Accounting Grade 12 Step Ahead Solutions 2021

» education Department: Education PROVINCE OF KWAZULU-NATAL CURRICULUM GRADE 10 -12 DIRECTORATE STEP AHEAD SUPPORT DOCUMENT SOLUTIONS GRADE 12 ACCOUNTING 2021

Ledger Accounts Answers Activity A 1 Company Concepts: Baseline Ledger accounts introduced are listed. Place a V in the appropriate box/boxes. re Nominal NAME OF LEDGER ACCOUNT Sheet ASSET | EQUITY | LIABILITY Accounts Accounts 1. | ORDINARY SHARE CAPITAL A v 2. | RETAINED INCOME v v 3. | SARS (INCOME TAX) v v 4, | SHAREHOLDERS FOR DIVIDENDS vA v 5. | ORDINARY SHARE DIVIDENDS v v 6. | INCOME TAX v v 7. | APPROPRIATION ACCOUNT v ACTIVITY A2: GENERAL LEDGER ACCOUNTS General Ledger of KwaZulu Ltd ORDINARY SHARE CAPITAL 3 30 125 000 01 | Balance (b/d) 1 050 000 ept (50 000x2,50) Jan Balance (cid) 2 125 000 31 | Bank — (400 000 x R3) 1200 000 2 250 000 2 250 000 un 01 | Balance (b/d) 2 125 000

RETAINED INCOME 2019 Bank 2019 30 55 000 01 | Balance 420 000 Sept (50 000% 1,10) Jan 2019 Appropriation 31 | Appropriation 104 260 Dec Balance 524 260 524 260 ] 01 | Balance (b/d) Jan SARS (INCOME TAX) 201 2019 9 | 30 | Bank 30 000 31 | Income tax 142 240 Jun Dec Dec | 01 | Bank 70 000 31 | Balance (cid) 42 240 142 240 142 240 ee) 01 | Balance (b/d) 42 240 Jan SHAREHOLDERS FOR DIVIDENDS 2019 31 | Ordinary share dividends 144 500 Dec

INCOME TAX 2019 2019 31 | SARS (Income Tax) 142 240 31 | Appropriation 142 240 Dec Dec ORDINARY SHARE DIVIDENDS 2019 ck 30 | Bank 117 000 31 | Appropriation 261 500 a Dec 9 ey | teed 144 500 dividends 261 500 261 500 APPROPRIATION eu 31 142 240 4 31 | Profit & Loss 508 000 Dec Income Tax Dec Ordinary Share Dividends 2 Retained Income 104 260 508 000 508 000

Activity A3 DATE ACCOUNT DEBITED ACCOUNT CREDITED AMOUNT 11106 | SARS: Income tax Bank R49 500 30/08 | SARS: Income tax Bank R120 000 01/09 | Bank Ordinary share capital R400 000 27/02 | Dividend on ordinary shares | Shareholders for dividends R490 000 Activity A 4 444 c 412 D 413 F 414 B 415 | 4.16 G 417 H 4.18 E 4.19 A ACTIVITY A5 Calculate the profit/loss on the disposal of the office computers sold on March 2020. Depreciation for current year = 18 600 x 33 1/3 x 9/12 = R4 650 Accumulated depreciation = R9 400 + 4 650 =R14 050 Cost price =R18 600 Net book value at date of sale =R4 550 Selling price =R7 000 Profit =R2 450

1.2. Dube computers (Pty) Ltd Income statement for the year ended 30 June 2020 Sales 3700 000 Cost of sales (2 100 000) Gross profit 1600 000 Other income 40 800 Commission income (36 000 + 2 350) 38 350 Profit on disposal of asset 2 450 Gross operating income 1640 800 Operating expenses (836 510) Staff costs 180 000 Director fees (2 x (120 000 + 132 000) 504 000 Sundry expenses (45 000 - 1 700) 43 300 Depreciation 47 000 + 24 500 + 4 650) 76 150 Trading stock deficit (281 000 - 21 000 - 247 940) 12.060 Donations (2 x 10 500) 21 000 Operating profit 804 290 Interest on loan (290 000 + 16 500) (45 500) Net profit before tax 758 790 Income tax (194 000 + 37 000) 231 000 Net profit after tax 527 990

ACTIVITY A6 1.1. MQOMBOYI LTD 1.1.1, Statement of Comprehensive income (income statement) for the year ended 31 March 2020. Sales( 10 563 280 + 36 720 ) 10 600 000 Cost of sales(6 236 000 + 24 000) (6 260 000) Gross profit 4340 000 Operating income 112 000 Rent income 99 500 Bad debts recovered 7 800 Provision for bad debts adjustment 1600 Profit on sale of asset 3 100 Gross operating income 4 452 000 Operating expenses (3 710 000) Directors fees 1 262 100 Water and electricity 218 000 Telephone 75 600 Audit fees 104 000 Sundry expenses 61001 Salaries and wages (1 280 000+9 100+3 900) 1 293 000 Employers contributions 318 200 Bad debts (22 300+8 000) 30 300 Consumable stores 49 800 Insurance (79 500-38 250) 41 250 Depreciation (34 999+80 000+41 800)+(92 500+1 750) 251 049 Trading stock deficit (364 200-24 000 — 334 500) 5 700 Operating profit 742 000 Interest income 26 000 Profit before interest expense 768 000 Interest expense (77 000) Net profit before 691 000 Income tax (193 480) Net profit after tax 497 520

1.2. NOTES TO THE BALANCE SHEET 1.3. Fixed/Tangible Assets Land and buildings Vehicles Equipment Carrying value at beginning of the Leet Bees 12 500 000 275 000 280 500 Cost 12 500 000 750 000 398 000 Accumulated depreciation - (475 000) (117 500) Movements Additions at cost : 627 000 Disposals at carrying value - - (6 500) Depreciation - (156 799) (94 250) Carrying value at the end of the financial | 12 500 000 year Cost 12 500 000 1 377 000 370 000 Accumulated depreciation . (631 799) (190 250) Ordinary share capital Authorised: 8 000 000 shares Issued: 1 200 000 shares in issue at beginning 4 800 000 (150 000) shares re-purchased ( ASP:R4.00) (600 000) 850 000 5 100 000 1900 000 9 300 000

