Accounting Grade 12 Paper 1 KwaZulu Natal Mock 2021 Memo

Downloaded from hlayiso.com TRIAL EXAMINATION 2021

Downloaded from hlayiso.com Accounting/P1 2 DBE/November 2020 NSC INSTRUCTIONS AND INFORMATION Read the following instructions carefully and follow them precisely. 1. 2. Answer ALL questions. A special ANSWER BOOK is provided in which to answer ALL questions. Show ALL workings to earn part-marks. You may use a non-programmable calculator. You may use a dark pencil or blue/black ink to answer questions. Where applicable, show ALL calculations to ONE decimal point. If you choose to do so, you may use the Financial Indicator Formula Sheet attached at the end of this question paper. The use of this formula sheet is NOT compulsory. Write neatly and legibly. Use the information in the table below as a guide when answering the question paper. Try NOT to deviate from it. QUESTION TOPIC MARKS | MINUTES 1 Statement of Comprehensive Income 60 45 and Retained Income Note Financial Indicators and Cash Flow : Statement | - 3 Interpretation of Financial Statements 35 30 4 Corporate governance 15 15 TOTAL 150 120 conyrontreseres [INIA UAT, ve

Downloaded from hlayiso.com Accounting/P1 3 DBE/November 2020 NSC QUESTION 1: STATEMENT OF COMPREHENSIVE INCOME AND RETAINED INCOME NOTE (60 marks; 45 minutes) You are provided with information from the records of Victoria Limited for the year ended 30 June 2020. The company sells and repairs two types of fridges: the Icekool and the Freezo models. REQUIRED: 41.1 Refer to Information B(a): Calculate: e Total depreciation for the year (7) e Profit/Loss on sale of fixed asset (2) 1.2 Refer to information B(d): Calculate the loss on the Icekool fridges destroyed in the fire. (5) NOTE: The relevant figures from QUESTIONS 1.1 and 1.2 must also be entered in the financial statement or note. 1.3 Complete the Statement of Comprehensive Income (Income Statement) for the year ended 30 June 2020. (35) 1.4 Prepare the Retained Income Note to the Statement of Financial Position (Balance Sheet). (11) Copyright reserved UNCED ALU A dada

Downloaded from hlayiso.com Accounting/P1 6 DBE/November 2020 NSC QUESTION 2: FINANCIAL INDICATORS AND CASH FLOW STATEMENT 24 2.2 (40 marks; 30 minutes) Four statements/reports are provided as options in which each of the following items would appear. Choose the financial statement/report and write only the letter (A-D) next to the question numbers (2.1.1 to 2.1.3) in the ANSWER BOOK. Cash Flow Statement Statement of Comprehensive Income (Income Statement) Statement of Financial Position (Balance Sheet) OjO| D> Directors' Report 2.1.1. Verbal explanation of the activities of a company for the past year 2.1.2 Bad debts recovered 2.1.3. Net book value of fixed assets (3 x 1) ORANGE LTD The information relates to the financial year ended 29 February 2020. REQUIRED: 2.2.1 Calculate the following financial indicators on 29 February 2020: Debt-equity ratio Earnings per share (EPS) Dividend pay-out rate % return on average equity (ROSHE) 2.2.2 Complete the Cash Flow Statement on 29 February 2020. All cash outflows must be shown in brackets to earn full marks. (3) (4) (3) (4) (23) conyeotveseres: [NNN HUAINIUHNIN e886 ove

Downloaded from hlayiso.com 40 Accounting/P1 7 DBE/November 2020 NSC INFORMATION: A. Extract from the Income Statement on 29 February 2020: Depreciation R 234 000 Interest expense 126 000 Income tax 415 200 Net income after tax 968 800 B. Extract from the Balance Sheet: 29 February 2020 | 28 February 2019 Fixed assets (carrying value) R 9 528 300 R 8 320 300 Fixed deposits 100 000 500 000 Current assets 1.002 000 755 000 Cash and cash equivalents 56 500 5 000 Bank overdraft 0 220 000 Shareholders’ equity 8 980 300 7411 500 Ordinary share capital 8 281 000 7 200 000 Retained income 699 300 211 500 Loan: BB Bank 900 000 1 200 000 Current liabilities 750 000 963 800 SARS: Income tax 4500 Dr 23 800 Cr Shareholders for dividends 120 000 160 000 C. Fixed assets: e Old equipment was sold at carrying value, R48 000. e Extensions to the buildings were completed during the financial year. D. Share capital: On 1 March 2019, the ordinary share capital comprised 800 000 ordinary shares. A further 200 000 shares were issued on this date. On 29 February 2020, the company repurchased 90000 shares at R81 000 above the value of the shares based on the average share price of R9,10 per share. These shareholders qualified for final dividends. E. Dividends and earnings: 29 February 2020 | 28 February 2019 Interim dividends 28 cents 60 cents Final dividends 12 cents 20 cents Earnings per share 2 94 cents Copyright reserved Please turn over UNA EU AA

