sales. 2 810 000 x 100 = 19%  One part correct; must be % 14 784 000 3 4.3.2 Calculate the average debtors’ collection period (in days). 734 150 (3 marks) 1⁄ (575 500  + 892 800 ) 2 𝑥 365 = 36,3 days  One part correct 7 392 000  5 4.3.3 Calculate the net asset value per share. (11 935 460 + 620 000 + 2 051 300) : (4 110 000 + 1 157 750) 14 606 760  : 5 267 750  = 2,8 : 1  One part correct (x : 1) 4 4.3.4 Calculate the debt/equity ratio. 4 110 000  : 9 339 010  = 0,44 : 1  One part correct (x : 1) 3 4.4 Comment on the liquidity of the business. Quote THREE financial indicators (with figures) in your explanation. Financial indicators and figures    Valid comment  Any three of: Current ratio : 1,1 : 1 to1,8 : 1 Acid test ratio : 0,5 : 1 to 1,1 : 1 Debtors collection period : 42 days to 36,3 days (check 4.3.2) Creditors payment period 54 days to 60 days General comment: The liquidity has generally improved. The business is able to pay short term debts with current assets. Improvement is collections from debtors – still not reached to the desired 30 days. Short term credit is also being effectively managed – by taking the maximum permissible credit term (60 days) making use of short term finance. 8 Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/SEPTEMBER 2016) ACCOUNTING 11 4.5 Some shareholders feel that the company paid back too much of the loan. What would you say to them? Make reference to TWO financial indicators with relevant figures to motivate your response. Financial indicators and figures   Valid comment  Relevant financial indicators: Debt/equity : improved from 0,7 : 1 to 0,4 : 1 (check 4.3.4) ROTCE : improved from 17% to 21,3 % Interest rate on loans : 11% The company is lowly geared (not making extensive use of borrowed funds) It is also positively geared (ROTCE is higher than interest rate) It was not necessary for the company to pay large portions of the loan as long as it is generating a better return on investment than the cost of borrowing (interest) 6 4.6 Comment on the dividend policy of the business and explain the effect of this on the business. Quote TWO financial indicators in your answer. Financial indicators and figures   Valid comment  The company paid out 100% of earnings in 2015 (EPS 164 cents and DPS was 164 cents) The directors decided to not retain any funds from the net profit. In 2016, the directors retained 17% of the earnings. They distributed 150 cents (DPS) of the 180 cents (EPS). Although the EPS increased from 2015, the directors paid a lower dividend this year. This adjustment to the dividend policy would have been explained in the directors’ report. There may have been plans for expansions or growth of the company. 6 4.7 A shareholder complained about the issue price of the new shares on 1 April 2016. Why do you think she complained? Quote TWO financial indicators with figures in your explanation. reason Financial indicators and figures   Valid comment  Relevant financial indicators :`` NAV : 992 cents in 2015 – 1010 cents in 2016 Market price of shares : 1000 cents in 2015 – 1100 in 2016 The company is showing growth in share value. New shares were issued (920 cents) at below the NAV and market price. The new shareholders benefitted from the low price they paid. The company lost out on an opportunity to generate additional funds from the issue of these shares. The directors’ intentions may be questioned. The shareholder is justified in complaining – this must be raised at the AGM. 6 Q4: TOTAL 70 MARKS Copyright reserved Please turn over