ACTIVITY A7 1. 1.2. STATEMENT OF COMPREHENSIVE INCOME FOR YEAR ENDED 31 DECEMBER 2020 FOR KHANYA LTD Sales (4 220 700 — 850) 4219 850 Cost of sales (1 100 720 - 680) (1 100 040) Gross profit 3119 810 Other income 12 860 Profit on sale of asset 12 500 Provision for bad debts adjustment (3 450 — 3 090) 360 Gross operating profit 3 132 670 Operating expenses (2 293 750) Sundry expenses 31 000 Bank charges 6000 Audit fees 45 000 Directors fees (432 000 + 540 000) 972 000 Salaries and wages (940 000 + 9 000) 949 000 Employers contribution (103 400 + 90 + 900) 104 390 Rent expense (63 360 - 5 280) 58 080 Bad debts (2 790 + 540) 3 330 Depreciation (13 750 + 81 400 + 3 000 18 500) 116 650 Trading stock deficit 138 000 — (82 000 + 47 700) 8 300 Operating profit 838 920 Interest income 680 Profit before interest expense 839 600 Interest expense (39 600) Net profit before tax 800 000 Income tax for the year (240 000) Net profit after tax 560 000 Fixed Asset Note on 31 December 2020 FIXED/TANGIBLE ASSETS VEHICLES Carrying value-1 January 2020 309 100

1.3. Cost 489 500 Accumulated depreciation (180 400) Movements Additions at cost 0 Disposals at carrying value (35 750) Depreciation (95 150) Carrying value-31 December 2020 178 200 Cost 407 000 Accumulated depreciation (228 800) Trade and other payables Creditors (43 400 - 680 ) 42 720 Shareholders for dividends 84 000 SARS:PAYE (14 100 + 1 600) 15 700 Creditors for salaries 6 680 UIF (1 300 + 90 + 90) 1 480 Pension fund( 14 500 + 630 + 900) 16 030 Accrued expenses 540 000 SARS: income tax ( 240 000 - 224 000) 16 000 722 610

ACTIVITY B 1 MODISE LTD 1 RETAINED INCOME Balance at beginning of year R567 000 Funds used for shares repurchased (250 000 x R0,25) (62 500)* Net profit after tax (3 400 0001 ~ 918 000) or 3 400 000 x 73% 2482000 Ordinary share dividends (2 400 000)* Interim 672 000 Final (4 800 000 0 x35/100 1) or 36 cents or 0,36 4208-000. (4 550 000 + 250 000) : Balance at end of year 586 500 2 MODISE LTD BALANCE SHEET ON 28 FEBRUARY 2020 ASSETS Non-current assets Operation, TA - CA 13 386 500} Fixed assets Operation, balancing figure 12 666 50 Fixed deposit / Investments / Financial assets (48 0000 x 12/s0] x 12/50) 720 000) Current assets (2 600 000 x 1,5) 3.900 000) Inventories (1.015 0001+ 25 000 0) 1040 00

21 1 Cash and cash equivalents 2 320 a TOTAL ASSETS See total for E +L 17 286 500} EQUITY AND LIABILITIES Ordinary shareholders’ equity 14 236 500} {Ordinary share capital 13 650 001 I'l Retained income See 1.2.1; could be -ve; 586 501 Non-current liabilities 450 000} tl Loan from director (630 0001 ~- 180 000 i) or 12/42 450 001 Current liabilities 2 600 000} Trade and other payables 6740 Shareholders for dividends See 1.2.1 1728 000} Loan (current portion) see above 180 000) 17 286 500) TOTAL EQUITY AND LIABILITIES , See OSHE + NCL + CL ACTIVITY B2 FIXED ASSETS (a) 285 000 - 91 200 193 800 (b) 82 365 142 500 - 45 600 - (96 900 x 20% x 9/12) Remaining: (285 000 - 142 500) - (91 200 - 45 600) 142500 - 45600 = (c) = 96 900 x 20% = 19 380 36 915 New: 180 000 x 20% x 112 = 3 000

Sold: 14 535 see (b)

2 BALANCE SHEET ON 30 JUNE 2019 ASSETS NON-CURRENT ASSETS TA-CA 5777 280 Fixed assets NCA -FA 5 127 280 Financial assets: Fixed deposit (Shallow Bank) 650 000 CURRENT ASSETS 1 465 940 Inventories (450 000 - 5 000 + 15 300) 460 300 Trade and other receivables 492 600 (430 000 - 17 200 + 79 800) Cash and cash equivalents (510 640 + 2 400) 513 040 7 243 220 TOTAL ASSETS =TE andl EQUITY AND LIABILITIES ORDINARY SHAREHOLDERS' EQUITY (800 000 x 6,36) 5 088 000 Ordinary share capital 3746 500 Retained income OSE - OSC 1341 500 NON-CURRENT LIABILITIES 452 000 Loan: Gaga Bank (752 000 - 300 000) 452 000 CURRENT LIABILITIES 1703 220 Trade and other payables 779 720 Current portion of loan 300 000 Shareholders for dividends (800 000 x 0,75) 600 000 SARS: Income tax 23 500 TOTAL EQUITY AND LIABILITIES 7 243 220

ACTIVITY C1 1.1 1.2 1.3 1.4 CASH GENERATED FROM OPERATIONS Gross operating profit before changes in working capital 6 127 160 CHANGES IN WORKING CAPITAL (221 960) Change in inventory (170 100) Change in trade and other receivables 152 100 (446 900 + 2 400) — 297 200 Change in trade and other payables (321 700 — (122 300 — 4 560) (203 960) Cash generated from operations 5 905 200 Calculate the following amounts that will appear in the Cash Flow Statement or 28 February 2020: Dividends paid 2 137 500 + 1 200 000 = 3 337 500 OR 2 137 500 + (3 100 000 — 1 900 000) = 3 337 500 Tax paid + 500 000 — 1 393 200 + 200 000 = (693 200) — 500 000 + 1 393 200 — 200 000 = 693 200 500 000 (1 393 200) 200 000 = (693 200)

1.5 CASH FLOWS FROM FINANCING ACTIVITIES 4 400 000 Proceeds from new issue of shares see 1.1 7 800 000 Shares repurchased (1 290 000 + 510 000) OR (1 800 000) (200 000 see 1.1 x 9,00) Mortgage loan repaid (1 600 000) ACTIVITY C 2 21 Calculate the missing amounts in the Cash Flow Statement. Missing item Calculations Amount Taxation paid R158 700 - R15 400- R12 000 R131 300 OR 12 000 + 15 400 - 158 700 Proceeds from | R4 699 200 + R2 599 000 - Sold — | R580 000 sale of fixed | R440 000 = R6 278 200 assets 2.2 CASH FLOW FROM FINANCING ACTIVITIES 1 151 500 Proceeds of shares issued 706 500 (2 809 500 — 2 328 000+ 225 000) Repurchase of shares (50 000 x 5,50) (275 000) Proceeds from loans (2 940 000 - 2 220 000) 720 000