Downloaded from hlayiso.com Accounting/P1 8 DBE/November 2020 NSC QUESTION 3: INTERPRETATION OF FINANCIAL STATEMENTS (35 marks; 30 minutes) You are provided with information of Solar-Style Ltd for the financial year ended 29 February 2020. The business provides solar panels to households to supplement their electricity supply. REQUIRED: NOTE: Provide figures, financial indicators or calculations in EACH case to support your comments and explanations. 3.1. Solvency and liquidity: 3.1.1. Comment on the solvency of the company. Quote ONE financial indicator with figures. (2) 3.1.2 Explain why the directors are satisfied with the change in the liquidity of the company. Quote TWO financial indicators with figures. (4) 3.2 Earnings, return and share price on the JSE: 3.2.1 Comment on the % return and earnings per share of the company. Quote TWO financial indicators with figures. (4) 3.2.2 Comment on the share price on the JSE and how the % return and earnings per share have affected the share price. Quote figures. (4) 3.3. Gearing: Explain how the loan affected the risk and gearing and whether or not it was a good idea to increase the loan. Quote TWO financial indicators with figures. (7) 3.4 Shareholding: Refer to Information D. The directors decided to offer the existing shareholders one share for every five shares they own on 1 September 2019, at a price of R6,50 each. Allen Mbatha currently owns 45% of the shares of Solar-Style Ltd. Allen was one of the few shareholders who decided to accept this offer. 3.4.1. Explain how Allen's decision affected his % shareholding. Provide a calculation to support your explanation. (4) 3.4.2 Give TWO reasons why Allen might have made this decision. (4) 3.5 Dividends: 3.5.1 One of the directors feels that the dividend pay-out rate (%) should have remained constant. Give ONE possible reason (with figures) for her opinion. (3) 3.5.2 Refer to Information E. Explain (with figures) why one of the shareholders, Erna Naidoo, feels that the dividends she earns in Solar-Style Ltd is not as good as those that she earns in Netgen Ltd. (3) Cea HATA ARE A ge

Downloaded from hlayiso.com Accounting/P1 9 DBE/November 2020 NSC INFORMATION: A. Extract from the Financial Statements: 29 February 28 February 2020 2019 Net profit after tax R_203 000 R_ 636 300 Non-current liability: Loan from Credbank 3.500 000 2 000 000 B. Financial indicators calculated: 29 February | 28 February 2020 2019 | Debt-equity ratio OMe 03:1 Acid-test ratio 0,8:1 2,6:1 Total assets to total liabilities 2,0:1 50:1 Stock turnover rate 6 times 3 times Earnings per share (EPS) 72 cents 96 cents Dividends per share (DPS) 48 cents 48 cents Dividend pay-out rate 67% 50% % return on average equity (ROSHE) 5,3% 8.7% % return on total capital employed (ROTCE) 6,2% 11,6% Net asset value per share (NAV) 877 cents 912 cents Cc. Additional information: 29 February 28 February 2020 2019 Market price of shares on JSE 840 cents 920 cents interest rate on investments 6.5% 65% Interest rate on loans 10,5% 12,0% D. Shareholding of Allen Mbatha in Solar-Style Ltd: Number of shares| Price per share | Total Solar-Style Ltd shares in issue: On 28 February 2019 800 000 shares On 29 February 2020 900 000 shares Shares purchased by Allen On 1 March 2015 360 000 shares 650 cents On 1 September 2019 ? 650 cents = Shareholding of Erna Naidoo in two companies: Solar-Style Ltd Netgen Ltd Dividends per share for 2020 36 cents 28 cents Price she paid for her shares 820 cents 400 cents Number of shares owned 30 000 shares 30 000 shares 35 Copyright reserved Please turn over UNIT} AAA