Downloaded from hlayiso.com 12 ACCOUNTING (EC/SEPTEMBER 2016) QUESTION 5: INVENTORY VALUATION, VAT AND PROBLEM SOLVING 5.1 INVENTORY VALUATION 5.1.1 Calculate the following for the financial year ended 31 August 2016: Calculate the value of the closing stock ( 5 x 150) (10 x 140) 30 550 + 156 050  – 750  – 1 400  200  + 1 005  – 15  = 184 450 = 155 (weighted average) 155  x 160  1 190 = 24 800  One part correct 10 Calculate the cost of sales 184 450 – 24 800  = 159 650  one part correct Above 2 Calculate the gross profit 993 x 220 = 218 460 (sales) 218 460  – 159 650  = 58 810  one part correct Above 4 5.1.2 Piet has experienced problems with stock theft and has installed a security camera. Despite this, he is sure that calculators were stolen. Calculate the number of units missing. (200 + 1 005 – 5 – 10) = 1 190  – 993 – 160 = 37 units  Refer 5.1.1 one part correct 4 Provide another option that Piet can use to solve this problem. Any valid option/suggestion  Do random physical stock counting. Have security check points at exits. Insert security disks/chips on produced to be cleared at the tills 2 5.1.3 The stock holding period for calculators was accurately calculated to be 64 days. Comment on whether this is appropriate for this product. One valid point   Calculators are durable items that could be stocked for a long time.  It would be more appropriate to have extra stock during exam time and at the beginning of the school year when sales would be more than other times.  Technological changes may cause some calculators to become outdated. It 2 Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/SEPTEMBER 2016) ACCOUNTING 13 5.2 VALUE ADDED TAX (VAT) Insert amounts only. Details not required VAT CONTROL 17 472  4 778  448  210  2 212  490  Fill in amount in the correct space 2 310  Receivable 13 500  4 778  Payable X 33 632 33 632 10 5.3 PROBLEM SOLVING: PROBLEM IDENTIFIED ADVICE OR SOLUTION (with figures) One valid point  Identifying s  High stock of bags (80 opening and 75 closing ) Provide stock according to sales They still received 120 units although figures/demand. Transfer stock to SMART they had stock on hand, other stall – shows better sales STREET Missing bags – (8) Stock control should be done daily. 80 + 120 – 110 = 90 should be on Control where stock is displayed. hand Bags sell well but money is missing Do daily reconciliations with assistant R45 x 130 = R5 850 – 5 500 – cash control (R350 short) JAMES Monitor sales to order appropriately. STREET Caps not a good seller – high closing Transfer caps to other stall stock / only 70 sold. Reconsider mark-up to increase sales Suggest commission for increased sales. 6 Q5: TOTAL 40 MARKS Copyright reserved Please turn over

Downloaded from hlayiso.com 14 ACCOUNTING (EC/SEPTEMBER 2016) QUESTION 6: BUDGETING 6.1.1 Explain why bad debts expense does not appear in a cash budget. Any valid explanation  Bad debts is a non-cash expense. It does not involve a flow of cash. 2 6.1.2 Explain why a cash budget is an effective internal control mechanism. Provide ONE reason. Any valid reason   It helps to plan receipts and payments.  It highlights payments (expenses) that are not well controlled.  It helps to ensure that cash is available for essential payments. 2 6.2 ALGOA LTD 6.2.1 MONTHS CREDIT SALES SEPTEMBER OCTOBER NOVEMBER July 108 000 12 960 August 104 400 46 980 12 528 September 93 000 37 200 41 850 11 160  October 102 000 40 800 45 900  November 111 600 44 640  Total collection from debtors 95 178 101 700  7 6.2.2 Calculations Answer (a) (b) 116 250 x 20% = 23 250  106 250 x 80% = 85 000  x 95% = 80 750  (c) 21 250 x 80/20 = 85 000 8 160 x 100 = 12%  74 400 x 12% = 8 928  (d) 68 000 513 000 = 95 000 + 515 000 = 610 000  x 0,15 = 91 500 5,40 (e)  13 Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/SEPTEMBER 2016) ACCOUNTING 15 6.2.3 Calculate: Calculate the amount of the loan that will be paid back on 1 November 2016. 2 000 x 12/0,1 = 240 000  30 000 was repaid  1 750 x 12/0,1 = 210 000  3 Calculate the total cost of the new vehicle purchased on 31 July 2016. 4 750 x 48 = 228 000  + 40 000  = 268 000  One part correct 4 6.2.4 A young shareholder is of the opinion that the company should not spend money on staff training – they should employ trained personnel. Explain why the company spends money on staff training? Give ONE point. A valid explanation  The company must be able to show that they are committed to the growth and development of the society that supports its venture (the triple bottom line). Giving back to society. Involvement in economic growth. CSR and the King code. 2 What can the business do to ensure that trained personnel remain in the employ of the business? Give ONE point. A valid explanation  Ensure that market related salaries are paid. Make workers feel valued and appreciated. Sign contracts to remain with business for a specified period. Get employees to participate in profit sharing options. 2 Q6: TOTAL 35 MARKS TOTAL: 300 Copyright reserved Please turn over

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