Accounting Grade 12 Winter Spring Revision 2020

education Department: Education PROVINCE OF KWAZULU-NATAL CURRICULUM GRADE 10 - 12 DIRECTORATE NCS (CAPS) SUPPORT DOCUMENT MIP WINTER AND SPRING LEARNER REVISION DOCUMENT GRADE 12 ACCOUNTING 2020

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT A. INCOME STATEMENTS ACTIVITY Aq (Limpopo Sept 2019 Q3) QUESTION 3 COMPANIES FINANCIAL STATEMENTS (45 marks; 30 minutes 1. The following information was taken from Khumalo Fashions Ltd. The financial years ended on 28 February 2019. FINANCIAL STATEMENTS AND NOTES REQUIRED: Complete the Income Statement for the year ended 28 February 2019. Certain figures have been added in the Answer book. (45) INFORMATION Balances on 28 February 2019 R Balance sheet accounts Ordinary shareholder's capital 1840 000 Retained income 213 260 Provision for Bad Debts (1 March 2018) 2.000 Loan from director 750 000 SARS: Income Tax (Dr) 74 195 Nominal accounts Cost of Sales i Sundry expenses ? Additional information and Adjustments: A. B. Serre Included in the Sales amount was R56 000 received for goods sold to a school at a mark-up of only 25%. All other goods were sold at a mark-up percentage of 40%. The following information from the February Bank Statement must still be taken into account: e — Bank charges, R340 e Interest on current account, R670 e — R/D cheque from a debtor for R3 650 as settlement of his account of R4 050. e — Acheque for stationery was entered in the journals as R778 instead of R878. A debtor with an outstanding debt of R800 must be written off as irrecoverable. Dresses to the value of R4 800 were damaged in transit. The insurance will cover 35% of the loss and will make a payment during March 2019. The balance is the business’ loss. A physical stock-take on 28 February 2019 showed: Stationery on hand, R280 e — Trading stock of R3 200 could not be accounted for during the —_stock-take. An annual Insurance premium of R9 600 was paid and recorded on 1 June 2018. The Provision for Bad Debts must be adjusted to R3 800. Commission on certain old stock was calculated at R1 600 being 10% of the sale items. This must be adjusted to 6% due to the nature of the goods sold. Provide for any outstanding directors fees. The directors receive the following annual fees: G. Khumalo R50 000 and R. Khumalo R60 000. ¢ Since 1 November 2018 R. Khumalo has been renting a house that belongs to the company. The rent of R6 000 per month is to be offset against her director's fees. This transaction was not recorded. R. Khumalo has also not received any fee as yet. Operating profit on Sales for the year was calculated as 25%. Net profit after Tax on Sales for the year was calculated as 15%. Tax was calculated at R78 795 for the year. Loan from director: e The balance of the loan on 1 March 2018 was R844 205. e Interest on loan is capitalised. e Payments made during the year, including interest, were R150 000. e Aloan repayment of R120 000 will be made on 1 July 2019. Dividends declared on 27 February 2019 amounted to R16 000. Page 2 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY A1 (Limpopo Sept 2019 Q3) COMPANIES FINANCIAL STATEMENTS 1. KHUMALO FASHIONS LTD. INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019 Sales 1 225 700 Cost of sales Gross profit Other operating income Commission income (89 200 Gross operating income Operating expenses Bank charges (3 260 Bad debts (5 600 Discount allowed (2 940 Stationery (3 860 Insurance (14 250 Director's fees (50 000 Sundry expenses Operating profit Interest income (11 350 Profit before interest expense Profit before tax Profit after tax Page 3 of 122

KZN ACCOUNTING ACTIVITY A2 (Free State Sept 2019, Q3 ) COMPANY FINANCIAL STATEMENTS GRADE 12 (67 marks; 40 minutes) 2020 MIP DOCUMENT You are provided with information from the records of Moonlight Ltd for the financial year ended 28 February 2019. REQUIRED: 21 Refer to Information D 2.1.4 Calculate the profit or loss on disposal of the computer on 1 August 2018. (6) 2.1.2 Calculate the total depreciation for the year. (9) 2.1.3. Suggest ONE internal control measure that the internal auditor can perform to verify the tangible (2) assets figure in the Balance Sheet. 22 Complete the Income Statement (Statement of Comprehensive Income) for the year ended 28 February 2019. (40) 2.3 Prepare the Retained income note on 28 February 2019. (10) INFORMATION: A. The following balances/totals, amongst others, appeared in the books on 28 February 2019: Retained income 765 000 Loan: Derby Bank 2110 000 Vehicles 1 520 000 Equipment 660 000 Accumulated depreciation on vehicles (1 March 2018) 484 500 Accumulated depreciation on equipment (1 March 2018) 178 000 Trading stock 1 287 000 Provision for bad debts (1 March 2018) 10 200 Sales ? Cost of sales 7 540 000 Rent income 158 200 Directors fees 932 400 Audit fees 64 000 Salaries and wages 320 000 Insurance 56 250 Commission income 31 580 Bad debts 2779 Interest expenses u Interest income ? Sundry expenses 187 640 Page 4 of 122

NZINALUUUNN TING URAVE 12 B. Adjustments and additional information 2U2ZU WIP DOCUMENT! (i) Goods are sold at a mark-up of 60% on cost price. (ii) A credit note for the return of merchandise sold for R12 480 was omitted from the Debtors Allowances Journal on the 15 February 2019. The goods were taken into stock, but no entries were made. (iii) Stock, costing R37 500 was stolen. The insurance company has agreed to pay out an amount of R26 250 which is still receivable. (iv) Stocktaking on 28 February 2019 reflected trading stock of R1 234 800 on hand. (v) A cheque for R10 150 was received from the trustee of a debtor who was declared insolvent. This represented a dividend of 40 cents in the Rand. The balance must be written off as bad debt. (vi) Provision for bad debts must be decreased to R9 700. (vii) The rent for February 2019 was still outstanding. The rent was increased by 10% on 1 November 2018. (viii) Income tax is calculated at 25% of the net profit. c. The loan statement received from Derby Bank on 28 February 2019 reflected the following: R Balance at the beginning of the financial year 2620 000 Repayments during the year (including interest) 510 000 Interest capitalised 2 Balance at the end of the financial year 2 398 200 D. Fixed Assets Included in the vehicle account is R950 000 for a delivery van which was purchased on the 1 December 2018. Vehicles are deprecated at 20% p.a. on cost. On 31 August 2018, a computer was taken over by Paul Cluver one of the directors, for personal use for R8 000 cash. The relevant page from the Fixed Asset Register is provided below. No entries have been made in respect of the disposal of this asset. Equipment is depreciated at 20% p.a. on the diminishing balance method. FIXED ASSET REGISTER Page 22 Item: Aider computer Date purchased: 1 June 2015 Cost price: R30 000 Depreciation policy: 20% on diminishing method DATE CURRENT ACCUMULATED DEPRECIATION DEPRECIATION 28 February 2016 R4 500 R4 500 28 February 2017 RS 100 R9 600 28 February 2018 R4 080 R13 680 31 August 2018 u ? Page 5 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT E. SHARE CAPITAL On 28 February 2019 the company repurchased 125000 shares at R0,50 above the average share price. Shareholders qualify for final dividends. The share capital after the share buy-back consisted of 1 375 000 ordinary shares. An interim dividend of R982 500 was paid on 1 September 2018. A final dividend of 80 cents per share was declared on 28 February 2019. ACTIVITY A2 (Free State Sept 2019, Q3 ) 2.1.1 Calculate the profit or loss on disposal of the computer on 31 August 2019. 6 24.2 Calculate the total depreciation for the year. 9 2.1.3 Suggest ONE internal control measure that the internal auditor can perform to verify the tangible assets figure in the Balance Sheet. 2 Page 6 of 122

2.2 Income Statement for the year ended 28 February 2019 Sale Cost of sales Gross profit Other operating income Commission income 31 580 Rent income 158 200 Gross operating profit Operating expenses Director's fees 932 400 Audit fees 64 000 Salaries and wages 320 000 Operating profit Profit before interest expense Net profit for the year 2.040 000 40 Page 7 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.3 Retained income Balance at beginning of year 765 000 Ordinary Share dividends Balance at the end of year 10 ACTIVITY A3 (Mpumalanga Sept 2018 Q3) CONCEPTS, INCOME STATEMENT AND NOTES TO FINANCIAL STATEMENTS (75 marks; 45 minutes) CONCEPTS 3.1 3.2 Choose the correct word from those given in brackets. Write only the word next to the question number (3.1.1-3.1.4) in the ANSWER BOOK. 3.1.1. Inthe event of bankruptcy, the shareholders are not responsible for the debts of the business. This is because of (limited/unlimited) liability. 3.4.2 In the financial statements, debtors will be shown as trade and other (equity/receivables/payables). 3.1.3 The portion of a loan that will have to be repaid within a year is a current (liability/asset). 3.1.4 The (internal/external) auditor is employed by the company to set up and audit internal control processes. PIXIE LTD The information below was extracted from the accounting records of Pixie Ltd on 28 February 2018. REQUIRED: 3.2.1 3.2.2 Prepare the following notes to the Financial Statements for the year ended 28 February 2018: e Ordinary Share Capital e Retained Income Complete the Income statement for the year ended 28 February 2018. Page 8 of 122

INFORMATION: A. Balances The following balances for 2018 were extracted from the accounting records before the adjustments and additional information were taken into account: 28 February2018 | 28 February2017 Balance Sheet accounts section Ordinary share capital R? R1 275 000 Retained income ? 28 900 Mortgage loan: Oberon Bank ? 76 500 Debtors control 98 750 118 500 Provision for bad debts 0 3 555 SARS (Income tax) (Cr.) 27 850 (Dr.) 19 500 Shareholders for dividends ? 68 000 Nominal accounts section Sales 1 800 000 Cost of sales a Rent Income ? Consumable stores 2 900 Advertising 62 545 Audit fees 5720 Director's fees 67 350 Interest on loan ct Salaries and wages 128 450 Sundry expenses 2 Interest income 13 180 Bad debts 2900 Information from the Cash Flow Statement for the year ended 28 February 2018: R Depreciation 78 350 Income tax paid 64 650 Proceeds from the issue of new shares 220 000 Payment for shares repurchased 120 000 Page 9 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT c. Share capital and dividends e Pixie Ltd has an authorised share capital of 400 000 shares. e 300 000 shares were in issue on 1 March 2017. e 20000 shares were repurchased on 1 October 2017 from the estate of a deceased shareholder. e 40.000 new shares were issued on 28 February 2018. These shareholders do not qualify for final dividends. e — Aninterim dividend of 10 cents per share was paid on 28 August 2017. ¢ A final dividend of 20 cents per share was declared on 28 February 2018. D. Adjustments and additional information that need to be taken into account: ie The company aims to achieve a mark-up percentage on cost of 90%, but this year has only achieved an actual mark-up of 80%. 7, Pixie Ltd has rented out their unused storeroom since 1 March 2014. The rent at the beginning of the current financial year (1 March 2017) was R1 750 per month. The lease agreement stipulates an annual increase of 10% effective from 1 January each year. The rent for March 2018 has already been received. 3, Consumable stores used for the financial year amounted to R2 750. 4. Merchandise to the value of R38 000 was damaged because of a pipe burst during February 2018. After the claim, Elvis Insurance agreed to pay R34 000 in March 2018. 5. The inventory records reflect a trading stock deficit of R23 400 on 28 February 2018. 6. The loan statement received from West Bank reflects the following: e Balance on 1 March 2017 R76 500 e Repayments during the year, including interest 12 500 e Balance on 28 February 2018 73 180 Interest on loan is capitalised and has not been recorded yet. if The employer's contribution of R2 700 to the Rosa Medical Aid was omitted from the Salary Journal. The amount will be paid in March 2018. Contributions are recorded in the Salaries and wages account. 8. If the annual sales exceed R1 500 000, the two directors are each rewarded a bonus of 10% of the amount exceeding R1 500 000. This must still be recorded. 9. Pixie Ltd paid a 40% deposit on their audit fees for the year. The outstanding balance will be settled on 7 June 2018. 10. — Included in the advertising cost for the year is a 12 month campaign that was launched on 4 December 2017 on a local billboard at a cost of R43 200. Advertisements will appear every second month starting in December 2017. 11. | Adebtor, C Mawela, with an outstanding balance of R600, has left the country. His account must be written off as irrecoverable. 12. The provision for bad debts must be decreased by R360. 13. Operating profit on sales was 22% for the year. 14. Sundry expenses is the missing figure in the Income Statement. Page 10 of 122