Downloaded from hlayiso.com Accounting/P1 10 DBE/November 2020 NSC QUESTION 4: CORPORATE GOVERNANCE (15 marks; 15 minutes) 4.1. Give ONE word/term for each of the following descriptions by choosing a 4.2 word/term from the list below. Write only the word/term next to the question numbers (4.1.1 to 4.1.3) in the ANSWER BOOK. external auditors, internal auditors; shareholders; directors 4.1.1. Their role is to manage and control all aspects of the company's activities. 4.1.2 Their role is to express an unbiased opinion on the reliability of the information in the financial statements. 4.1.3 Their role is to assess the internal control measures in a company on an on-going basis. (3 x 1) ELECTRONIC LTD The information relates to Electronic Ltd. In recent months, Electronic Ltd has been receiving negative publicity in the national newspapers. A shareholder, Quinton Miller, is concerned about possible corruption in this company. REQUIRED: 4.2.1. Explain, in your own words, why you agree or disagree with the extract below that appeared in a local newspaper. State TWO different points. Sustained (On-going) corruption, fraud and mismanagement will not take place at a listed company unless there is illegal or criminal collusion (dishonest collaboration) on the part of the board of directors and the auditors. [Paraphrased from @TheJaundicedEye, Independent, Saturday 7 March 2020] 4.2.2 Refer to the information on the next page. Explain TWO points to prove possible corruption for EACH of the following problems. Quote figures or calculations. Problem 1: Payment of directors' fees Problem 2: Control and productivity of other employees (3) (4) (4) (4) Conyrontreseves (TITTLE UMA HIHUNIN, ve

Downloaded from hlayiso.com Accounting P1 41 DBE/November 2020 NSC INFORMATION: Information identified from the books of the company NOTE: Rand amounts are expressed in millions. 9 oe 29 February 2020 | 28 February 2019 Directors’ fees: Chief executive officer (CEO) 1 72% R11,2m R6,5m Chief financial officer (CFO) 4 72% R9,9m R5,8m Other full-time directors 12 | 83% R39,0 m R36,0 m Other employees: Number of employees 19% 570 employees 480 employees Salaries and wages 22% R91,0 m R74,4m General information: Gross profit 11% R289,0 m R260,0 m Operating profit (20%) R61,0m R76,2m Operating profit per employee (50%) RO,1m RO,2m Net profit (21%) R41 m R52 m 15 TOTAL: 150 Copyright reserved A 0 AA

Downloaded from hlayiso.com Accounting/P1 DBE/November 2020 NSC GRADE 12 ACCOUNTING FINANCIAL INDICATOR FORMULA SHEET Gross profit x 100 Gross profit x 100 Sales 4 Cost of sales 1 Net profit before tax x 100 Net profit aftertax x 100 Sales 1 Sales 1 Operating expenses x 100 Operating profit x 100 Sales 1 Sales 1 Total assets : Total liabilities Current assets : Current liabilities (Current assets — Inventories) : Current liabilities } Non-current liabilities : Shareholders’ equity (Trade & other receivables + Cash & cash equivalents) : Current liabilities Average trading stock x 365 Cost of sales Cost of sales 1 Average trading stock Average debtors x 365 Average creditors x 365 Credit sales 1 Cost of sales 1 ; Net income after tax x 100 Net income after tax____ x 100 Number of issued shares 1 Average shareholders' equity 1 (*See note below) Net income before tax + Interest on loans x 100 Average shareholders’ equity + Average non-current liabilities 1 Shareholders' equity x 100 Dividends forthe year_ x 100 Number of issued shares 1 Number of issued shares 1 Interim dividends x 100 Final dividends x 100 Number of issued shares 1 Number of issued shares 1 Dividends per share x 100 Dividends forthe year x 100 Earnings per share 1 Net income after tax 1 Total fixed costs Selling price per unit —- Variable costs per unit NOTE: * In this case, if there is a change in the number of issued shares during a financial year, the weighted-average number of shares is used in practice. Copy esere 0 A