| | | 2.3. CASH AND CASH EQUIVALENTS Net change in cash and cash equivalents 92 700 Cash and cash equivalents at beginning of year (39 900) Cash and cash equivalents at end of year 52 800 ACTIVITY C3 Cash Flow Statement for the year ended 30 June 2020 Cash flow from operating activities Cash generated from operations 639 100 Interest paid (82 000) Taxation paid (75 600 - 8 000 - 12 500) (55 100) Dividends paid (210 000 + 240 000) (450 000) or (210 000 + 414 000 - 174 000) Cash flow from investing activities (374 900) | Purchase of fixed assets (1505 400 + 61 000 + 23 500 - 1 201 500) (388 400). Sale of fixed assets | 23 500 Change in fixed deposit ( 185 000 - 195 000) (10 000) Cash flow from financing activities 3 260 000 Sale of shares 3.584 000 Shares repurchased (40 000 x R4.10) (164 000) Change in loan (560 000 - 400 000) (160 000) Net change in cash and cash equivalent 2937 100 Cash and cash equivalent at the beginning (2 000 - 17 100) (15 100) Cash and cash equivalent at the end 2 922 000

3.2 Apart from the dividends, identify TWO good decisions. Explain the effect of each decision on the company. Quote figures. Decision Consequence 4 Sale of shares, R3.584 000 Improves cash flow - business can take advantage of investment opportunities 2 Purchase of fixed assets, R388 400 Improves operating efficiency - business can earn greater profits ACTIVITY C4 ZOLILE LIMITED CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2020 ACTIVITY D1 CONCEPTS W4ole 11.2 1p 113 |B WE ys MIRIAM LTD 1.2.1 | Comment on the overall liquidity position of the company. Quote THREE relevant financial indicators (with figures). Any THREE valid indicators: The current ratio increased from 1,7: 1 to 1,8: 1 The acid-test ratio decreased from 1,3: 1 to 0,9: 1. The stock-holding decreased from 68 to 52 days. The debtors' collection period increased from 30 to 47 days

Expected responses, e.g.: ¢ The business is liquid/should have no problem in paying off its short-term debts. ¢ Although the liquidity is good, the debtors are taking too long to pay. 1.2.2 | The directors decided to change the dividend pay-out policy in 2020. Provide calculations that indicate the policy change. In 2019, the company paid 40 cents (DPS) of 112 cents (EPS) — 36% In 2020, the company paid 105 cents (DPS) of 107 cent (EPS) — 98% OR pay out increased from 36% to 98% DPS increased from 40 to 105 cents (by 65 cents) per share EPS decreased from 112 to 107 cents (by 5 cents) per share Explain the effect of this change of policy on the company. State TWO points. TWO valid points e Retained income decreased and this could affect future growth (expansion) of the business. It would influence the share price / increase demand for the shares It could motivate shareholders to vote for the directors at the AGM Cash flow problem (one mark) 1.2.3, | One of the directors feels that the company should pay back the loan as soon as possible. What are your views about this? Quote and explain TWO relevant financial indicators with figures. The debt/equity ratio is 0,3 : 1 / decreased from 0,4: 1 to 0,3: 1. The business is lowly geared. Low risk. They are not making much use of loans compared to own capital. The ROTCE dropped from 13% to 11%.

The company is receiving a return (11%) that is less than the interest rate (14%) (negatively geared). They are not using the loans effectively to generate a profit. It was a good decision to pay back the loan. 1.2.4 | Explain why the shareholders are satisfied with the market price of the shares on the JSE. Quote figures/financial indicators. e Increased from 777 cents to 960 cents./ increased by 183 cents e The market price is higher than the NAV of 775 cents e There is a demand for shares in this company. ¢ Investors are interested in buying shares. Explain why the shareholders are satisfied with the price at which the shares were repurchased. Quote figures/financial indicators. The company paid 800 cents per share although the market value at the end of the year was 960 cents. / The company paid 160 cents less than the market value ACTIVITY D2 Choose a description in COLUMN B that matches the user of financial statements in COLUMN A. Write only the letters (A to D) next to the question numbers (2.1.1 to 2.1.3) in the ANSWER BOOK. 241 | ¢ 241.2 |p 213 |A

2.2.1 Retained income Balance at beginning 560 000 Net profit after tax (90 000 x 70/30 ) 210 000 Share buy-back (30 000 x 2 ) (60 000) Dividends (270 000 x 34/100 ) (91 800) Paid 27 500 Final/declared (91 800 — 27 500) 64 300 Balance at end 618 200 2.2.2 As an existing shareholder what factors/ financial indicators would you assess in determining whether R10.20 per share is a fair issue price? Provide reasons for your choices. NAV: improved from 490 cents to 1 033 cents/ by 543 cents Market price: improved from 485 cents to 850 cents / by 365 cents Khethiwe owns 43% of the shares in issue on 30 June 2019. Calculate the minimum number of shares she must purchase in order to be a major shareholder. She currently owns: 300 000 x 43% = 129 000 shares To be majority shareholder she needs: (370 000 x 50%) + 1 = 185 001 shares She needs to buy: 185 001 — 129 000 = 56 001 shares

The majority shareholder suggested that she should be given the first option to purchase the additional shares before they are advertised to the public. What advice would you Offer to the directors concerning this proposal? Legislation and governance regulations must be followed by everyone/the directors must apply the law to safeguard the integrity of the business/insider trading is illegal and unethical/nepotism as the CEO is abusing his position. 2.3 Companies buy back shares from time to time. Explain the benefits from such transactions. Explain TWO benefits. it improves the NAV which could impact positively on the market price of shares/it improves EPS which creates a better image of the company/it improves the DPS hence present shareholders will be satisfied/ shows that the company is solvent and liquid. 2.4 Quote TWO financial indicators (with figures and trends) that indicate an improvement in the liquidity position of the business.