ACTIVITY A3 (Mpumalanga Sept 2018 Q3) 3.1 3.2 3.2.1 CONCEPTS 3.4.1 3.1.2 3.1.3 3.14 PIXIE LTD NOTES TO THE FINANCIAL STATEMENTS ON 28 FEBRUARY 2018 ORDINARY SHARE CAPITAL AUTHORISED 400 000 ordinary shares ISSUED 300 000 | Ordinary shares in issue on 1 March 2017 1275 000 Ordinary shares in issue on 28 February 2018 RETAINED INCOME Balance on 4 March 2017 28 900 Dividends on ordinary shares Balance on 28 February 2018 10 Page 11 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 3.2.2 PIXIE LTD INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2018 Sales 4 800 000 Cost of sales Gross profit Other operating income Gross operating income Operating expenses Operating profit Net profit before interest expense Net profit before tax Net profit after tax B. BALANCE SHEET ACTIVITY B1 (DBE REVISION DOC. 2014 - Q2) 1. CALCULATION OF FINAL PROFIT, BALANCE SHEET AND NOTES The financial year of KAYZEE Limited ends on 30 June. The accountant of KAYZEE Limited calculated the net profit before tax as R1 234 335. However, it was discovered that not all the adjustments were made before calculating the net profit before tax. REQUIRED: 1.1. Calculate the correct net profit after tax for the year ended 30 June 2018. (19) 1.2 Prepare the following notes to the Balance Sheet (Statement of Financial Position): (a) Ordinary Share Capital (11) (b) Retained Income (13) (c) Trade and other receivables (8) 1.3 Complete the Balance Sheet (Statement of Financial Position) on 30 June 2018. Where notes are not required, (40) Page 12 of 122

A: 2 calculations must be shown in brackets for part marks to be given. INFORMATION: The following extract was taken from the list of balances which appeared in the ledger of KAYZEE Limited on 30 June 2018, before any additional adjustments and information were taken into account: Ordinary Share Capital ? Retained Income (1 July 2017) R465 000 Land and Building 4 684 000 Equipment 525 000 Accumulated depreciation on equipment: 215 000 Fixed Asset: ZAR Bank 480 000 Trading stock 198 500 Debtors’ control 54 000 Provision for bad debts 2475 Bank (Dr) 1025 000 Cash float 4000 Consumable stores on hand 1100 Income Accrued 31 660 SARS: Income Tax (Dr) 364 200 Creditors control 87 150 Loan: JSE Bank @ 15% p.a. (1 June 2018) 420 000 Profit and loss (net profit before tax) 1 234 335 The following adjustments and additional information were not taken into account: (a) According to the profit and loss account the insurance amounted to R40 500. This amount included an annual premium of R10 800 which was paid on 1 January 2018. Trading stock, R42 000 was damaged in a fire which broke out in the storeroom. The insurance company accepted the claim and will cover 75% of the claim. The amount will be received during July 2018. This was recorded. Write off the balance. The provision for bad debts must be adjusted to 4% of the outstanding debtors. In the profit and loss account, the amount for Rent income amounted to R136 950. The accountant did not take into account that the tenant paid the rent for July 2018 in advance. The rent had increased by R1 050 per month on 1 February 2018. Interest on the loan for the last month is still outstanding. Interest is capitalized. The business intends to reduce the loan by R60 000 in the next financial year. Profit on sale of an asset sold during the year, R21 750, was recorded as a loss in the profit and loss account. Income tax for the year amounted to R371 700. The bank reconciliation statement on 30 June 2018, showed an outstanding cheque of R15 000, dated 31 August 2018. This cheque was issued to a creditor. Share Capital: ¢ On 1 July 2017 the ordinary share capital amounted to R3 600 000 © 60% of the authorised share capital of 500 000 shares were issued. ¢ On 31 July 2017 the directors issued an additional 100 000 shares at R16. ¢ On 10 January 2018 the directors decided to buy back 70 000 shares from the estate of a deceased shareholder at R15 per share. This transaction was completed successfully, but no entry has been made as yet. Dividends: On 1 December 2017 an interim dividend of 75 cents per share was declared and paid. A final dividend of 120 cents per share was declared on 30 June 2018. Page 13 of 122

KZN ACCOUNTING GRADE 12 ACTIVITY B1 - CALCULATION OF FINAL PROFIT, BALANCE SHEET AND NOTES 14 Correct net profit after tax for the year ended 30 June 2014 2020 MIP DOCUMENT ‘Incorrect Net Profit before Tax 1234 335 | Correct Net Profit before tax Income Tax | Net Profit after Tax 1.2 (a) Ordinary Share Capital 1.3 Authorised: | 500 000 ordinary shares Issued: shares on 30 June 2017@ shares issued @ shares repurchased @ shares on 30 June 2018 (b) Retained Income Balance at end of the previous year 465 000 Net profit after tax for the year 885 000 Repurchase of ordinary shares @ Dividends on ordinary shares Paid Recommended Balance at end of current year (c) Trade and other receivables Trade debtors | Provision for bad debts Net Trade Debtors SARS (Income Tax) Expenses Prepaid Income Accrued Page 14 of 122

NIN AUUUUIN HINO GRKAUE 12 2U2U MIP DOCUMENT 1.3 BALANCE SHEET OF KAYZEE LIMITED AT 30 JUNE 2018 ASSETS Note R NON-CURRENT ASSETS Fixed Assets 3 Financial Assets CURRENT ASSETS Inventories 4 Trade and other Receivables 5 Cash and Cash Equivalent 6 TOTAL ASSETS EQUITY AND LIABILITIES SHAREHOLDERS EQUITY Ordinary Share Capital vd Retained Income 8 NON-CURRENT LIABILITIES Loan CURRENT LIABILITIES Trade and other Payable 9 Bank Overdraft Current Portion of Loan TOTAL EQUITY AND LIABILITIES Activity B2 (Mpumalanga Sept 2019 Q3) FIXED ASSETS AND BALANCE SHEET (60 marks; 35 minutes) 21 2.2 CONCEPTS Choose the correct word(s) from those given in brackets. Write only the word(s) next to the question number (2.1.1-2.1.3) in the ANSWER BOOK. 2.1.1 (Directors/internal auditors) are appointed by the shareholders to manage the company. 2.1.2 (Liquidity/Solvency) is the ability of the business to pay off their immediate debts. ( 2.1.3 (GAAP/IFRS) makes that financial statements across the world is comparable and consistent. (3) (3x1) COOPER LTD You are provided with information for the financial year ended 30 June 2019. REQUIRED: 2.2.1 __ Refer to Information B. Calculate the missing amounts denoted by (a) to (c) in The Fixed Asset Note for vehicles. (13) 2.2.2 Complete the Balance Sheet (Statement of Financial Position) on 30 June 2019. Show ALL workings. (36) Page 15 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT INFORMATION: A. Extract from the books on 30 June 2019: Balance sheet accounts section R Ordinary share capital 3 746 500 Retained income ? Mortgage loan: Gaga Bank 752 000 Fixed assets at carrying value (balancing figure) zt Trading stock 450 000 Debtors control ? Provision for bad debts 17 200 Bank (favourable) 510 640 Petty cash 2 400 Fixed deposit: Shallow Bank (5,5% p.a.) 650 000 SARS (Income tax) 446 500 Creditors control 661 600 Nominal accounts section Rent income 176 880 Directors’ fees 518 000 Dividends on ordinary shares (interim) 404 800 B. Extract from the Note for Fixed assets Carrying value - Beginning (a) Cost 285 000 Accumulated depreciation (91 200) Movements Additions at cost 180 000 Disposals at carrying value (b) Depreciation (c) Carrying value - End Cost 2 Accumulated depreciation 5 Page 16 of 122

ene ee red MI Te oud WHIT YVUUUIVICINE Additional information in respect of fixed assets: ¢ Fixed assets consist of Land and buildings, Vehicles and Equipment. ¢ On 1 July 2018 Cooper Ltd had the following vehicles: Two delivery vehicles purchased on 1 October 2016 at R142 500 each. ¢ Depreciation on vehicles is calculated at 20% per annum on the diminishing balance method. * One of the vehicles was written off in an accident on 31 March 2019. The insurance company, BST Insure, agreed to pay out R79 800 on 31 July 2019. ¢ — Cooper Ltd replaced the delivery vehicle written off with a new vehicle purchased on 1 June 2019 for R180 000. This was correctly recorded. Share capital and dividends © 80% of the 1 000 000 authorised shares were in issue on 30 June 2019. ¢ The directors declared a final dividend of 75 cents per share on 30 June 2019. Trading stock and consumable stores on hand e An invoice issued to a debtor has not been recorded in full. Obsolete goods were sold for R4 000 which is 20% below cost. The selling price was recorded correctly but not the cost price. ¢ Consumable stores on hand amounts to 15 300 on 30 June 2019. Provision for bad debts has already been adjusted to 4% of the debtors of 2019. Loan from Gaga Bank R300 000 of the loan will be repaid during the next financial year. The following adjustments have not been taken into account: ¢ The tenant has paid rent until 31 July 2019. The rent was increased by R1 320 from 1 April 2019. ¢ — The two directors earn the same monthly fees. Two month's fees are still outstanding to both the directors. After the actual tax was calculated on the corrected net profit for the year, it was found that the provisional tax paid was R23 500 less than the actual tax. The NAV per share on 30 June 2019 amounts to 636 cents per share after all adjustments and information were taken into account. Activity B2 (Mpumalanga Sept 2019 Q3) 2.1 CONCEPTS 244 24.2 2.1.3 3 2.2.1 _ FIXED ASSETS (a) (b) Cc, (c) © Page 17 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.2.2 BALANCE SHEET ON 30 JUNE 2019 ASSETS NON-CURRENT ASSETS 5777 280 Fixed assets 5 127 280 Financial assets: Fixed deposit 650 000 CURRENT ASSETS TOTAL ASSETS EQUITY AND LIABILITIES ORDINARY SHAREHOLDERS’ EQUITY Ordinary share capital 3 746 500 NON-CURRENT LIABILITIES CURRENT LIABILITIES Trade and other payables TOTAL EQUITY AND LIABILITIES 36 Page 18 of 122