Downloaded from hlayiso.com _ t | STICKER | CENTRE NUMBER EXAMINATION NUMBER NATIONAL SENIOR CERTIFICATE ACCOUNTING P1 GRADE 12 NOVEMBER 2020 SPECIAL ANSWER BOOK QUESTION MARKS INITIAL MOD. 1 2 3 4 TOTAL This answer book consists of 11 pages. cooyereveservca _ANIUNANNUAN AIAN TNANIN sca rs ve cme sms AER RI RC RAEN MR TENG emu msemnencnees

Downloaded from hlayiso.com Accounting/P 1 2 DBE/November 2020 NSC — Answer Book QUESTION 1 1.1 | Calculate: Total depreciation for the year Workings Answer 7 Calculate: Profit/Loss on sale of fixed asset Workings Answer 2 1.2 | Calculate: Loss on the Icekool fridges destroyed in the fire Workings Answer 5 NOTE: The relevant figures from QUESTIONS 1.1 and 1.2 must also be entered in the financial statement or note. | ea) ANTI ATUL AS diel ae!

Downloaded from hlayiso.com Accounting/P1 3 DBE/November 2020 NSC — Answer Book 1.3. Statement of Comprehensive Income (Income Statement) for the year ended 30 June 2020. Sales 12 945 000 Cost of sales Gross profit Operating income Service fee income 3 400 000 Gross operating income Operating expenses Salaries and wages 2.740 000 Audit fees 356 000 Sundry operating expenses 252 500 Operating profit Interest income Profit before interest expense Interest expense Net profit before tax Net profit after tax 35 conyrontresered NINN NINA ve

Downloaded from hlayiso.com Accounting/P1 4 DBE/November 2020 NSC - Answer Book 1.4 Retained Income Note Balance at beginning 3 200 000 Dividends Balance at end 11 TOTAL MARKS 60 Copyrontreseres IMI MAIN UMA NAMLAUNHI——e8se1 oer

Downloaded from hlayiso.com Accounting/P1 5 DBE/November 2020 NSC - Answer Book QUESTION 2 2.1 2.1.1 2.1.2 2.1.3 2.2 ORANGE LTD 2.2.1 Calculate on 29 February 2020: Debt-equity ratio Workings Answer Earnings per share (EPS) Workings Answer Dividend pay-out rate : Workings Answer % return on average equity (ROSHE) Workings Answer Cony reseves | NN Please turn over

Downloaded from hlayiso.com Accounting/P1 6 DBE/November 2020 NSC — Answer Book 2.2.2 CASH FLOW STATEMENT ON 29 FEBRUARY 2020 CASH EFFECTS OF OPERATING ACTIVITIES Cash generated from operations Interest paid (126 000) . Dividends paid (440 000) Income tax paid CASH EFFECTS OF INVESTING ACTIVITIES Fixed assets purchased Proceeds of sale of fixed assets 48 000 Decrease in fixed deposits 400 000 CASH EFFECTS OF FINANCING ACTIVITIES Proceeds of shares issued | Funds used to repurchase shares Net change in cash and cash equivalents Cash (closing balance) TOTAL MARKS 40 Conyront eserves ANNU MUNIN MNRAU IN| 2s ver

Downloaded from hlayiso.com Accounting/P1 7 DBE/November 2020 NSC ~ Answer Book QUESTION 3 3.1.1] Comment on the solvency of the company. Quote ONE financial indicator with figures. 3.1.2 | Explain why the directors are satisfied with the change in the liquidity of the company. Quote TWO financial indicators with figures. 3.2.1 | Comment on the % return and earnings per share of the company. Quote TWO financial indicators with figures. 3.2.2 | Comment on the share price on the JSE and how the % return and earnings per share have affected the share price. Quote figures. Conyrontreseves | AINILTAUL AMIN NALHTINIT | 2 oer

Downloaded from hlayiso.com Accounting/P 1 8 DBE/November 2020 NSC — Answer Book 3.3 | Explain how the loan affected the risk and gearing and whether or not it was a good idea to increase the loan. Quote TWO financial indicators with figures. 3.4.1] Refer to Information D. Explain how Allen’s decision affected his % shareholding. Provide a calculation to support your explanation. 3.4.2 | Give TWO reasons why Allen might have made this decision. eae ANAC AEE oes

Downloaded from hlayiso.com Accounting/P1 9 DBE/November 2020 NSC — Answer Book 3.5.1 | One of the directors feels that the dividend pay-out rate (%) should have remained constant. Give ONE possible reason (with figures) for her opinion. 3.5.2] Refer to Information E. Explain (with figures) why one of the shareholders, Erna Naidoo, feels that the dividends she earns in Solar-Style Ltd is not as good as those that she earns in Netgen Ltd. TOTAL MARKS 35 Cony ceseves NII HLH AI HII) e282 em over