25 The company paid back a large portion of the loan. Explain why this was a good decision. Quote TWO financial indicators (with figures) Debt/equity ratio: decreased from 0.5:1 to 0.2:1. Lower financial risk/low geared ROTCE: decreased from 22.3% to 20.8%. Still positively geared as it is greater than interest on loan (11%). 2.6 Comment on the dividend pay-out policy over the past two years. Provide a possible reason for the policy adopted. Quote figures. 2019: 52/63 x 100 = 82.5% 2020: 34/84 x 100 = 40.5% A greater % was retained in 2020 for future expansion purposes. ‘WITYD3 3.1.1. Calculate the net asset value per share on 29 February 2020 1 630 000 x 100 400 000 = 407,5 c/share Accept R4,08 3.1.2. Calculate the return on total capital employed for the 2020 financial year. 620 000 + 76 200 x 100 (1 280 000 + 520 000 + 1 630 000 + 380 000 (3 810 000 three marks) two marks 4 i i i i

= _696 200_ x 100 1 905 000 four marks = 36,6% Accept 36,5% ACTIVITY E1 1.1 INVENTORY SYSTEMS AND VALUATION 1.1.1 | Calculate the value of the closing stock on 31 August 2018. 31570 +156 050 - 1770 1400" 206 + 1005 -11 -10 =184 450 x 160 (R155 x 160) 1190 = R24 800t Calculate the gross profit on 31 August 2018. Sales (993 x R220) R 218 460 Cost of sales( 184 450 — 24 800) (R159 650) Gross profit 58 810 1.1.2 | Oratile has found that Zinhle changed the supplier of smart watches in January without informing her. He discovered that the new supplier of smart watches is a family member of Zinhle. What advice would you offer to Oratile in this regard? State TWO points. e Oratile must explain to Zinhle that this is unethical and that her decision to favour her family member is disadvantaging the business. e He must put a procurement policy in place and must ensure that employees abide by this policy. ¢ Itis important to support loyal suppliers but the quality and price of the product must not be compromised.

1.2 MANAGEMENT OF INVENTORIES 1.2.1 | Provide a calculation to prove that smart watches are being stolen. 206 + 984 — 993 — 160 = 37 Give TWO points of advice. Regular stock checks (count and check against records) Order smaller quantities, but more frequently Improve physical security, e.g. controls at entrance 1.2.2 | Oratile is unsure whether he is charging the right prices for the Smart phones and Smart cameras. Give him advice on EACH product. Quote figures. PRODUCT ADVICE WITH FIGURES Any valid advicev¥ Vv Figurev v Smart phones Mark-up% is reasonable (25%) as they are selling a large number of units (895). Customers are prepared to pay the price being asked (R6 875). Stock holding period is only 21 days. Smart cameras Mark-up% possibly too high (80%). These products are not popular (only sold 370/580=60% units sold). Stock-holding period of 207 days. If mark-up is reduced, stock may sell quicker.

ACTIVITY E2 2.1 2.14 2.1.2 2.2.1 Calculate the following on 28 February 2019: Value of closing stock. Workings Answer 195 424 + 4 034 660 ~ 38 584 49 + 788-7 5 050 x 220 1111000 Gross profit for the year ended. Workings Answer see 2.1.1 see 2.1.1 COS: 4 191 500-1 111000 = 30805 Gross profit: 3 450 300 - 3 080 500 369 800 Calculate the stock value on 28 February 2019 using the FIFO method. Workings Answer 200-7 193x 5512 = 1063 816 1 202 731 220 - 193 27x5145 = 138915

2.2.2 Explain the effect on gross profit if the FIFO method is used. A larger closing stock will result in a smaller cost of sales and hence a greater (an increased) gross profit. The gross profit will be more compared to when weighted average method is used. 2.2.3 | As an internal auditor, explain the benefits of using the FIFO method to the owner and the accountant. State TWO points. Stock shown at recent prices, realistic. Reflect a higher gross profit Easy to apply No manipulation of profits. 2.3 Ching Lee feels that she was not able to achieve her targeted mark-up % for 2019. Do (or perform) a calculation to confirm whether she is correct. Workings Answer see 2.1.2 369 800 x 100 3 080 500 see 2.1.2 12% t OR: 3 080 500 x 25% = 770 125 (targeted); Actual was 369 800 (2.1.2) Did not achieve target by 400 325 Provide TWO suggestions that can be implemented in order to improve profitability. Give less trade discounts

Support local suppliers Supervise sales to ensure correct prices are applied. Consider after-sales services such as maintenance, repairs, installations. ACTIVITY E 3 3.1 Explain the difference between the specific identification method and weighted average method of valuing stock. Specific identification method ——] — Each item is assigned a specific cost — the original purchase price recorded in a register = this data base is retrieved when item is sold. Weighted average method — The average price is calculated taking into account opening stock, purchases, returns and carriage on purchase, divided by the total number of units in relation to the above. - Therefore, final closing stock will be calculated on the average cost of the goods. NN 3.2 Provide a calculation to show the number of cooler boxes missing. 3 900- (520 + 4 300 — 850 - 20) = 50 50 cooler boxes were missing. 3.3 Calculate the following in respect of cooler boxes: The value of the closing stock of cooler boxes. 850x R67= R56 950 Cost of sales of cooler boxes. 290 400 (31 200+ 291 400-1 000) — 56 950 = R264 650 Gross profit on cooler boxes. 387 000- 264 650 =R122 350

2.4.1 | Calculate the Stock Holding Period in days. Use Closing Stock in your calculation. x wo jon = 78,5 days 2.4.2 | Comment on your findings in response to the manager’s feelings. Stock holding period decreased / improved from 125 days to 78,5 days Stock Tumover rate increased / improved from 2.9 to 5.7 times Stock is selling faster

2.5 Calculate the value of the closing stock of tents. 14 x R1400 = R19 600 7 x R1680 = R 11 760 7 x R1540 = R 10780 R 42 140 2.6 | If the mark-up percentage is 25% on cost price, calculate the total sales of tents for the period. 14x 1260x1,25 = R22 050 28x 1400x1,25 = R49000 28x 1680x1,25 = R58 800 35x 1540x1,25 = R67 375 R197 225 OR: (17 640 + 39 200 + 47 040 + 53 900) x 1,25 = R197 225 ACTIVITY E4 4.1. Choose the description from COLUMN B that best describes the stock valuation method in COLUMN A. 4.1.1 1C 412/A 4.1.3 |B

4.2 4.2.1 Calculate the following on 30 June 2016: Closing stock 65 x2900 = 188500 15 x2800 = 42000 Cost of sales 138 000 + 512 000 + 26 000~ 14 500 — 230 500 = 431 000 4.2.2 The owner suspects that generators had been stolen. Calculate the number of generators stolen. 250-5 — 80- 162 =3 Give TWO points of advice Expected responses Count stock regularly/randomly and check against stock records Order smaller quantities, but more frequently Improve physical security e.g. controls at entrance/security cameras ¢ Claim on insurance policy

4.2.3 Calculate the value of closing stock using the weighted-average cost method. 138 000 + 512 000 + 26 000 — 14 500 60 + 190 -5 661 500 245 = 2700 x80 =216000 The owner, Mrs Westhuizen, thinks that changing to the weighted-average method will lessen her tax burden. She approaches you for advice. Provide TWO points of advice. Any two valid points ¢ Itis true it will for a while reduce the tax liability as the gross profit using WAC is smaller/lower than when using FIFO but it is not permissible; e Itis unethical to manipulate stock valuation methods; e To change would affect comparisons over financial years.