CONCEPTS AND BALANCE SHEET (55 marks; 35 minutes) 34 CONCEPTS Choose an explanation from COLUMN B that matches a concept in COLUMN A. Write only the letter (A - D) next to the question number (3.1.1 - 3.1.4) in the ANSWER BOOK. COLUMN A COLUMN B 3.4.4 Finance cost A | Consumable stores not used at the end of the financial year 3.1.2 Dividends B | Interest on bank overdraft on the Income Statement 3.13, | Inventory C | A financial indicator which reflects liquidity 3.1.4 Current liability D | Profits distributed to shareholders in proportion to the number of shares held E | Debts payable over a short period of time 3.2 PHAMBILI LIMITED The information below relates to Phambili Ltd. The financial year ended on 28 February 2019. REQUIRED: 3.2.1. Prepare the following notes for the financial year ended 28 February 2019. (a) Ordinary share capital (b) Retained income 3.2.2. Complete the Balance Sheet (Statement of Financial Position) on 28 February 2019. Where notes are not required, show ALL workings. (29) INFORMATION: A Balances extracted from the accounting records on 28 February 2019 (unless otherwise stated). R Ordinary share capital (1 March 2018) 1 220 000 Retained income (1 March 2018) 355 500 Loan from VDS Bank 1376 000 Fixed assets at carrying value 1 499 500 Fixed deposit: Sandton Bank 2? Trading stock 480 000 Creditors’ control 177 500 Debtors’ control 400 000 Packing material on hand 16 000 Accrued expenses (expenses payable) 10 000 Income received in advance (deferred income) 11 500 Bank (favourable) 1.010 100 Provision for bad debts (1 March 2018) 6 200 SARS: Income tax (provisional tax payments) 1 180 000 Ordinary share dividends 350 000 Page 19 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT B Share capital: ¢ Phambili Ltd. is authorised to sell 6 000 000 ordinary shares. e 500 000 shares were in issue on 1 March 2018. e 900 000 new shares were issued on 1 August 2018 at R3,00 per share. This has been properly recorded. e 150 000 shares were repurchased on 10 January 2019 from a disgruntled shareholder for 75 cents above the average share price. This transaction was not recorded. This shareholder does not qualify for final dividends. C Dividends: The Directors declared a final dividend of 50 cents per share on 28 February 2019. D Provision for bad debts: The provision for bad debts must be decreased to R5 400. E Loan: e The loan was received on 1 September 2016. e This loan is to be repaid over 6 years in equal monthly instalments with effect from 1 October 2016. All payments have been made. e Interest is not capitalised and has been paid in full. F Taxation: After taking into account all relevant information, taxation for the year was accurately calculated to be R1 148 000 at 28%. B3 (Gauteng Sept 2019 Q3) ol CONCEPTS 3.4.1 3.1.2 3.1.3 3.1.4 4 3.2 PHAMBILI LIMITED 3.2.1 Prepare the following notes for the financial year ended 28 February 2019. (a) Ordinary share capital 1 Page 20 of 122

eee Vie ie 42UeU WI DU UUIVILINE (b) Retained income Balance at the beginning of the year 355 500 Ordinary share dividends Balance at the end of the year rm Page 21 of 122

KZN ACCOUNTING GRADE 12 3.2.2 2020 MIP DOCUMENT Complete the Balance Sheet (Statement _—of 28 February 2019. Where notes are not required, show ALL workings. BALANCE SHEET ON 28 FEBRUARY 2019 Financial Position) on ASSETS NON-CURRENT ASSETS CURRENT ASSETS 1 400 200 Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES ORDINARY SHAREHOLDERS’ EQUITY Ordinary share capital NON-CURRENT LIABILITIES Loan CURRENT LIABILITIES 1 208 000 Trade and other payables TOTAL EQUITY AND LIABILITIES 29 Page 22 of 122

Activity B4 (Eastern Cape Sept 2019 Q 4) QUESTION 4: FINANCIAL STATEMENTS (60 marks; 35 minutes) 41 42 Choose the correct description in COLUMN B to match the concept in COLUMN A. Write only the letters (A-E) next to the question numbers (4.1.1 to 4.1.5) in the ANSWER BOOK. COLUMN A COLUMN B 4.44 SAICA A Guidelines for preparation of financial statements to ensure consistency. 4.4.2 CIPC B Appointed by the board of directors 4.13 IFRS c Maintaining the integrity of the profession and institute disciplinary action against those who breach standards. 414 Internal auditor D Expresses an unbiased opinion on the financial statements of the company. 415 External auditor E Maintaining records and control of new/existing companies. CDJ LTD. The information relates to a public company with an authorised share capital of 1500 000 ordinary shares, the financial year-end 28 February 2019. REQUIRED: 4.21 4.2.2 4.2.3 Complete the Retained Income Note to the Statement of Financial Position (Balance Sheet). Complete the Statement of Financial Position (Balance Sheet) on 28 February 2019. At the annual general meeting, the board of directors proposed the following TWO programmes: Program 4 R1 500 000 be allocated for staff training and development initiatives during the next two financial years. Program 2 R1 000 000 to be spent on the upliftment of the computer facilities at three local schools. Vic Pienaar, a young shareholder, was not pleased about this proposal. He feels that greater dividends should be given to shareholders. e Explain why the directors included these proposals in their director's report. Provide TWO points. ¢ Provide a different benefit of each of the programmes proposed, to the company. Page 23 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT INFORMATION: A. Balances/Totals on 28 February 2019. i : Debit Credit Ordinary share capital (1 000 000 shares) R4 200 000 Retained income (1 March 2018) “| 468 000 | Loan: Central Bank 352 400 | Fixed assets at cost ; ~—_-R4.949.040 Accumulated depreciation 201 520 Trading stock 255 340 Debtors Control : 235 000 Provision for bad debts {4000 | Fixed deposit: King Bank ? Bank 381 300 Creditors’ Control 22 000 SARS (income tax) : 340 000 | Insurance : 23 520 Rent Income 34 600 B. Additional information: (i) Share Capital: 200000 | Shares were in use at the beginning of the current financial year. 600000 | Additional shares were issued on 1 April 2018 at R3,90 per share. 200000 | Additional shares were issued on 31 October 2018 at R5 per share. 50 000 On 28 February 2019, shares were bought back from the estate of a diseased shareholder for R237 500. This transaction was not yet recorded. They qualify for final dividends. (ii) Loan agreement with Central Bank: Opening balance of loan on 1 March 2018. R550 000 Repayment during the year, including interest 197 600 Closing balance 420 000 e The interest on loan is capitalised. e R150 000 of the loan will be paid in the next financial year. (iii) Dividends: e Aninterim dividend of 30 cents per share was paid on 31 August 2018. e A final dividend of 22 cents per share was declared on 28 February 2019 and must still be brought into account. (iv) The following adjustments must be taken into consideration for the drafting of the Balance Sheet only: ¢ — The rent for February 2019 was not received yet. The space was rented out since 1 December 2018. e Anadditional insurance policy on granite saws was taken out on 1 October 2018. The annual premium of R13 440 was paid. Consumable stores on hand R1 580. A debtor owing R35 000 was declared insolvent. No entry was made. The provision for bad debt must be adjusted to R6 000. Audit fees of R9 000 are still outstanding on 28 February 2019. Page 24 of 122

(v) Net profit and income tax: Vw e eveu win WUUUIVILINE Income tax for the year was calculated at 30% Net profit before tax is R1 085 600 after all adjustments above were taken into account. Activity B4 (Eastern Cape Sept 2019 Q 4) 44 411 4.1.2 4.1.3 414 4.1.5 4.2.1 RETAINED INCOME Balance at the beginning of the year Balance at the end of the year Page 25 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 4.2.2 STATEMENT OF FINANCIAL POSITION ON 28 FEBRUARY 2019 : | ASSETS Non-current assets Current assets TOTAL ASSETS EQUITY AND LIABILITIES Shareholder’s equity | Ordinary share capital Non-current liabilities | Current liabilities TOTAL EQUITY AND LIABILITIES Page 26 of 122

peg ee eeeeran nae vive 4U2U WIT DUUUWIENT 4.2.3 At the annual general meeting, the board of directors proposed the following TWO programmes: Explain why the directors included these proposals in their directors’ report. Provide TWO points. Provide a different benefit of each of the programmes proposed, to the company. 4 Programme 1 Programme 2 Page 27 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY B5 (North West Sept 2019 Q 4) BALANCE SHEET AND GAAP PRINCIPLES (85 marks; 55 minutes) 5.1 5.2 GAAP PRINCIPLES Choose a GAAP principle in COLUMN B that matches the description in COLUMN A. Write only the letters (A- F) next to the question numbers (4.1.1 to 4.1.5) in the ANSWER BOOK. COLUMN A COLUMN B Onl The original cost of the assets of a business need tobe | A prudence recorded. 5.1.2 All significant information needs to be clearly shown in B matching the financial statements of a business. ees) Income and expenses must be recorded in the correct c business entity financial period. 5.1.4 Financial Statements are prepared with the assumption | D materiality that the business does not expect to close down in the near future. E historical cost 5.1.5 The owner and business are seen as two separate F going concern entities for accounting purposes. SAHARA LIMITED The information provided relates to Sahara Ltd for the year ended 30 June 2019. Sahara Ltd has an authorised share capital of 1 000 000 ordinary shares. REQUIRED: 5.2.1 Prepare the following notes to the Balance Sheet: (a) Ordinary share capital (10) (b) Retained income 5.2.2 Complete the Balance Sheet (Statement of financial position) on 30 June 2019. Show calculations. (46) INFORMATION: A. Ordinary share capital: © 700 000 ordinary shares were issued on 1 July 2018 to the total value of R2 100 000. e The company decided to buy back 30 000 shares from an unsatisfied shareholder on 1 October 2018 at RQ per share. An electronic transfer to the shareholder was done on the same day. These shares do not qualify for any dividends thereafter. ¢ A further 100 000 new ordinary shares were issued on 1 March 2019 at R7 per share. B. Dividends: e Aninterim dividend of 20 cent per share was paid on 31 December 2018. e A final dividend of 35 cent per share was declared on 30 June 2019 and will be paid in August 2019. ( Net profit and income tax: e The correct net profit before income tax for the year ended on 30 June 2019 was calculated at R1 250 000. This is after all the adjustments reflected below were brought into account. e Income tax is calculated at 28% of net profit. Page 28 of 122