Downloaded from hlayiso.com Accounting/P 1 40 DBE/November 2020 NSC — Answer Book QUESTION 4 41 4.1.1 41.2 4.1.3 4.2 ELECTRONIC LTD 4.2.1 Explain, in your own words, why you agree or disagree with the extract that appeared in a local newspaper. State TWO different points. Copyright reserved UNE TA T AA a

Downloaded from hlayiso.com Accounting/P1 11 DBE/November 2020 NSC — Answer Book 4.2.2 | Explain TWO points to prove possible corruption for EACH of the foliowing problems. Quote figures or calculations. Problem 1: Payment of directors’ fees Problem 2: Control and productivity of other employees TOTAL MARKS 15 TOTAL: 150 Copyright reserves MIAN TAMAR YA ATM A A

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE GRADE 12 ACCOUNTING P1 2021 TRIAL EXAMINATION MARKING GUIDELINES MARKS: 150 MARKING PRINCIPLES: 1. Unless otherwise stated in the marking guidelines, penalties for foreign items are applied only if the candidate is not losing marks elsewhere in the question for that item (no penalty for misplaced item). No double penalty applied. 2. Penalties for placement or poor presentation (e.g. details) are applied only if the candidate is earning marks on the figures for that item. 3. Full marks for correct answer. If answer incorrect, mark the workings provided. 4. If a pre-adjustment figure is shown as a final figure, allocate the part-mark for the working for that figure (not the method mark for the answer). Note: if figures are stipulated in memo for components of workings, these do not carry the method mark for final answer as well. 5. Unless otherwise indicated, the positive or negative effect of any figure must be considered to award the mark. If no + or – sign or bracket is provided, assume that the figure is positive. 6. Where indicated, part-marks may be awarded to differentiate between differing qualities of answers from candidates. 7. This memorandum is not for public distribution; as certain items might imply incorrect treatment. The adjustments made are due to nuances in certain questions. 8. Where penalties are applied, the marks for that section of the question cannot be a final negative. 9. Where method marks are awarded for operation, the marker must inspect the reasonableness of the answer. 10. Operation means 'check operation'. 'One part correct' means operation and one part correct. Note: check operation must be +, -, x, ÷, or per memo. 11. In calculations, do not award marks for workings if numerator & denominator are swapped – this also applies to ratios. 12. In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect at least in part. Indicate with a . 13. Be aware of candidates who provide valid alternatives beyond the marking guideline. Note that one comment could contain different aspects. 14. Codes: f = foreign item; p = placement/presentation. These marking guidelines consist of 11 pages. Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 2 DBE/November 2020 NSC – Marking Guidelines QUESTION 1 20% and 15% do not constitute ‘one part correct’ 1.1 Calculate: Total depreciation for the year Workings Answer Vehicles: (4 220 000 – 1 325 000) x 20% = 579 000  2 895 000 721 700  Equipment: one part correct 40 000 x 15% x 7/12 = 3 500  one part correct (968 000 – 40 000) x 15% = 139 200  928 000 142 700 four marks 7 Calculate: Profit/Loss on sale of fixed asset Workings Answer (40 000 – 21 500) 22 500 – 18 500 4 000  one mark one mark one part correct 2 1.2 Calculate: Loss on the Icekool fridges destroyed in the fire Workings Answer (200 + 1 400 – 1300 – 275) (25 x 3 500) x 20% R17 500     one part correct one part correct 87 500 – 70 000 three marks one mark 5 NOTE: The relevant figures from QUESTIONS 1.1 and 1.2 must also be entered in the financial statement or note. Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 3 DBE/November 2020 NSC – Marking Guidelines 1.3 Statement of Comprehensive Income (Income Statement) for the year ended 30 June 2020. Sales 12 945 000 Cost of sales (12 945 000 + 275 000 ) x 100/160  OR (3 500 x 1 300) (6 750 x 550) * (8 262 500) 4 550 000 + 3 712 500 OR (700 000 + 4 900 000 – 1 050 000) + (4 320 000 – 607 500) 5 Gross profit sales – cost of sales 4 682 500  Operating income operation 3 495 000  Service fee income 3 400 000 Profit on sale of asset see 1.1 4 000  can be a loss (see under expenses) 3 Rent income 7 x 13 000 see directors' fees 91 000  * two marks if no calculation in director’s fees Gross operating income 8 177 500 Operating expenses operation (6 576 500)  Salaries and wages 2 740 000 Audit fees 356 000 Sundry operating expenses 252 500 Depreciation see 1.1 721 700  Directors fees (1 279 000 + 91 000) 1 370 000  Consumable stores (28 800 – 21 600) one mark 805 000  (815 800 + 7 200 – 18 000) Loss due to fire see 1.2 17 500  Bad debts (196 000  + 10 800 ) 206 800  19 Advertising (123 200 – 16 200 ) 107 000  8 100 x 2 Operating profit GOI – OE 1 601 000  Interest income 165 000  Profit before interest expense 1 766 000 Interest expense 1 984 000 – 1 718 000 / (266 000) * (1 984 000 + 582 000 – 2 300 000) Net profit before tax PbIE – IE 1 500 000  Income tax 28% of NPBT (420 000)  8 Net profit after tax NPbT – IT 1 080 000  35 – 1 foreign items (max -2); mark workings only of misplaced items *one part correct Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 4 DBE/November 2020 NSC – Marking Guidelines 1.4 Retained Income Note Balance at beginning 3 200 000 Net profit after tax see 1.2 1 080 000  (9,60 – 7,00) three marks Shares repurchased 50 000 x R2,60 one part correct (130 000) * Not 480 000 Ignore brackets Dividends operation; ignore brackets (1 487 000)  Interim / Paid 675 000  Final / Recommended 812 000 * 1 450 000  x 56 cents  x 0,56 x 56% Balance at end Inspect: must subtract SBB and OSD 2 663 000 * 11 *one part correct -1 Presentation (no / incorrect details) TOTAL MARKS 60 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 5 DBE/November 2020 NSC – Marking Guidelines QUESTION 2 2.1 2.1.1 D Directors Report 2.1.2 B Statement of Comprehensive Income 2.1.3 C Statement of Financial Position 3 2.2 ORANGE LTD 2.2.1 Calculate on 29 February 2020: Debt-equity ratio Workings Answer 900 000 : 8 980 300 0,1 : 1    one part correct; in the form x : 1 3 Earnings per share (EPS) Workings Answer one part correct 968 800  x 100* 96,9 cents  1 000 000  OR 97 cents (800 000 + 200 000) Do not accept 910 000 Accept R0,97 4 Dividend pay-out rate Workings Answer (28 + 12) (280 000 + 120 000) 40 cents  x 100* OR 400 000 x 100 41,3%  *one part correct 96,9 cents see EPS above 968 800 Must indicate % Or 97 cents 3 % return on average equity (ROSHE) Workings Answer 968 800  x 100* 11,8%  *one part correct ½ (8 980 300  + 7 411 500 ) % sign not necessary 16 391 800 two marks Accept 12% 8 195 900 two marks * ensure that a candidate does not get full marks if ½ is omitted 4 * x 100 is not regarded as ‘one part correct’ Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 6 DBE/November 2020 NSC – Marking Guidelines 2.2.2 CASH FLOW STATEMENT ON 29 FEBRUARY 2020 CASH EFFECTS OF OPERATING ACTIVITIES Cash generated from operations Interest paid (126 000) Dividends paid (440 000) Income tax paid 23 800  + 415 200  + 4 500  or – 23 800 – 415 200 – 4 500 (443 500) * 4 Be aware of alternative calculation methods, e.g. ledger account; brackets CASH EFFECTS OF INVESTING ACTIVITIES Fixed assets purchased 9 528 300 + 234 000 + 48 000 – 8 320 300  OR – 9 528 300 – 234 000 – 48 000 + 8 320 300 (1 490 000) * 5 Be aware of alternative calculation methods, e.g. ledger or note format, brackets Proceeds of sale of fixed assets 48 000 Decrease in fixed deposits 400 000 CASH EFFECTS OF FINANCING ACTIVITIES Proceeds of shares issued 8 281 000  + 819 000  – 7 200 000  1 900 000 * 5 90 000 x 9,10 Funds used to repurchase shares 819 000  + 81 000  OR 90 000 x 10 (900 000) * see above (9,10 + 0,90) Change in loans / Decrease in loans 1 200 000 – 900 000 (300 000)  10 Net change in cash and cash equivalents inspect, operation 271 500  Cash (Opening balance) – 220 000 + 5 000 (215 000)  Cash (closing balance) 4 56 500  23 *one part correct; with the correct use of brackets / no brackets If part of workings is reflected as a final answer, award the working marks allocated for that part If the correct final answer is presented without the correct use of brackets, award all working marks, even if workings are not provided e.g. 3 / 4 for 443 500 iro income tax paid. Misplaced items: mark workings only TOTAL MARKS 40 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 7 DBE/November 2020 NSC – Marking Guidelines QUESTION 3 3.1.1 Comment on the solvency of the company. Quote ONE financial indicator with figures. Comment  figure  The degree of solvency has declined from 5,0 : 1 to 2,0 : 1 (by 3,0 : 1) Although the solvency declined (trend not good), the business is still solvent. 