ACTIVITY F COST ACCOUNTING ACTIVITY F1 (COST CONCEPTS) COLUMN A COLUMN B 14 Direct material Material that forms part of the item produced 1.2 Indirect material Materials that are used in the manufacturing process but do not form part of the product. 1.3 Direct labour Labour directly involved in the manufacture of goods 14 Indirect labour A Labour used in the factory but not involved in the manufacture of the goods 1.5 Prime cost Total direct costs 1.6 Factory Other expenses incurred by the factory other overheads than direct. 17 Fixed costs Costs that remain constant irrespective of the amount produced 18 Variable costs Costs that vary in proportion to the amount of goods produced. 1.9 Total cost of Includes all costs involved in the production production 1.10 Unit cost Cost of one item produced 1.11 Mark-up The profit made on the goods produced 1.412 Selling price The price that the items are sold for.

ACTIVITY F2 (PRODUCTION COSTS) Production Costs Cost item Direct Indirect Not part of costs costs production costs 2.1 | Rent of factory x 2.2 | Wages of cleaners Xx 2.3 | Wages of employees using Xx tools working on the product. 2.4 | Insurance of the equipment in the factory plant. Xx 2.5 | Maintenance of the factory buildings. x 2.6 | Cost of raw materials included in the finished products. x 2.7 | Administrative costs. x 2.8 | Marketing costs x ACTIVITY F3 3.1 | Direct material costs = 18 870+ 6 000 + 530 + 600 + 1 500 = 27 500 3.2 | Direct labour costs = 16 000 3.3 | Prime costs = 27 500 +16 000 = 43 500 3.4 | Manufacturing overheads = 1 5000 + 2000 +500 +4 500+ 11 400=23 400 | 3.5 | Total manufacturing costs. = 43 500 + 23 400 = 66 900 | 3.6 | Unit price per canoe 7 66 900 30 = 2230 3.7 | Selling price = 2 230 x 170 | 100 =3791

ACTIVITY F4 414 Production Cost Statement on 28 February 2019 Direct Materials Cost (1 770 000 — 10 000) 1760 000 Direct Labour Cost 1475 000 Prime Cost 3 235 000 Factory Overhead Cost (327 000 + 10 000) 337 000 Total Cost of Production 3572 000 Work-in Process at the beginning of the year 37 600 3 609 600 Work-in Process at the end of the year (84 600) Cost of Production of Finished Good 3 525 000 (315 000 + 3 337 000 - 127 000 ) 4.1.2 Calculate the Net profit Sales 6 390 000 Cost of sales (3 337 000) Selling and distribution cost (603 000) Administration cost (810 000) Net profit 1640 000 OR 6 390 000 — 3 337 000 — 603 000 ~ 810 000 = 1 640 000 | ACTIVITY F5 5.1.1 | Calculate the Direct Material Cost Opening stock 180 000 Purchases (400 000 - 7 000 ) 393 000 Carriage on purchases 5 000 Less closing stock (86 000) 492 000 5.1.2 | Calculate the Factory Overhead Cost

5.1.3 6.1.1 Depreciation 32 000 Sundry expenses (85 600 ~ 2 600) x 60/100 49 800 Indirect material (25 000 + 36 000 — 9 000- 18 000) 33.000 Indirect labour 70 000 + 6300 76 300 Rent expenses (56 500 + 5 500) 1 200/1 600 ad Water and electricity (98 000) 4/8 49 000 286 600 Production cost statement for the year ended 29 February 2020. Direct material Set 492 000 Direct labour (175 000 + 15 750) 190 750 Prime cost 682 750 Factory overheads See 5.1.2 286 600 Production cost 969 350 Work-in-process at the beginning 150 000 1 119 350 Work-in-process at the end (1119 350 ~870 000) (249 350) Production cost of finished goods (1 200 000 + 170 000 — 500 000) 870 000 ACTIVITY F6 Calculate the break-even point for the year ended 28 February 2019. 246 000 + 102 500 150-70 4 356 or 4 357 units

6.1.2 6.1.3 6.1.4 714 7A2 Should the business be satisfied with the number of units that are currently produced? Explain. Compare:BEP with units produce and sold see 6.1.1 They are producing 4 100 and the break-even is 4 356/4 357 units. OR Produce 256/257 units less than what is required to break-even. Despite the fact that there was an increase in the price of direct material, the direct material cost per unit decreased from R32 to R27. Give TWO valid reasons for the decrease. Any two valid points e Better training of workers resulted to less wastage. e Raw material obtained at a cheaper price. ¢ Greater care or efficiency in the use of raw material resulted to less wastage. ¢ Tighter control over use of raw material. Award one mark for the following response ¢ Training of workers. e Less wastage. Despite the fact that there was no increase in wages during the year, the direct labour cost per unit increased from R20 to R28. Give a valid reason for the increase. ACTIVITY F7 Calculate the Break-even point for 2017. 97 600 25-17 8 12 200 units Explain why the owner should be concerned about the break-even point. Provide TWO points. Number of units produced is 12 200 same as the break-even point of 12 200. Which means the business is making no profit or loss.

7.1.3 8.1.1 Although the number of units produced increased from 11 800 to 12 200 still no profits were realised because fixed costs also increased. Provide one reason for the decrease in the Direct Material Cost. e There was less wastage of raw material during production. ¢ More efficiency during the production process. © Sourcing out cheaper suppliers. ¢ Buying in bulk to negotiate discounts. ACTIVITY F8 (INFORMAL CLASS TEST) 8.4 | GEVEN MANUFACTURERS PRODUCTION COST STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2017 Direct material cost (1 050 000 + 102 000) 1 152 000 Direct labour cost Prime cost =DMC 648 000 Prime cost 1 800 000 (- 84 000 one mark +100 800 504 000 Factory overhead cost (487 200 + 16 800) Prime + FOHC 2 304 000 Work-in process (beginning) 160 000 2 464 000 Work-in process (end) TCP = subtotal above (88 000) Total cost of production 7 200 x R330 2 376 000 ST |

8.1.2 ABRIDGED INCOME STATEMENT FOR YEAR ENDED 28 FEBRUARY 2017 Sales 4080 000 See TCP 8.1.1 400 x R330 Cost of sales (336 000 + 2376 000 - 132 000) (2 580 000) OR 8 000-1 200 (1 200 x R280) + (6 800 x R330) Gross profit Sales 1 500 000 20! (131 600) 126 00 (- 42 000 + 25 200 ) Administration cost (148 400 - 16 800 see 8.1.1) Selling and distribution cost (422 000 - 102 000) (320 000) Net profit (subtract AC & SDC) 1048 400 SEE ee 8.2 GYMWEAR MANUFACTURERS 8.2.1 Shirts: Calculate the break-even point for shirts. 530 000 + (302 — 238) = 8 281,25 / 8 282/8 281 /8281,3