MINN te "Balances in the books on 30 June 2019: R Retained income 799 660 Creditors’ Control 720 000 Debtors’ Control _ 530 000 | | Creditors for salaries 35 500 | | Accrued income _24 000 Cash in the bank : 66 000 Fixed deposit wa] SARS: Income tax (provisional) 400 000 Fixed deposit: e A fixed deposit of R175 000 matures on 31 January 2020. Loan: Quality Bank: 42U2U WIT DUOUUNWICIN I Balance at beginning of financial year 300 000 Interest capitalised during the year 8 000 Repayments, including interest, during the year 56 000 ¢ Capital portion of loan to be paid in the following financial year remains the same as the current year. Fixed assets: e Land and buildings cost price on 1 July 2018 is R1 275 000. The following invoice was not recorded: Improvement to land and buildings: R300 000 Repairs to land and buildings: R120 000 ¢ The carrying value of vehicles on 30 June 2019 was R720 000. ¢ All equipment were purchased on 1 January 2016 at R600 000. Depreciation is calculated at 15% per annum on the cost-price method. Rent income: e — Rent income received in advance for July and August 2019 amounted to R17 000. Financial indicators on 30 June 2019: ¢ The current ratio is 1,5: 1 ACTIVITY B5 (North West Sept 2019 Q 4) 5.1 5.2.1 Choose a GAAP principle in COLUMN B that matches the description in COLUMN A. 5.1.4 5.1.2 5.1.3 5.1.4 5.1.5 (a) ORDINARY SHARE CAPITAL Authorised shares: 1000 000 ordinary shares Issued share capital: Ordinary shares on 1 July 2018 Ordinary shares on 30 June 2019 (b) RETAINED INCOME Page 29 of 122

KZN ACCOUNTING GRADE 12 5.2.2 Balance on 1 July 2018 Net profit after income tax Ordinary share dividends Balance on 30 June 2019 2020 MIP DOCUMENT 13 SAHARA LTD BALANCE STATEMENT ON 30 JUNE 2019 ASSETS NON-CURRENT ASSETS Fixed Assets CURRENT ASSETS Inventory Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES SHAREHOLDERS EQUITY NON-CURRENT LIABILITIES Loan: Quality Bank CURRENT LIABILITIES Trade and other payables Shareholders for dividends TOTAL EQUITY AND LIABILITIES 46 C. CASH FLOW STATEMENT & D. RATIO ANALYSIS AND INTERPRETATION ACTIVITY C1 ( Limpopo Sept 2019 Q4) (75 marks, 45 minutes) Page 30 of 122

14 VINAUL 16 4U4U WIT DUUUIWICINE LEWIS LTD. You are provided with extracts from the financial records of Lewis Ltd. REQUIRED 1.1.1 Calculate the total dividends paid that will be reflected on the Cash Flow Statement on 30 (4) June 2019. 1.1.2 Calculate the balance on the SARS (Income Tax) account on 1 July 2018. (5) 1.1.3 Movements in fixed assets: (a) Calculate the amount of cash received for the equipment sold during the year. (2) (b) Calculate the cost of the new assets purchased during the financial year. (5) 1.1.4 Complete the “Cash flow from Financing Activities” section of the Cash Flow Statement (8) on 30 June 2019. Calculate the closing balance of Retained Income on 30 June 2019. (7) On the AGM of Lewis Ltd. there was interest shown in purchasing additional machinery and equipment. The company will have to obtain a loan of R2 million at an interest rate of 14%. (a) Calculate the Return on total capital employed (ROTCE). (9) (b) | Show how the proposed additional loan will impact on the debt/equity ratio. (4) Provide a calculation. INFORMATION A. Extract from the Income Statement for the year ended 30 June 2019: Interest on loan R140 000 Depreciation R136 000 Net profit before tax R1 144 000 Income tax R376 000 B. Extract from the Balance Sheet on: 30 June 2019 30 June 2018 Fixed assets 6 480 000 5 324 000 Land and Buildings 4 900 000 4 100 000 Equipment (carrying value) 1 580 000 4 224 000 Shareholder’s equity 5 782 000 5 470 000 Share capital de 4 500 000 Retained income ts 970 000 Long term loan 950 000 1 038 000 Cc. Extract from the notes to the financial statements on 30 June 2019: Trade and other receivables 30 June 2019 30 June 2018 SARS (Income tax) 23 900 0 Trade and other payables 30 June 2019 30 June 2018 SARS (Income tax) 0 2? Shareholders for dividends R108 000 R143 000 D. Fixed assets: ¢ New equipment was bought during the year and an additional warehouse was built. ¢ Old equipment was sold at carrying value on 1 February 2019: o Cost price R160 000 o Accumulated depreciation on date of sale R54 500 o Asset sold for cash Re * No Land and Buildings were sold during the year. E. Shares: ¢ On 1 July 2018 the company had an issued share capital of 937 500 shares. ¢ On 1 July 2018 the company repurchased 50 000 shares at 60c above the average Page 31 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT share price. The average price per share at that stage was R4,80. ¢ During the financial year new shares were issued. F. Dividends and Tax: ¢ Dividends paid and declared during the year, R333 000. e Tax paid during the year, R532 000. 1.2 TAYLOR LTD. The following information pertains to the financial records of Taylor Ltd. for the year ended 28 February 2019. REQUIRED1 1.2.1 Calculate the following financial indicators on 28 February 2019: (a) Net Asset Value per share (NAV). (3) (b) % Return on average Shareholder’s Equity (ROSHE). (5) 1.2.2. Comment on the liquidity of the company. Quote THREE financial indicators (with figures and (8) trends) to support your answer. 1.2.3 Tricia Harper is a shareholder and she is unsure if she should sell her shares or not. She asks (3) for your advice. Provide figures in your answer. 1.2.4 Refer to Information C. Calculate the total dividends Charlie Williams received during the (6) year. 1.2.5 The dividend pay-out policy has changed from the previous year. Provide calculations to show (6) the change and provide ONE possible reason for the change. INFORMATION A. — Extract from the Income Statement for the year ended 28 February 2019: Interest on loan (14%) 87 000 Net profit before tax 635 000 Net profit after tax 457 200 B. Other financial information and indicators for the past two years: 2018 Number of issued shares on 28 Feb 2018 700.000 Number of issued shares on 28 Feb 2019 762 000 Shareholder’s equity R1 690 000 R1 510 000 Current ratio 4431 2a Acid test ratio 16:1 14:1 Stock turnover rate 10 times 6 times Debtors’ collection period 30 days 30 days Creditor's payment period 30 days 60 days Debt/Equity ratio 04:1 03:1 % return on shareholder's equity 2, 22,3% Net asset value per share (NAV) 2 216c Dividends per share (DPS) 45c 15c Earnings per share (EPS) 60c 55c Market price per share 252¢ 236c C. Details on Charlie Williams’ dividends: e = On1 March 2018 Charlie Williams owned 10 400 shares in Taylor Ltd. e He bought 10% of the new shares issued during the year. ¢ The interim dividend paid during the year was 20c per share (the new shares did not qualify for the interim dividend). C1 Limpopo Sept 2019 Q4) 75 CASH FLOW STATEMENT, RATIO ANALYSIS 14 LEWIS LTD. Page 32 of 122

4.1.1 Calculate the total dividends paid that will be reflected on the Cash Flow Statement on 30 June 2019. 1.1.2 Calculate the balance on the SARS (Income Tax) account on 1 July 2018. | 1.1.3 Movements in fixed assets: (a) Calculate the amount of cash received for the equipment sold during the year. (b) Calculate the cost of the new assets purchased during the financial year. 1.1.4 Complete the “Cash flow from Financing Activities” section of the Cash Flow Statement on 30 June 2019. Cash flow from financing activities ie (211 000) i 1.1.5 Calculate the closing balance of Retained Income as on 30 June 2019. 1.1.6 On the AGM of Lewis Ltd. there was interest shown in purchasing additional machinery and equipment. The company will have to obtain a loan of R2 million at an interest rate of 14%, Page 33 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT (a) Calculate the Return on total capital employed (ROTCE). (b) Show how the proposed additional loan will impact on the debt/equity ratio. Provide a calculation. 1.2 TAYLOR LTD. 1.2.1 Calculate the following financial indicators on 28 February 2019: (a) Net Asset Value per share (b) % Return on average Shareholder’s Equity (ROSHE) 1.2.2 Comment on the liquidity of the company. Quote THREE financial indicators (with figures and trends) to support your answer. 4.2.3 Tricia Harper is a shareholder and she is unsure if she should sell her shares or not. She asks for your advice. Provide figures in your answer. 1.2.4 Refer to Information C. Calculate the total dividends Charlie Williams received during the year. Page 34 of 122

weve nue oe 4ULU WI DUUUWILINE 1.2.5 The dividend pay-out policy has changed from the previous year. Provide calculations to show the change and provide ONE possible reason for the change. ACTIVITY C2 (Free State Sept 2019, Q4) CASH FLOW STATEMENT AND INTERPRETATION (70 marks; 50 minutes) 21 2.2 Indicate whether the following statements are TRUE or FALSE. Write only ‘true’ or ‘false’ next to the question number (2.1.1-2.1.4) in the ANSWER BOOK. 2.1.1 Cash flow statement reflects the profit/loss of the company. 242 Net current assets are also referred to as net working capital. 210 Accumulated depreciation is regarded as a negative asset. 2.1.4 Liquidity refers to the ability of the company to settle its immediate debts. PHILA LTD You are provided with information relating to Phila Ltd for the financial year ended 31 March 2019. The company is registered with an authorised share capital of 2 000 000 ordinary shares. REQUIRED: 2.2.1 Calculate the following amounts for the Cash Flow Statement: . Income tax paid e Dividends paid (14) ° Cost of new delivery vehicles purchased 2.2.2 Prepare the sections for the Cash Flow Statement on 31 March 2019. ° Cash Effects of Financing Activities (9) . Net change in Cash and Cash equivalents (4) 2.2.3 Calculate the following financial indicators on 31 March 2019. . Debt-equity ratio (3) . Net asset value per share (3) . % Return on average shareholders’ equity (4) 2.2.4 The management decided to change the mark-up % in the current financial year. Was this a good decision? Explain. Quote figures. 2.2.5 Comment on the management of expenses. Quote TWO relevant financial indicators to support your comment. (4) 2.2.6 Comment on the issue price of the new shares issued on 30 June 2018. Was this fair? Quote figures. (6) 2.2.7 Comment on the dividend pay-out policy of the company by comparing 2018 to 2019 and quote relevant figures. (6) 2.2.8 Comment on the degree of risk and gearing of the business. Quote TWO financial indicators with figures. (6) 2.2.9 How many shares will a shareholder, having 45% of the issued share capital, have to buy to gain control of the company? (4) INFORMATION: Information from the Income Statement for the financial year ended 31 March: Page 35 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2019 2018 Sales 8 300 000 6 650 000 | Cost of sales 5 187 500 3 800 000 | Gross Profit 3112 500 2 850 000 Net profit before taxation 1240 000 931 000 Net profit after taxation 892 800 651 700 Interest on loan 211 000 Depreciation 425 000 B Extract from the Balance Sheet on 31 March: 2019 2018 Fixed assets 10 152 700 7915 400 Fixed deposit: SSB BANK 250 000 400 000 Shareholders’ equity 9 209 000 6 458 200 Current assets (including stock) 794 500 681 300 Trading stock 430 000 198 000 Current liabilities 688 200 538 500 SARS (Income tax) 8 500 (Dr) 12 000 (Cr) Cash & cash equivalents 0 45 300 Bank overdraft 34 200 2.000 Loan from Zipho Bank 1 300 000 2 000 000 Shareholders for dividends 378 000 300 000 c Share Capital and dividends 1.000 000 | Ordinary shares on 1 April 2018 6 360 000 400 000 | Shares issued on 30 June 2018 @ R8,60 ? (120 000) | Shares repurchased on 30 March 2019 2 1 280 000 | Ordinary shares on 31 March 2019 8 960 000 . An amount of R168 000 above the average share price was paid to repurchase the shares on 30 March 2019. An interim dividend of 15 cents per share was paid on 30 September 2018. . A final dividend was declared on 31 March 2019. D Fixed Assets ° Old equipment valued at R389 500 was sold at carrying value. . Extensions to land and buildings costing R2 250 000 were completed during the financial year. . Additional delivery vehicles were also purchased. Page 36 of 122