2 3.1.2 Explain why the directors are satisfied with the change in the liquidity of the company. Quote TWO financial indicators with figures. Financial indicator   figures with explanation   • Acid test ratio is now more efficient at 0,8 : 1 whereas it was too high at 2,6 : 1 in 2019 / more productive use of liquid assets (working capital) • Stock turnover rate has improved from 3 times to 6 times indicating that stock is being sold more quickly. 4 3.2.1 Comment on the % return and earnings per share of the company. Quote TWO financial indicators with figures. Financial indicator (with trend)   figures with explanation   •ROSHE declined from 8,7% to 5,3% (by 3,4% percentage points / 39%) / compare to alternative investments • EPS declined from 96 cents to 72 cents (by 24 cents; by 25%) / representing a drop in profitability (assuming no change to share capital) OR Earnings yield: 96/912 (10,5%) to 72/877 (8,2%) – using NAV 96/920 (10,4%) to 72/840 (8,6%) – using MP 4 3.2.2 Comment on the share price on the JSE and how the % return and earnings per share have affected the share price. Quote figures. Comment on the market price  (with figures)  • The decline in earnings has led to a decline in the share price on the JSE from 920 cents to 840 cents (by 80 cents / 8,7%) / a drop in demand for shares / investor confidence Comparison of MP with NAV  (with figures)  • The MP (840c) is lower than the Net Asset value (877c) by 37 cents / was 8c higher than NAV in 2019 / indicating declining demand 4 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 8 DBE/November 2020 NSC – Marking Guidelines 3.3 Explain how the loan affected the risk and gearing and whether or not it was a good idea to increase the loan. Quote TWO financial indicators, with figures. TWO financial indicators   Figures   Debt equity ratio increased from 0,3 : 1 to 0,4 : 1 (by 0,1 : 1) The ROTCE decreased from 11,6% to 6,2% (by 5,4% points / 46,6%) Explanation  mention / compare with interest rate  It was not a good idea to increase the loan: • Although the debt equity suggests low financial risk, the ROTCE is very low; below the current interest rate of 10,5% • The business experienced negative gearing in 2019 (interest rate:12%) and has not taken steps to improve the situation in the 2020 financial year. • Financial risk has increased and profits have dropped. 7 3.4.1 Refer to Information D. Explain how Allen's decision affected his % shareholding. Provide a calculation to support your explanation. Calculation: 360 000/5  360 000 + 72 000 = 432 000 shares of 900 000 shares → 48% His % shareholding increased (from 45%) to 48% (by 3% / 6,7%)  4 3.4.2 Give TWO reasons why Allen might have made this decision. TWO possible reasons   part-marks for partial / incomplete / unclear explanations Figures are not necessary – can enhance the quality of the response • He was able to buy the shares at the same price (650c) that he paid five years ago (March 2015) • This is significantly lower than the current price on the JSE (920c; 840c) • R6,50 is a lot lower than NAV (912c; 877c) • Although earnings have declined, solar panels might become very popular in future because of the current Eskom problems. Future prospects. • He wants to support (or be part of) a recovery plan / he sees potential in the recovery of the business. • He needs to purchase only a few more shares on the JSE to become the majority shareholder (18 000 + 1 or 100 or 51%) / closer to becoming the majority shareholder / closer to being the main decision-maker. 4 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 9 DBE/November 2020 NSC – Marking Guidelines 3.5.1 One of the directors feels that the dividend pay-out rate (%) should have remained constant. Give ONE possible reason (with figures) for her opinion. ONE valid reason  part-marks for partial explanations Figure/s  • A drop in EPS (from 96 cents) to 72 cents (by 24 cents / 25%) and an unchanged DPS at 48 cents as effectively increased the dividend pay-out rate from 50% to 67% (by 17% / 34%) • A constant dividend pay-out rate at 50% would have resulted in a lower DPS of 36 cents (by 12 cents / 25%) in line with the drop in EPS. • If the DPR remained constant, the company would have been able to retain 50% of EPS (instead of 33%); to focus on long-term effect / growth of the business. 