Identify ONE variable cost (with figures) that has not been well controlled. Give TWO possible reasons for this problem. ONE VARIABLE COST WITH FIGURES Variable cost Figures REASONS ifferent reasons Direct labour cost Increased by R31 (31%) (from R100 to R131) Expected responses: ¢ Negotiated wage increase / applied minimum wage / inflation / increased salary scales (for qualifications) e Paid bonuses to some workers e Excessive overtime ¢ Lack of productivity (inefficiency) of workers e Inexperienced / poorly trained workers e High staff turnover rate ¢ Old equipment affects productivity e Work hours lost due to training time (workers paid for training) / due to load-shedding (power-cuts) / due to paid sick leave ¢ Errors in calculation of wages (over-paid) ‘EE EERE Ene eran een Explain why Jan might be concerned about the large decreases in the other TWO variable costs. Explanations on the two VC's State or imply what the concern is Comment | Using cheaper material Inferior quality. on DMC Economising on material May affect the quality of the product Reduced advertising or reduced May cause sales to drop / may commission / reduced demotivate salespersons Comment | remuneration of salespersons areas onS&DC | Reduced distances for deliveries / | Leads to loss of customers discontinuing the service in certain

8.2.2 Out-sourcing / using cheaper Might be inferior and negatively affect service providers business in future Jan does not understand why the unit cost of production has increased when neither his fixed costs nor the variable costs have increased. Explain why this is so. State ONE point (with figures). ¢ No economies of scale / decrease in production by 8 900 units (25 000 to 16 100) ¢ Lower production increased FC per unit by R11,72 or 55,2% (R21,20 to R32,92) Shoes: Calculate the % increase in the selling price of shoes. 1640-1 260 380 x 100 OR 130,2% -100%= 30,2% 1260 1 = 30,2% Jan decided to improve the quality of the shoes and to export them. Explain how the direct material costs and the selling and distribution costs were affected by this decision. Provide figures. e DMC increased from R330 to R456 (by R126/by 38%/38,2%) e S&DC increased from R28 to R194 (by R166/by 593%/592,8%) Jan was concerned that the increase in price would have a negative impact on the business. Explain whether his concern was justified. State TWO points. Reasons (any two) State NO concer OR imply NO concern in explanation or by using figures ¢ Sales increased (by 1 250 units) / customers still supported the business (despite increase in price) ¢ Net profit increased (by R1 196 750) / price did not negatively affect sales) e BEP decreased (due to increased contribution per unit) by 475 units / The business now exceeds BEP by bigger margin (3 908 units).

ACTIVITY G1 1.1.1. What is the current VAT rate in South Africa? 15% 1.1.2 Is VAT paid on all items? Explain. No Explain Some items are exempt from VAT 1.1.3 What is the difference between VAT input and VAT output? VAT input- is charged on goods bought. VAT output- is charged on goods sold. 1.1.4 The average turnover of Thabo Traders is R240 000 per annum. The company is not registered for VAT. (a) Explain if it is compulsory for the business to register as a VAT vendor No Explain: The business generated a revenue which is less than R1 000 000 and not a VAT vendor, therefore it is not obliged to pay VAT. (b) Explain if the business would benefit if it registered as a VAT vendor Yes Explain : A VAT Vendor is allowed to reclaim VAT input charged on purchases. Avoid cash flow problems associated with a VAT return (c) Provide one disadvantage of being a VAT vendor Higher administration cost Goods are charged at a higher price which may reduce demand.

1.1.5 Explain tax evasion and the consequences thereof. Explain VAT evasion- is an illegal activity in which a person or entity deliberately avoids paying ‘true’ tax liability. 1.2 VAT Calculations ANSWERS 800 1000 z ° 1150 60% 96 736 33 1/3% 180 | Of nm mi OF a wm) > 1380 2000 2400 360 qe 560 700 805 40% 1400 210 aro! v oOo; 2 = lx

ACTIVITY G 2 General Ledger of Nene Supermarket for July 2020 OUTPUT VAT ACCOUNT 2020 | 25 | Returns DAJ 720 |} 2020 25 | BANK CRJ 6 390 July July Discount all | CRJ 75 Bad debt GJ 60 VAT control | GJ 5 535 INPUT VAT ACCOUNT 2020 | 25 | BANK CPJ 3750 |] 2020 25 | Drawings GJ 63 July July Returns CAJ 150 VAT control GJ 3537 3750 3 750 VAT CONTROL ACCOUNT 2020 | 25 | VAT input GJ 3527 |} 2020 25 | VAT output GJ 5535 July July Balance cld 2008 5 535 5 535 Balance bid 2 008

Calculate the amount receivable from or payable to SARS for VAT on 31 March 2019. ACTIVITY G3 1.4 VAT CONCEPT 3.1.1 Output 3.1.2 South African revenue services (SARS) 3.1.3 0% 3.2 VAT CALCULATIONS 43 820 + 1335+2820+112+756+756-184-6818= 41841 OR -43820-1335-2820-112-756+184+6818= -41841 Receivable/Payable: PAYABLE ACTIVITY G4 4.1.1 Calculate the amount of VAT payable to/ receivable from SARS on 31 May 2020. Indicate whether the amount is payable or receivable. 74 800 + 132 000 - 139 536 - 4 560 =62 704 Payable 4.1.2 What comment would you offer Raymond Zondo concerning this practice? State TWO points. Any TWO valid answers Raymond Zondo must keep accurate records of VAT and make timeous submissions to SARS for the following reasons: e Itis illegal business practice (fraud)/not prudent practice — can be charged / can be sentenced ¢ The business is an agent of SARS -money collected on behalf of SARS. e The business will be liable for penalties/fines and charged with interest for late payments

ACTIVITY G5 5.1 Calculate the amount receivable from or payable to SARS for VAT on 31 March 2019. 21 375 — 44 550 + 4 725-2 130 + 72 000 - 1 800 = 49 620 OR — 21 375 + 44 550 - 4 725 + 2 130 - 72 000 + 1 800 = 49 620 OR Balance at beginning = 21 375 Output 72 000 - 1 800 - 2 130 = 68 070 Input 44 550-4 725 = (39 825) 49 620 OR VAT CONTROL VAT CONTROL 21 375 44 550 44 550 21 375 4725 2 130 2130 4725 72 000 1800 1800 72 000 49 620 49 620 98 100 98 100 98 100 98 100 Receivable/Payable: Payable