E Financial indicators calculated on 31 March: 2019 2018 | Gross profit on cost of sales a 60% 75% | Gross profit on sales . 38% 43% Operating expenses on sales : 22% 23% Operating profit on sales - 16% 16% Market price per share on the JSE 728 cents 630 cents Net asset value per share ? 636 cents Earnings per share 69 cents 62 cents Dividends per share 41 cents 60 cents % return on shareholders’ equity ? 11% % return on total capital employed 15,3% 13% % interest rate on loans 13% 13% Debt/Equity ratio ? 03741 Current ratio 12:1 1,334 Acid-test ratio 0,5:1 0,9:1 Period for which stock is on hand 22 days 18 days Average debtors' collection period 44 days 47 days C2 (Free State Sept 2019, Q4) 21 2.2.1 2.14 2.1.2 2.1.3 2.1.4 Calculate the following for the Cash Flow Statement: Income tax paid Dividends paid Cost of new delivery vehicles purchased 14 Page 37 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.2.2 Cash effects of financing activities 9 Net change in Cash and Cash equivalents 4 2.2.3 Calculate the debt/equity ratio. 3 Calculate the net asset value per share. 3 Calculate the % return on average shareholders’ equity. 4 2.2.4 The management decided to change the mark-up % in the current financial year. Was this a good decision? Explain. Quote figures. 3 2.2.5 Comment on the management of expenses. Quote TWO relevant financial indicators to support your comment. 4 Page 38 of 122

Viwwe te 4U2U WIE DUUUIVICINE 2.2.6 Comment on the issue price of the new shares issued on 30 June 2018. Was this fair? Quote figures. 2.2.7 Comment on the pay-out policy of the company by comparing 2018 to 2019 and quote relevant figures. 2018 2019 2.2.8 Comment on the degree of risk and gearing of the business. Quote TWO financial indicators with figures. Comment: 2.2.9 How many shares will a shareholder, having 45% of the issued share capital, have to buy to gain control of the company? Page 39 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT C3 (Mpumalanga Sept 2018 Q4) CASH FLOW STATEMENT AND INTERPRETATION 3.1 TINAMERA (75 marks; 45 minutes) Ltd You are provided with information relating to Tinamera Ltd for the financial year ended 30 June 2018. REQUIRED: 3.1.1 Refer to Information C. Complete the Fixed/Tangible Asset Note for the year ended 30 June 2018. (15) a2 Complete the Cash Flow Statement Ltd for the year ended 30 June 2018. Some of the details and figures have been entered in the ANSWER BOOK. (25) 3.1.3 Calculate the following financial indicators on 30 June 2018: e Percentage operating profit on sales (3) e —Debt-equity ratio (3) e Net asset value per share (3) 3.14 Refer to Information E. The following statement was taken from the minutes of the annual general meeting: ‘We, the shareholders, would like to express our concern over the directors’ decision to repurchase 80 000 shares during this financial year.’ Provide a reason supported by information from the Cash Flow Statement as to why the (2) shareholders feel this way. ¢ After an investigation, it has come to light that Jim Jeffs, the shareholder from whom the company repurchased the shares, is a close friend of the financial director. (2) Briefly explain why you as a shareholder may find this to be a problem. INFORMATION: A. Information extracted from the Income Statement on 30 June 2018: Sales 5 611 000 Operating profit 1 410 550 Interest on loan 86 760 Net profit before tax 4 323 790 B. Figures extracted from the Balance sheet and notes on 30 June: 2018 2017 Shareholder’s equity R4 607 300 R3 808 100 Fixed assets ? 3 948 600 Mortgage loan 4 142 000 920 000 Inventories 759 600 589 500 Bank overdraft ? 91 000 Shareholders for dividends 30 000 60 000 Page 40 of 122

Cc. REE mUU UW UMAUT IZ 2U2ZU MIF DOCUMENT Fixed/Tangible assets Buildings Vehicles Equipment Carrying value - 1 July 2017 3 452 000 413 400 83 200 Cost 3 452 000 872 000 340 000 Accumulated depreciation 0 (458 600) (256 800) Movement Additions at cost ? 0 7 Disposals at carrying value 0 i 0 Depreciation 0 2 2 Carrying value - 30 June 2018 4 522 800 ? ? Cost 4 522 800 Accumulated depreciation 0 Additional information in respect of fixed assets: ¢ Anextension to the office block was undertaken during the year. The business had three vehicles at the beginning of the year. The following details appeared in the Fixed Asset Register on 1 July 2017: Vehicle 4 Vehicle 2 Vehicle 3 Cost 240 000 352 000 280 000 Accumulated depreciation (225 000) (70 400) (163 200) Carrying value 15 000 281 600 116 800 NOTE: Vehicle 1 is old and is reaching the end of its useful life. Vehicle 3 was sold at its carrying value of R102 800 during the year. ¢ — Equipment of R116 000 was purchased on 1 December 2017. No equipment was sold. e Depreciation policy: Vehicles: 20% on cost Equipment: 15% on carrying value Loan The company took out an additional loan on 30 June 2018. Repayments on the old loan, including interest totalled R164 760. Interest on loan is capitalised. Shares ¢ Jim Jeffs, a shareholder, is very concerned about the liquidity and profitability situation of the company and has decided to sell his shares. The directors repurchased all 80 000 ordinary shares from him at a price of R4,20 per share. The average issue price on this date was R3,05. ¢ No new shares were issued. e Number of shares in issue on 30 June 2018 was 750 000. Dividends Total dividends paid and declared for the financial year ended 30 June 2018 amounts to R170 000. Page 41 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 3.2 INTERPRETATION OFFINANCIAL INDICATORS Your friend, Phakamile, is a director in two companies. You are considering buying shares in one of the companies. He presents you with the financial indicators of the two companies. The companies are of similar size and they have issued the same number of shares. REQUIRED: Study the financial indicators given and answer the questions that follow. 3.2.1. Which company uses more loans? Explain whether this is a good idea or not. In each case, quote a (6) financial indicator to support your answer. 3.2.2 According to Phakamile the liquidity indicators of Thabiso Ltd are better than those of Lauren Ltd. Explain, quoting THREE financial indicators to support his opinion. (9) 3.2.3. Although the market price of the shares of Lauren Ltd is higher than those of Thabiso Ltd, Phakamile is of the opinion that Thabiso Ltd's shareholders are more satisfied with the market price of their shares. Explain, quoting financial indicators to support this opinion. (4) 3.2.4 In which company is Phakamile a major shareholder? Support your answer with a calculation. (3) FINANCIAL INDICATORS Thabiso Ltd Lauren Ltd Number of shares in issue 500 000 500 000 Phakamile’s shareholding 50 000 300 000 Market price per share on the JSE 630 cents 680 cents Net asset value per share §20 cents 790 cents Earnings per share 165 cents 813 cents Dividends per share 182 cents 552 cents % return on shareholders’ equity 11,8% 28,5% % return on total capital employed (before tax) 12,4% 30,3% % interest rate on loans 14% 14% Debt/Equity ratio 18:1 03:1 Current ratio aie | 5,8: 1 Acid-test ratio 0,8:1 Hie | Period for which enough stock is on hand 80 days 140 days Debtors’ average collection period 26 days 55 days Page 42 of 122

KZN ACCOUN I ING C3 (Mpumalanga Sept 2018 Q4) 3.1 3.1.4 3.1.2 3.1.3 TINAMERA LTD FIXED ASSET NOTE TO THE BALANCE SHEET ON 30 JUNE 2018 GRADE 12 2020 MIP DOCUMENT Land and Buildings Vehicles Equipment Carrying value - 1 July 2017 3 452 000 413 400 83 200 Cost 3 452 000 872 000 340 000 Accumulated depreciation 0 (458 600) (256 800) Movements Additions at cost Disposal at carrying value Depreciation Carrying value - 30 June 2018 4522 800 Cost 4522 800 Accumulated depreciation 0 15 TINAMERA LTD CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2018 CASH FLOW FROM OPERATING ACTIVITIES Cash generated from operations 1 295 760 Interest paid (86 760) Dividends paid Income tax paid (625 000) CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets CASH FLOW FROM FINANCING ACTIVITIES Proceeds of new loans Repayment of loan Net change in cash and cash equivalents Cash and cash equivalents beginning of year (91 000) Cash and cash equivalents at the end of year ] Calculate the percentage operating profit on sales as 25 Page 43 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 3 Calculate the debt-equity ratio 3 Calculate the net asset value per share 3 3.1.4 e Provide a reason supported by information from the Cash Flow Statement as to why the shareholders are concerned over the directors’ decision to repurchase 80 000 shares. e After an investigation, it has come to light that Jim Jeffs, the shareholder from whom the company repurchased the shares, is a close friend of the financial director. Explain briefly why you as a shareholder may find this to be a problem. : 4 3.2 INTERPRETATION OF FINANCIAL INDICATORS “3.2.1 Which company uses more loans? Quote a financial indicator to support your answer. Explain whether this is a good idea or not. Quote a financial indicator to support your answer. 6 3.2.2 According to Phakamile the liquidity indicators of Thabiso Ltd are better than those of Lauren Ltd. Explain, quoting THREE financial indicators to support his opinion. 9 Page 44 of 122