3 3.5.2 Refer to Information E. Explain (with figures) why one of the shareholders, Erna Naidoo, feels that the dividends she earns in Solar-Style Ltd is not as good as those that she earns in Netgen Ltd. ONE valid reason  part-marks for partial explanations Figure/s  • The price per share at Solar-Style Ltd is more than double the price at Netgen Ltd (820 cents against 400 cents) Erna only received 36 cents per share at Solar-Style Ltd and 28 cents at Netgen Ltd. She expects the DPS at Solar to be more than double the amount she received at Netgen Ltd (i.e. over 56 cents) • Received DPS of 36c on an investment of 820c (4,4%) in Solar-Style Ltd Received DPS of 28c on an investment of 400c (7%) in Netgen Ltd OR The dividend yield on Solar-Style Ltd is 4,4% (36/820) while the dividend yield on Netgen Ltd is 7% (28/400). 3 TOTAL MARKS 35 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 10 DBE/November 2020 NSC – Marking Guidelines QUESTION 4 4.1 4.1.1 Directors  4.1.2 External auditors  4.1.3 Internal auditors  3 4.2 ELECTRONIC LTD 4.2.1 Explain, in your own words, why you agree or disagree with the extract that appeared in a local newspaper. State TWO different points. Any TWO valid and separate points   part-marks for partial responses • The Board of Directors is accountable for managing the company (they have control over all employees) and if they are doing their job properly they should be aware of potential fraud. • The Auditors are accountable for expressing an opinion on the financial statements, and they will be guilty of negligence if they do not do their duties properly and alert shareholders to problems that should be obvious. • The Directors are accountable for establishing internal control processes to prevent fraud (using the staff they employ) and the Auditors are accountable for inspecting the internal control processes and must alert the Directors to possible breeches. • If any employee commits fraud this should be identified quickly by the appointed managers and directors because internal control procedures exist for this reason. 4 Article refers to sustained corruption due to collusion between directors and auditors Respective roles/responsibilities: Directors; management and control / strategic planning / ensure the success of the business Report to the Board / Shareholders Auditors: External / unbiased / no vested interest / conflict of interest To protect the investment / interest of the shareholders (members of the general public) True: Corruption would require willing participation of role players / stakeholders Focus on self-interest / self-enrichment – at the expense of the business (shareholders) They are in positions of authority / power – are in control (influence decisions) Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 11 DBE/November 2020 NSC – Marking Guidelines 4.2.2 Explain TWO points to prove possible corruption for EACH of the following problems. Quote figures or calculations. Problem 1: Payment of directors' fees TWO valid points   Figures   • The CEO & CFO do not deserve the 72% increase in their fees as the operating profit and net profit decrease significantly by 20% / 21% respectively. • The other directors do not deserve an increase of 8,3% either because they would have known that proper procedures were not being followed in setting directors' fees and the profits have decreased by 20%. • Negligence of the Remuneration committee in performing its duties / lack of transparency – possible collusion 4 Problem 2: Control and productivity of other employees. TWO valid points   Figures   • The number of employees increased significantly by 110 (19%) while the operating and net profits decreased by 20% / 21% respectively • Operating profit earned per employee has dropped by 50% (from R0,2 m to R0,1 m), although the number of employees increased by 19%. Drop in the productivity per employee – including the existing employees. • Increase in salaries (22%) not justified – R16,6 million more than last year; way above the inflation rate; drop in productivity levels as revealed by the drop in profits. • Operating profit decreased by 20% despite the fact that gross profit increased by 11% which indicates that control of operating expenses was a big problem; not sales. 4 TOTAL MARKS 15 TOTAL: 150 Copyright reserved