ACTIVITY H1 BUDGETING 1.1 Explain the difference between a Projected Income Statement and a Cash Budget. ¢ Cash Budget is used to look at predicted inflows and outflows of cash in order to predict the bank balances during each month of the budget period. e AProjected Income Statement looks at the expected incomes and expenses during the budgeted period in order to show the predicted monthly net profit. 1.21 Debtors Collection Schedule _ July 2020 R 83 300 4165 August 2020 R 88 900 62 230 4445 September 2020 R 92 400 17 556 64 680 4620 October 2020 R 95 200 18 088 66 640 November 2020 R 98 000 18 620 83 951 87 213 89 880 1.2.2 Projected Income Statement Sept October November Sales 132 000 136 000 140 000 Cost of Sales (82 500) (85 000) (87 500) Gross Profit 49 500 51 000 52 500 Other Operating Income 6 200 7 200 7 200 Commission Income 1400 1400 1 400 Rent Income 4800 5 800 5 800 Gross Operating Income 55 700 58 200 59 700 Operating Expenses (42 315) (42 595) (50 174) Advertising 2500 2500 2500 Salaries and Wages 21 600 21 600 28 800 Bad Debts 4165 4445 4620 Depreciation 4050 3 850 3 850 Sundry Expenses 10 000 10 200 10 404 Operating Profit 13 385 15 605 9526

Interest Expense (on Loan) (1 600) (1.600) (2 000) Net Profit for the month 11785 14.005 7 526 ACTIVITY H2 BUDGETS 2.1 | DEBTORS COLLECTION SCHEDULE CREDIT SALES NOV August R280 000 0 September R324 000 162 000 October R360 000 | x 26% 93 600 November R456000 | x 15% x 98% 67 032 B Total 322 632 | 2.2 | MADE IN LB DESIGNERS PROJECTED INCOME STATEMENT FOR NOV 2020 oY Sales “*° x = (304 000 + 456 000) 760 000 c Cost of Sales (475 000) D GROSS PROFIT 285 000 OTHER OPERATING INCOME 8 960 Rent Income 8 960 GROSS OPERATING INCOME 293 960 OPERATING EXPENSES (164 000) Salaries and wages 96 000 Advertising 25 000 Sundry expenses 10 000 Bad debts 9% X R324 000 29160} F Discount allowed 2% x R68 400 1368] G Depreciation 2100 Trading stock deficit 372 OPERATING PROFIT 129 960 Interest expense (7 200)

| NET PROFIT ~ ~ 122 760 a need 2.3 | MADE IN PZM DESIGNERS CASH BUDGET FOR THE 3 MONTHS ENDING 31 NOVEMBER 2020 CASH RECEIPTS SEPT OCT NOV Cash sales 216 000 240 000 304000} H Cash from debtors 111 628 139 320 332632] | Rent Income 8 000 X 1.12 8 000 8 000 8960} J Loan from Fundbank 0 180 000 0 Total receipts 335 628 567 320 645 592 K CASH PAYMENTS Cash purchases 108 000 120 000 114 000 Cash paid to creditors 210 000 252 000 280 000 Interest on the loan 18 180000 1 4500 4500 7200] L 00 Er = 2700 + 4500 alaries and wages 120 000 ox 1.20 120 000 144 000 96000} M Advertising 15 000 45 000 25 000 Sundry expenses 10 000 10 000 10000] N Total payments 467 500 575 500 532 200 Surplus / Deficit (131 872) (8 180) 113 392 (e} Opening bank balance 24 000 (107 872) (116 052) | P Closing bank balance (107 872) (116 052) | (2 660) Q 2.4 | Discuss 2 ways, (other than increasing the loan), which indicates that the owners have taken the recession into account in the drawing up of the Cash Budget. Support your answers by quoting relevant figures. The business increased the advertising in October from R15 000 to R45 000 in order to encourage customers to buy — this could include incentives. Increases in Cash Sales. More monies received from debtors — better internal control measures were put in place.. The business is obviously looking to cut back on wages and salaries - either through retrenchments or by working short time.

Any other acceptable answer. ANY ACCEPTABLE ANSWER ACTIVITY H3 3.1.1 3.1.2 3.1.3 Provide TWO items that will not be included in a cash budget. Provide a reason for your answer ANY TWO Bad debts | Depreciation | Discount received ! Discount allowed | Profit on sale of an asset ! Loss on sale of an asset REASON Itis non-cash items Explain the difference between a Projected Income statement and a Cash budget Projected income statement calculates the projected profit or loss Cash budget calculates the expected cash available to the business Use the information given for the budgeted period. Comment on the debtor's collection policy in comparison to the creditor’s payment policy Creditors are being paid 60 days after purchases. Debtors are given up 90 days to settle accounts. Creditors are being paid before debtors settle their account therefore the business might experience a cash flow problem.

3.2 3.2.1 3.2.2 Month Credit sales July August |May 225 000 56 250 22 500 Nune 300 000 176 400 75 000 July 275 000 161 700 August 325 000 232 650 259 200 |RECEIPTS JULY AUGUST Cash sales 275 000 829 000 Receipt from Debtors 232 650 259 200 IRent income 35 000 88 500 Fixed deposit 85 000 Asset disposal income 65 000 Total receipts (Award mark only if both lamounts filled in) 607 650 657 700 PAYMENTS Payment to Creditors 400 000 860 000 Salaries 57 750 75 500 {Wages 57 750 7 750 Maintenance (Tangible assets) 20 000 20 000 Advertising 418 000 16 500 Drawings 40 000 10 000

ehicle 90 000 Total payments (Award mark only if both amounts filled in) 63 500 {629 750 Cash surplus (shortfall) M4 150 27 950 Bank: opening balance (9 500) B84 650 IBank: closing balance 34 650 62 600 3.2.3 2.3 Comment briefly on each of the items on the budget. Provide ONE point of advice regarding each item Item (Comment Advice Advertising Effectively managed. Maintain effective Imanagement. 3% of previous month's Sales. Improve further. Maintenance —_ Not well managed. Budget realistically. Increased by R10 000 in July Improve control measures over land by R7 000 in August maintenance to avoid major expenditure in the future. Enter into maintenance contracts. Rent income Collected less than Improve collection by budgeted for each issuing reminders etc. month. (Charge interest on Collection measures overdue rent. lineffective. ACTIVITY H4 4.1 CONCEPTS

4.1.1 | Whatis the main purpose of preparing a Cash Budget? Expected responses To identify future bank balances receipts and payments Monitor or improve control over receipts and payments Anticipate future 41.2 | Identify THREE items that should not be placed in the Cash Budget Bad debts Depreciation Trading stock on hand 4.2.2. Cash Budget for the period 1 April 2020 to 31 May 2020 Receipts April May Cash sales 22 000 28 800 Cash from debtors 24 180 23 604 Rent income 15 000 15 000 Fixed deposit 36 000 Interest on fixed deposit 3 200 Total Receipts 106 604