3.2.3 3.2.4 KZN AVLUUN LING GRAVE 12 2U2U MIF DOCUMEN | Although the market price of the shares of Lauren Ltd is higher than those of Thabiso Ltd, Phakamile is of the opinion that Thabiso Ltd’s shareholders are more satisfied with the market price of their shares. Explain, quoting financial indicators to support this opinion. In which company is Phakamile a major shareholder? Support your answer with a calculation. ACTIVITY C4 (Gauteng Sept 2019 Q4) FIXED ASSETS, CASH FLOW STATEMENT AND INTERPRETATION (70 marks; 45 minutes) The given information relates to Hadley Ltd. The company has an authorised share capital of 900 000 ordinary shares. The financial year ended on 28 February 2019. REQUIRED: 41 Refer to Information A, B and C. Calculate the missing figures indicated by (a) to (e) in the Fixed Asset Note below. 4.2 Prepare the Cash Flow Statement for the year ended 28 February 2019. (Where applicable show calcu figures in brackets to earn part marks). 43 Calculate the Debt-Equity ratio for 2019. (Round-off to TWO decimal points.) lations / 44 The directors decided to increase the loan during the current financial year. Explain TWO financial indicators to indicate why this was a good decision. Quote figures. 4.5 The board of directors is of the opinion that the shareholders should be happy with their percentage return and the market price of their shares. Quote and explain TWO financial indicators with figures to support thei opinion. 46 The Cash Flow Statement reflects some important decisions taken by the Directors. r Apart from the loans, identify TWO good decisions. Explain the effect of these decisions on the company. Quote figures. INFORMATION: A Extract from the Income Statement for the year ended 28 February 2019 R Depreciation ? Interest expense 208 800 Net profit before tax ? Income tax 713 250 Net profit after tax i B Extract from the Balance Sheet on 28 February Page 45 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2019 2018 Land and Buildings 5 800 000 6 800 000 Vehicles 2.700 000 a Equipment i 850 000 Accumulated depreciation on vehicles ? 960 000 Accumulated depreciation on equipment u 180 000 Financial Assets (Fixed Deposit) 2.000 000 2.000 000 Trade and other receivables 405 750 168 300 Trade debtors 378 675 144 600 Accrued income 27 075 0 SARS (Income tax) 0 23 700 Inventories 360 750 436 185 Cash and cash equivalents 2 841 250 1.429 465 Shareholders’ equity 11 000 250 10 200 000 Ordinary share capital 40 260 000 9 000 000 Retained income 740 250 1 200 000 Mortgage loan SS Bank 2 100 000 1 380.000 Trade and other payables a 763 950 Trade creditors 55 200 72 450 Income received in advance 19 350 15 000 SARS (Income tax) 31.950 0] Shareholders for dividends zu 676 500 Cc Fixed Asset Note Land and Vehicles Equipment Building Carrying value on 28 Feb 2018 6 800 000 840 000 (c) Cost 6 800 000 = (b) 850 000 Accumulated depreciation 0 (960 000) (180 000) Movements Additions at cost 900 000 400 000 Disposals (a) Wie (d) Depreciation (171 000) (e) Carrying value on 28 Feb 2019 5 800 000 Cost 5800000 | 2700000 | Accumulated depreciation | Land and Building e Part of the Land and Building was sold at carrying value during the financial year. Vehicles e Anew delivery van was bought on 1 November 2018. e No vehicles were sold during the financial year. Equipment ¢ Aprinter bought for R150 000 on 1 March 2016, was sold at carrying value on 31 August 2018. e Anew printer was purchased on 31 August 2018. ¢ Depreciation on equipment is written-off at 10% p.a. on the cost price. D The following is an extract from Note 1 to the Cash Flow Statement: Reconciliation between Net Profit before Tax and Cash Generated from Operations Page 46 of 122

AZIN ALLUUIN TING GRAVE 12 2UZU MiP DOUCUMEN | R Operating profit before changes in working capital 2 854 800 Cash effects of changes in working capital (198 615) E Share capital and Dividends e Authorised shares: 900 000 ¢ On 1 March 2018, there were 600 000 shares in issue. ¢ On 31 August 2018 an interim dividend of 243 cents per share was paid. ¢ On 1 November 2018, 40% of the unissued shares were issued for R1 800 000. ¢ On 28 February 2019, 5% of the issued shares were repurchased at R16 each. e A final dividend of 90 cents per share was recommended. All shares, including the shares repurchased, qualified for final dividends. F Income Tax e Tax is 30% of the net profit. G Financial indicators on 28 February: 2019 2018 Earnings per share 252 cents 110 cents % return on average shareholders’ equity (ROSHE) 15.7% 12,3% % return on average capital employed (ROTCE) 20,9% 21,3% Net asset value per share 1 608 cents 1.700 cents Debt-equity ratio u 0,13:1 The market price of shares on the JSE 1680 cents 1 560 cents Interest on alternative investments 75% 6,5% Interest on loans 12,0% 10,5% ACTIVITY C4 (Gauteng Sept 2019 Q4) 44 Calculate the missing figures indicated by (a) - (e) in the Fixed Asset Note. 17 Page 47 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT CALCULATIONS AMOUNT (b) (d) Page 48 of 122

REN WU Vine ie 4U4U WHE DUUUIILINE 4.2 CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019 CASH EFFECTS OF OPERATING ACTIVITIES Cash generated from operations Interest paid (208 800) Dividends paid Income Tax paid CASH EFFECTS FROM INVESTING ACTIVITIES CASH EFFECTS FROM FINANCING ACTIVITIES 30 Net change in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 4.3 | Calculate the Debt-Equity ratio for 2019. (Round-off to TWO decimal points.) 3 4.4 | The directors decided to increase the loan during the current financial year. Explain TWO financial indicators to indicate why this was a good decision. Quote figures. 8 Page 49 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 4.5 | The board of directors is of the opinion that the shareholders should be happy with their percentage return and the market price of their shares. Quote and explain TWO financial indicators with figures to support their opinion. 6 4.6 | The Cash Flow Statement reflects some important decisions taken by the Directors. Apart from the loans, identify TWO good decisions. Explain the effect of these decisions on the company. Quote figures. DECISION EFFECT ON COMPANY 6 a oo ———— —— C5 (Eastern Cape September 2019 Q5) CASH FLOW AND INTERPRETATION —_— (80 marks; 50 minutes) The following information relates to Frankfurt Ltd that distributes perfumes to retailers. The financial year ended on 31 August 2019. REQUIRED: 5.1 Calculate the following concerning the cash flow statement: orale The cash generated from operations. (15) 5.1.2 The cash flow from investing activities. (10) 5.1.3 The cash flow from financing activities. (7) 5.1.4 The net change in cash and cash equivalents. (5) Page 50 of 122

5.2 Calculate the following financial indicators for 2019: ¢ Acid test ratio (4) © Debt-equity ratio (4) e Net asset value per share (4) e Percentage return on total capital employed. (8) 5.3 It was a good decision for the directors to increase the loan. Explain and quote TWO financial indicators with figures to support the director's decision. (6) 5.4 One of the shareholders want to sell his shares at 550 cents per share. Explain why the business should not repurchase these shares. Quote TWO financial indicators (with figures) to support your opinion. (4) 5.5 Identify TWO major decisions taken by the directors, as evident from the Cash Flow Statement. Quote figures. Explain how these decisions would benefit the business in future. (8) 5.6 Lee Jenkins owns 20 000 shares in the company. She is not satisfied with the low dividends she obtained this year. ¢ Calculate the amount of money she received this year in the form of dividends. (2) e Explain to her why you think the directors changed the dividend pay-out policy this year. Quote figures. (3) INFORMATION: A. Extract from the Income Statement on 31 August 2019. Depreciation R950 000 Interest expense 144 150 Net profit before tax 1 230 000 Income tax ? Net profit after tax 861 000 B. Extract from the Balance Sheet on 31 August: Note 2019 2018 Fixed assests at carrying value R3 616 400 R2 300 000 Financial assets 300 000 712 500 Current assets 1231 050 1116 650 Inventories 903 900 1 044 700 Trade and other receivables See (iv) 257 150 70 950 Cash and cash equivalents 70 000 1000 Ordinary share capital 1932 000 2.000 000 Retained income 1413 800 1 156 000 Loan 1622 000 300 000 Bank overdraft 62 000 Trade and other payables See (v) 1 138 000 it C. Additional information: (i) Ordinary share capital: 1000 000 | Shares in issue at beginning of year R2 000 000 200 000 | Additional shares issued on 30/11/2018 520 000 280 000 | Shares repurchased on 31 May 2019 (588 000) 920 000 | Issued shares on 31 August 2019 1 932 000 (ii) Extract from Retained income: | Repurchase of shares (R266 000) | (iii) Fixed assets e Fixed assets were bought during the year for R? e — Fixed assets were sold during the year at book value, R225 000. Page 51 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT (iv) Trade and other receivables: 2019 2018 Net Trade debtors R208 150 R70 000 Prepaid expenses 0 950 SARS (Income tax) 49 000 (v) Trade and other payables: 2019 2018 Trade creditors R944 800 R860 700 Income received in advance 0 28 300 SARS (Income tax) 163 700 Shareholders for dividends 193 200 120 000 D. Financial indicators: 2019 2018 % Return on shareholder's equity ? 16,3% Earnings per share 80 cents 56 cents Dividends per share 33 cents 50 cents % Return on total capital employed ? 21,2% Interest rate on loan 15% 14% Net asset value per share (NAV) q 315,6 cents Debt-equity ratio ? 01:4 Market price per share 380 cent 360 cent Current ratio 1,6: 4 1,5:4 Acid-test ratio ? 0,4: 1 80 Page 52 of 122

KZN ALUUUN ING GRADE 1Z 2020 MiP DOCUMENT ACTIVITY C5 (Eastern Cape September 2019 Q5) 5.1.1 CASH GENERATED FROM OPERATIONS Net profit before tax Adjustments in respect of: Depreciation 950 000 Changes in working capital 15 5A.2 CASH FLOWS FROM INVESTING ACTIVITIES 10 5.1.3 : CASH FLOWS FROM FINANCING ACTIVITIES a 7 Page 53 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 5.1.4 NET CHANGE IN CASH AND CASH EQUIVALENTS USE ADDITIONAL PAPER TO ANSWER THE REMAINING QUESTIONS ACTIVITY C6 (NSC NOV 2017 - Q4) CASH FLOW STATEMENT AND INTERPRETATION 6.1 6.2 Choose a term to complete each of the following statements. Write only the term next to the question number (6.1.1-6.1.4) in the ANSWER BOOK. [ shareholder(s); external auditor(s); director(s); internal auditor(s) 6.1.1... are appointed by the shareholders to manage the company. 6.1.2 The... is employed by the company to set up functional internal control processes. 6.1.3 A... is a person who invests in a company by buying shares. 6.1.4 __... ate appointed by shareholders to give an unbiased opinion on the financial statements. SO-FINE LTD The given information relates to So-Fine Ltd for the financial year ended 31 August 2017. REQUIRED: 6.2.1 Prepare the following notes to the Balance Sheet on 31 August 2017: e Ordinary share capital e Retained income 6.2.2 Complete the Cash Flow Statement by inserting only the details and figures indicated by a question mark (?). 6.2.3 Calculate the following financial indicators on 31 August 2017. « Percentage operating profit on sales e Debt-equity ratio 6.2.4 Calculate the dividends per share (DPS) of a shareholder who owned the same number of shares for the entire financial period. INFORMATION: A. _ Information from the Income Statement for the financial year ended 31 August 2017: Sales R8 652 000 Operating expenses 1760 000 Depreciation 320 000 Interest expense 86 100 Operating profit 697 000 Income tax 187 770 Net profit after income tax 438 130 (7) Page 54 of 122