61 180 Payments Cash purchases 9920 11760 Payments to creditors 12 360 11 840 Operating expenses 6 000 6 300 Drawings 240; 240 Deposit on purchase of vehicle 45 000 Salaries 7 000 7 350 Total Payments 80 520 37 490 Cash surplus / deficit (19 340) 69 114 Balance on 1 April 2020 14720 (4 620) Balance on 31 May 2020 (4 620) 64 494 4.2.1 Debtors’ Collection Schedule from 1 April 2020 to May 2020 Credit sales April May February 23 600 4248 March 26 000 15 600 4680 April 22 800 4332 13 680 May 27 600 24 180 23 604 4.2.2. Cash Budget for the period 1 April 2020 to 31 May 2020

Receipts April May Cash sales 22 000 28 800 Cash from debtors 24 180 23 604 Rent income 15 000 15 000 Fixed deposit 36 000 Interest on fixed deposit 3 200 Total Receipts 106 604 61 180 Payments Cash purchases 9920 11 760 Payments to creditors 12 360 11 840 Operating expenses 6 000 6 300 Drawings 240 240 Deposit on purchase of vehicle 45 000 Salaries 7 000 7 350 Total Payments 80 520 37 490 Cash surplus / deficit (19 340) 69 114 Balance on 1 April 2020 14 720 (4 620) Balance on 31 May 2020 (4 620) 64 494 edtors Collection schedule trom Credit sales April May February 23 600 4 248 March 26 000 15 600 4680 April 22 800 4 332 13 680

May 27 600 24 180 23 604 ACTIVITY H5 BUDGETS AND INTERNAL CONTROL 5.1.1 Rewrite the statement correctly. A cash budget is a financial statement that shows actual incomes and expenses for a specific period. A cash budget is a financial plan that shows projected / anticipated receipts and payments for a specific period. 5.1.2 Rewrite the statement correctly: A cash budget is prepared in order to calculate profit or loss. A cash budget is prepared to calculate / determine a surplus or shortfall in cash at the end of a specific period. OR A cash budget is prepared to calculate / determine whether bank balance would be favourable or unfavourable at the end of a specific period. 5.2.1 Collections from Debtors for September 2020. (Debtors’ collection schedule) DEBTORS COLLECTION SCHEDULE Month / 2020 Credit September Sales July 76 950 27 702 August 83 025 83 025 x 60% = R49 815 Total R77 517

5.2.2 Payments to Creditors for September 2020. (110 700 x 100/180) - 5% = 58 425 Or 61 500- 5% = 58 425 5.3 Cash Budget for the period 1 August 2014 to 30 September 2020. CASH RECEIPTS AUGUST SEPTEMBER Cash sales 27 675 24 300 Receipts from debtors 78 975 77517 Loan received 90 000 Total receipts 196 650 101 817 CASH PAYMENTS Payments to creditors 54 150 58 425 Operating expenses 8 250 8 250 Water and electricity 3000 3300 Salaries 14000 15 120 Wages 15 000 15 000 Drawings 30 000 45 000 Equipment 32 800 Total payments 124 400 179770 Cash surplus (shortfall) 72 250 (77 953) Bank (opening balance) 35 200 107 450 Bank (closing balance) 107 450 29 497 5.4 Study the cash budget and identify TWO major problems. Briefly explain the consequences of each problem you identified and provide solutions to the problems.

Problem any one problem Consequence any one problem explained Solution any one solution provided Problem and Consequence Solution No increase in employees’ salaries. Workers’ | Make provision for an inflation based become disillusioned and their productivity | increase for employees. levels decreases. Provide for performance incentives This Committed workers might leave to find work | would motivate them to be more efficient elsewhere due to unfair practice. / and productivity would improve. or The manager will receive an increase of 8%. Regarded as an unfair practice. or The owner will withdraw an additional R15 000 fo tour through Africa (33% above his normal drawings) No provision was made for advertising during | Set aside a percentage of the month's budget months sales towards advertising in order to generate increased sales and profit. ACTIVITY H6 6.1 Explain the importance of comparing the actual figures to the budgeted figures in the 6.2 cash budget. To determine of the items/costs were managed well and within the set limits (Any acceptable answer) Calculate the values marked (A) — (F). Calculations 1080 000 x 95% = 1.026 000 1800 000 x %/g9 = 1 125 000 360 000 /2 = 180 000 288 200 (675 400) + 288 200 (see D) = (387 200) 49 680 x 1/145 = 43 200 Tym!) oO) | co) >

6.3 6.4 6.5 Refer to the figures for “Cash received from debtors”. Are the debtors adhering to the credit terms of the business? Provide figures to support your answer. Explanation: Comparison of budgeted e and actual They should have paid R864 000 and only paid R624 000 No new workers were employed during July and August 2018. What could possibly be a reason for the change in each of the actual figures for those two months? Reason July Workers worked overtime August Less workers came to work / Workers were on a strike (Any acceptable answers for both scenarios) The owner feels that the business pays less money by renting equipment than purchasing the equipment. Do you agree with her opinion? Provide TWO points to support your answer. Yes/No — Explanation Yes e Only hires equipment when necessary e Does not have to pay maintenance on equipment e Any other reasonable answer No ¢ By purchasing their own equipment they will save money as the equipment will last longer than what the repayment period ¢ The equipment can be rented out to earn an additional income (if it is not in use in the business at that time) e Any other reasonable answer

6.6 67 The business still faces a cash flow problem in August, even though a loan was obtained in July and the receipts from debtors improved. Excluding these two items and the renting of equipment (as in 6.5), identify TWO other items, with figures, that needs attention. Also provide advice how these items can be managed. Item Figure Advice Creditors 960000 or (b) | Buy less on credit, attempt more cash sales 1 125 000 in order to qualify for a cash discount. or 1 200 000 Drawings 150 000 or Urge owner to decrease drawings so that 210 000 or the business can recover the cash flow 168 000 Salaries and 144000 to 180 | Pay workers a fixed salary; employ workers wages 000 or for a fixed term. 144 000 to 108 000 The owner bought the vehicle from the business for her son. The usual driver and the finance officer were unhappy with this. Prove each Person’s point by explaining ONE reason for each. Concern Driver He was supposed to have first option to buy the vehicle and now he can't go against the owner of the business. Finance officer The business received R60 000 less (R180 000 — R120 000) than what they would have received if the vehicle was sold to the driver.