6.3 B. _ Information from the Balance Sheet on 31 August: 2017 2016 (R) (R) Fixed assets (carrying value) 6 177 000 4975 000 Fixed deposits 220 000 300 000 Loan: Dolphin Bank 985 000 450 000 Current assets 619 600 663 300 Current liabilities 490 000 614 300 Shareholders’ equity 2? ui Ordinary share capital 5 292 000 2 Retained income ? 147 370 Cash and cash equivalents 23 400 2500 Bank overdraft - 65 100 Shareholders for dividends 168 000 120 000 SARS: Income tax 11.800 (Cr) 2400 (Dr) C. Share capital and dividends The authorised share capital comprises 1 200 000 ordinary shares. 900 000 ordinary shares were in issue on 1 September 2016. The company issued 150 000 ordinary shares at R6,30 per share on 1 May 2017. 70 000 ordinary shares were repurchased from shareholders on 30 August 2017. A cheque for R437 500 was issued for these shares. These shareholders qualify for final dividends. An interim dividend of 12 cents per share was paid on 1 February 2017. A final dividend was declared on 30 August 2017. D. Fixed assets: Transactions during the current financial year. Old equipment was sold for cash at the carrying value of R324 000. Additional equipment and delivery vehicles were purchased. CASTRO LTD AND RONKI LTD You are provided with information relating to two companies. BACKGROUND INFORMATION: ¢ Henry Harries owns 300 000 shares in each company. ¢ Castro Ltd issued 200 000 new shares only to existing shareholders at the average issue price (R9,10). These funds were used to establish a new branch. No new loans were raised. ¢ Ronki Ltd paid R4 800 000 to repurchase 320 000 shares. REQUIRED: NOTE: Where comments or explanations are required, © quote _financial indicators and figures to support your answer. CASTRO LTD 6.3.1 Comment on the price of R9,10 charged by Castro Ltd for the new shares issued. (3) 6.3.2 Explain how the issue of new shares has affected the financial gearing and risk of Castro Ltd. Quote TWO financial indicators. (6) 6.3.3 Henry had the option to buy some of the new shares issued by Castro Ltd. He had saved sufficient funds (interest rate 5% p.a.) for this purpose. ¢ If Henry wanted to retain his 60% shareholding in the company, how many shares would he have had to buy and how much would he have had to pay? (5) ie eny; decided = =NOl| io | buy theso: shares, Apart from | the % shareholding, explain TWO reasons why he has made a mistake by not taking up this option. (6) Page 55 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT RONKI LTD 6.3.4. Comment on the liquidity of Ronki Ltd. Quote TWO financial indicators. (6) 6.3.5 Comment on the price paid by Ronki Ltd for the repurchase (buy-back) of shares. (3) 6.3.6 Explain THREE ways in which Henry has benefited from the repurchase of the shares by Ronki Ltd. (6) ADDITIONAL INFORMATION: Financial indicators and additional information from annual reports: CASTRO LTD RONKI LTD 2017 2016 2017 2016 Debt-equity ratio 0:07 OSs Current ratio 1,9:1 35:1 Acid-test ratio ald Tel Stock-holding period 54 days 54 days Number of shares in issue 700 000 500 000 580 000 900 000 Average share issue price R9,10 R10,20 Price paid for share repurchase R15,00 Price of share on JSE R12,00 R15,00 Net asset value per share R10,73 R11,38 R13,30 R13,22 % return on shareholders’ equity 23% 17% 16% 13% % return on total capital employed 20% 15% Earnings per share 140 cents 196 cents 266 cents 171 cents Total dividends R357 000 R325 000 R928 000 R928 000 Dividends per share 51 cents 65 cents 160 cents 103 cents ACTIVITY C6 (NSC NOV 2017 - Q4) 6.1 6.1.1 6.1.2 6.1.3 6.1.4 4 6.2 SO-FINE LTD 6.2.1 ORDINARY SHARE CAPITAL AUTHORISED SHARE CAPITAL 1 200 000 ordinary shares ISSUED SHARE CAPITAL 900 000 Ordinary shares on 1 September 2016 Ordinary shares on 31 August 2017 § 292 000 7 Page 56 of 122

6.2.2 6.2.3 RETAINED INCOME Balance on 1 September 2016 147 370 Net profit after income tax 438 130 Ordinary share dividends Balance on 31 August 2017 SO-FINE LTD CASH FLOW STATEMENT FOR THE YEAR ENDED 31 AUGUST 2017 CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations Interest paid Dividends paid Income tax paid CASH FLOWS FROM INVESTING ACTIVITIES Purchases of fixed assets t Change in investments CASH FLOWS FROM FINANCING ACTIVITIES ? ? Change in non-current liabilities Net change in cash and cash equivalents Cash and cash equivalents — opening balance Cash and cash equivalents - closing balance 19 Calculate the percentage operating profit on sales. Calculate the debt-equity ratio. 4 Page 57 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 6.2.4 Calculate the dividends per share (DPS) of a shareholder who owned the same number of shares for the entire financial period. 6.3 CASTRO LTD 6.3.1 Comment on the price of R9,10 charged by Castro Ltd for the new shares issued. 6.3.2 Explain how the issue of new shares has affected the financial gearing and risk of Castro Ltd. Quote TWO financial indicators. 6.3.3 If Henry wanted to retain his 60% shareholding in the company, how many shares would he have had to buy? How much would he have had to pay? Henry decided NOT to buy these shares. Apart from the % shareholding, explain TWO reasons why he has made a mistake by not taking up this option. Reason 1: Reason 2: Page 58 of 122

ave RCOROROLO TE ETE TOT Vn ie 42U2U WIT DUUUIICIN | RONKI LTD 6.3.4 Comment on the liquidity of Ronki Ltd. Quote TWO financial indicators. 6.3.5 Comment on the price paid by Ronki Ltd for the repurchase (buy-back) of shares. 6.3.6 Explain THREE ways in which Henry has benefited from the repurchase of the shares by Ronki Ltd. Point 1: Point 2: Point 3: E. AUDIT REPORTS ACTIVITY E1 (Gauteng Sept 2019 Q 3) AUDITING You are provided with an extract from the report of the independent auditors. Audit Opinion - To the shareholders: We have examined the financial statements as set out on Pages 23 to 89. In our opinion, the financial statements fairly present, in all material respects, the financial position of the company as at 28 February 2019 and the results of their operation and cash flows for the year ended are in accordance with International Financial Reporting Standards (IFRS), and in the manner as required by the Companies Act in South Africa. Mxo and Frank Chartered Accountants (SA) Registered Accountants and Auditors Midrand, 31 March 2019 Page 59 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT REQUIRED: ira Explain why the shareholders would be satisfied with this audit report. (2) 1.2 Tello Motloung, the managing director, has informed the auditors that he intends to buy the unissued shares for himself without informing the other shareholders. What advice should the auditors give to Tello? Explain. (2) le) Explain why the auditors found it necessary to stipulate the page numbers in the report. (2) 14 Explain TWO major consequences for Mxo and Frank should they be negligent in performing their duties, (4) ACTIVITY E41 AUDITING (| Explain why the shareholders would be satisfied with this audit report. 2 1.2 Tello Motloung, the managing director, has informed the auditors that he intends to buy the unissued shares for himself without informing the other shareholders. What advice should the auditors give to Tello? Explain. 2 1.3. | Explain why the auditors found it necessary to stipulate the page numbers in the report. 2 14 | Explain TWO major consequences for Mxo and Frank should they be negligent in performing their duties. 4 Page 60 of 122

21 2.2 2.3 ACTIVITY E2 (North West Sept 2019 Q 4) You are provided with the extracts of the independent audit reports of Giovanni Ltd. REQUIRED: 2.1 Provide ONE reason why public companies must be externally audited. 22 What type of report did Giovanni Ltd receive from the independent auditors? Explain your answer. 23 Refer to Information B. One of the directors says that “the company must not waste money on things like this.” Provide THREE reasons against his opinion. INFORMATION: A. Extract from the Independent Auditors’ Report: In our opinion, these financial statements present fairly, in all material respects, the financial position of Giovanni Ltd as at 31 March 2019, in accordance with International Financial Reporting Standards (IFRS) and the requirements of the Companies Act___ (Act 71 of 2008) of South Africa. B. The following extract appeared in the Directors’ report of Giovanni Ltd: In terms of the outreach/ programme, Giovanni Ltd has established a sports academy for the local community. The company is providing sporting facilities to schools and is maintaining the sports ground. ACTVITY E2 (North West Sept 2019 Q 4) Provide ONE reason why public companies must be externally audited. What type of report did Giovanni Ltd receive from the independent auditors? Explain your answer. Type: Explanation: Refer to information B. One of the directors says that “the company must not waste money on things like this.” Provide THREE reasons against his opinion. Page 61 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY E3 (Limpopo Sept 2019 Q 3) AUDIT REPORT The following media release from the Auditor General appeared in the national newspapers. PWC reports on overall deterioration in the audit results of Richard Distributors Ltd. The audit report for Richard Distributors Ltd, a public owned company that is a leader in the transport and logistics industry, continues to cause concern — seven of the eleven provincial head offices received reports showing problems. Answer the following questions: 3.1 What is the purpose of an independent auditor report and to whom is it addressed? 3.2 Explain the difference between a qualified and an unqualified audit report. 3.3 Predict THREE implications for the company or directors after PWC release their report. 3.1 AUDIT REPORT 3.1 3.2 3.3 What is the purpose of an independent auditor report and to whom is it addressed? Purpose: Addressed to: Explain the difference between a qualified and an unqualified audit report. Qualified: Unqualified: Predict THREE implications for the company or directors after PWC release their report. Page 62 of 122

41 42 43 44 AZINAULUUIN TING GRAUE 12 2U2U IWIIF DOCUMENT ACTIVITY E4 (Mpumalanga Sept 2019 Q 3) 4. AUDIT REPORT You are provided with an extract from the audit report of the independent auditors of Cooper Ltd. Read the report and answer the questions that follow. To Shareholders Point 1 We have audited the annual financial statements of Cooper Limited for the year ended 30 June 2019, set out on pages 25 to 51..... Basis for Opinion Point 2 An amount that was shown as additions to Land and buildings was for revaluations of the Buildings. No audit evidence was provided. Opinion Point 3 In our opinion, the financial statements fairly present the financial position of the company at 30 June 2019, except for the increase in the value of the fixed assets in the Balance Sheet. REQUIRED: 44 Explain why the auditors did specifically address the report to shareholders? (2) 4.2 Refer to point 1. Explain why the independent auditors referred to pages 25-51 in the report. (2) 43 Refer to point 2. The directors claimed that the value of the buildings increased over the years and that the value must be increased and shown as additions in the fixed asset note. As the independent auditor, what advice would you give? Provide ONE point. (2) 44 Refer to point 3. e The company received a/an (unqualified/qualified/disclaimer) audit report. (1) e Give a reason for your answer. (1) ACTIVITY E4 (Mpumalanga Sept 2019 Q 3) Page 63 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT F. INVENTORY SYSTEMS ACTIVITY F1 WEIGHTED AVERAGE & FIFO (35 marks; 20 minutes) Omega Electronics is a business that sells televisions. The business is owned by Ching Lee. They make use of the WEIGHTED AVERAGE method for stock valuation and use the periodic inventory system. The financial year ended on 28 February 2019. The mark-up is 25% on cost price. REQUIRED: 14 Calculate the following on 28 February 2019: 1.1.1. Value of the closing stock. (10) 1.1.2 Gross profit for the year ended. (5) 1.2 The owner and the accountant disagree on the method of stock valuation. The accountant wants to use the FIFO method. 1.24 Calculate the stock value on 28 February 2019 using the FIFO method. (7) 1.2.2 Explain the effect on gross profit if the FIFO method is used. (2) 1.2.3 As an internal auditor, explain the benefits of using the FIFO method to the owner and the accountant. State TWO points. (4) Ve) 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. (3) e Provide TWO suggestions that can be implemented in order to improve profitability. (4) INFORMATION: A. Stock of television sets: Date: Details: Total: 1 March 2018 49 units R195 424 28 February 2019 220 units 2 ACTIVITY F1 Page 64 of 122

KZN ALUUUNHIING KAUE IZ ACTIVITY F 2: INVENTORY SYSTEM (46 marks; 30 minutes) 2UZU WIP DOUUMEN! The information provided is from the accounting records of Clan William Ltd. The company sells cooler boxes and tents. The financial year ended on 28 February 2018. The business uses the periodic inventory system and the weighted average method of stock valuation for cooler boxes and the specific identification method for tents. REQUIRED: 2.1 Explain the difference between the specific identification and the weighted average methods of valuing stock. (2) COOLER BOXES: 2.2 Provide a calculation to show the number of missing cooler boxes on 28 February2018. (4) 2.3 Calculate the following in respect of cooler boxes: The value of closing stock (3) Cost of sales of cooler boxes (5) Gross profit on cooler boxes (3) 2.4 The manager feels that the business is more efficient in controlling stock. 2.4.1 Calculate the stock holding period (in days) of cooler boxes for 2018. Use the closing stock. (4) 2.4.2 Comment on your findings in response to the manager's opinion. (3) TENTS: 25 Calculate the value of the closing stock of tents. (4) 2.6 The mark-up percentage on tents is 25% on cost. Calculate the total sales of tents for the financial period. (6) INFORMATION: COOLER BOXES A Value of Stock on hand Date No. of Items Unit Price Total (R) 01 March 2017 520 R60 31 200 28 February 2018 850 2 2 B Purchases of cooler boxes PURCHASES Date — No. of Items Unit Price Total (R) August 2017 1600 R64 102 400 February 2018 2700 R70 189 000 TOTAL 4300 291 400 C SALES OF COOLER BOXES: 3 900 units were sold for R387 000. Page 65 of 122

KZN ACCOUNTING D RETURNS: GRADE 12 20 damaged cooler boxes costing R60 each were returned to the supplier. The supplier only agreed to give an allowance of R1 000 due to late notification. 2020 MIP DOCUMENT E. Financial Indicators 2018 2017 Stock Holding Period 2 125 days Stock Turnover Rate 5.7 times 2.9 times INFORMATION: TENTS STOCK ON NUMBER OF TENT RANGE HAND PURCHASES PRICE PER TENTS SOLD DURING THE | TENT 1 MARCH YEAR DURING THE 2017 YEAR 1. Bush Baby 14 - R1 260 14 2. Leopard 10 32 R1 400 28 3. Lizzard 28 R1 680 28 4. Buffalo 8 34 R1 540 35 ACTIVITY F2 Page 66 of 122

ACTIVITY F3: STOCK VALUATION (45 marks; 25 minutes) 3.1 Choose the correct word(s) from those given in brackets. Write only the word(s) next to the question number (5.1.1 - 5.1.4) in the ANSWER BOOK. 3.1.41 year. 3.1.2 value products. 3.1.3 business. 3.1.4 value purchased in large quantities. 3.2 KROOKED SKATEBOARD TRADERS You are provided with information relating to Krooked Skateboard Traders owned by G Gonzales. The In the (perpetual / periodic) inventory system, the cost of sales must be calculated at the end of the The (specific identification / weighted-average) stock valuation method is best suited for unique high- In the perpetual inventory system, merchandise purchased is recorded as an (asset / expense) to the The (first-in-first-out / weighted-average) stock valuation method is best suited for products of similar business sells a type of skateboard that is imported from California. The financial year ended on 28 February 2019. The business uses the weighted-average method to value their stock and uses the periodic inventory system. REQUIRED: 3.2.1. Calculate the following on 28 February 2019: (a) The value of closing stock using the weighted-average method. (9) (b) Cost of Sales (4) (c) Gross Profit (3) 3.2.2 G Gonzales wants to alternate between using the weighted-average method and a FIFO method, depending on which will result in the higher cost of sales. (a) In your opinion, why do you think G Gonzales wants to increase the value of cost of sales in the financial statements? (2) (b) Provide ONE reason why the bookkeeper says that alternating between two methods of valuing stock does not comply with the requirements of GAAP. (2) INFORMATION: A Stock records of skateboards Number of Date units Total value 01 March 2018 860 R238 600 28 February 2019 420 i B Purchases of skateboards Purchases: TOTAL TOTAL DATE NO. OF PRICE TOTAL CARRIAGE ON CARRIAGE ON PURCHASE UNITS |PERUNIT) PURCHASES PURCHASES PURCHASES COST R R R R R 31/05/18 1200 280 336 000 20 24 000 360.000 01/07/18 1600 300 480 000 20 32.000 512 000 12/09/18 1.000 290 290.000 24 24 000 314 000 15/01/19 600 320 192 000 24 14 400 206 400 Totals 4 400 1 298 000 94 400 1 392 400 Page 67 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT Cc 3.3 3.1 3.2 3.2.41 Returns of skateboards Forty (40) skateboards from the July purchases that were not of good quality were returned to the supplier. They credited the business account with the total cost, including carriage on purchases. Sales 4 800 units at R350 each: R1 680 000 PROTEC TRADERS Patrick Ace is the owner of PROTEC Traders, who sells safety helmets. He has three different stores that are managed by Lucas, Pitso and Pepe. He is concerned that the stores are not running effectively and gave you the following information to analyse for February 2019. REQUIRED: Identify a different problem in each store. Quote figures to support the problem identified in each case and give Patrick Ace advice on how to solve each problem. (9) Store 1 Store 2 Store 3 Lucas Pitso Pepe Sales R280 000 R340 000 R300 000 Returns from customers for the month R4 000 R28 000 R3 000 Returns policy 7 days 21 days 7 days Stock stolen during the month 0 units 4 units 50 units Advertising R30 000 R10 000 R24 000 Number of employees 6 4 6 Choose the correct word(s) from those given in brackets. Write only the word(s) next to the question number (5.1.1 - 5.1.4) in the ANSWER BOOK. 3.1.4 3.1.2 3.1.3 3.1.4 KROOKED SKATEBOARD TRADERS Calculate the following on 28 February 2019: (a) The value of closing stock using the weighted-average method. (b) Cost of sales: (c) Gross Profit: 3 Page 68 of 122

3.2.2 G Gonzales wants to alternate between using the weighted-average method and a FIFO method, depending on which will result in the higher cost of sales. (a) In your opinion, why do you think G Gonzales wants to increase the value of cost of sales in the financial statements? (b) Provide ONE reason why the bookkeeper says that alternating between two methods of valuing stock does not comply with the requirements of GAAP. 3.3 PROTEC TRADERS Identify a different problem in each store. Quote figures to support the problem identified in each case and give Patrick Ace advice on how to solve each problem. __ Problem (Quote figures.) Solution / Advice Store 1: Lucas Store 2: Pitso Page 69 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT Store 3: Pepe G. TANGIBLE ASSETS ——— ACTIVITY G1 (32 Marks, 19 Minutes) HB Contractors purchased a second hand caravan, to accommodate their four staff members while working on building sites far from their homes in Durban. This asset is considered to be part of the equipment that is taken to building sites. The businesses financial year ends on 31 July each year. Information: e Caravan details: Asset Caravan Cost Price R80 000 Registration No. ND 455 789 Depreciation Method Diminishing Bal Date Purchased 1 August 2017 Depreciation Rate 20% p.a. e The caravan was sold for R50 000 cash on 30 January 2020. Required: 1.1. Provide TWO advantages of purchasing a caravan for the staff, rather than booking them alternative (4) accommodation. 1.2 Isit ethical for Harry Bhengu, the owner of HB Contractors, to use business funds to pay for his personal (3) accommodation in a hotel during the duration of the contract? 1.3 Complete the Fixed Asset Register for this caravan. (9) 1.4 Draft the Asset Disposal account in the General Ledger to calculate whether a profit or a loss was made on (10) the disposal of this caravan. 1.5 Apart from the above caravan, HB Contractors has various specialised tools that are needed for their various (6) construction projects. Discuss THREE control measures that can be implemented to ensure the safety of these tools, as well as the safely of the workers. Page 70 of 122

KZN ACCOUNTING GRADE 12 ACTIVITY G1 (32 Marks, 19 Minutes) 14 1.3 14 15 2020 MIP DOCUMENT Provide TWO advantages of purchasing a caravan for the staff, rather than booking them alternative accommodation. |s it ethical for Harry Bhengu, the owner of HB Contractors, to use business funds to pay for his personal accommodation in a hotel during the duration of the contract? Complete the Fixed Asset Register for this caravan. Depreciation penllenes “ne alue 31 July 2018 31 July 2019 30 January 2020 disposal of this caravan. Asset Disposal Draft the Asset Disposal account in the General Ledger to calculate whether a profit or a loss was made on the Apart from the above caravan, HB Contractors has various specialised tools that are needed for their various construction projects. Discuss THREE control measures that can be implemented to ensure the safety of these tools, as well as the safely of the workers. (4) Page 71 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY G2: (30 Marks, 18 Minutes) You are provided with the asset disposal account in the books of Elan Square that recorded the sale of a vehicle on 31 August 2019, and some additional information. Required: 2.1 Complete the fixed assets note in the books of Elain Square for the financial year ended 28 February 2020. The (14) incomplete note is in your answer book. Show detailed calculation for depreciation in the space provided. 2.2 Answer the following questions: 2.2.1 2.2.2 2.2.3 Information: Which GAAP principle is used when assets are depreciated? Explain the purpose of the principle. (3) Elain has suggested to the bookkeeper that in future vehicles must be depreciated by 50% on cost, in order to get the greatest tax benefit. Explain to her whether this is feasible or not as well as the consequences of this decision. Elain budgeted R50 000 for motor expenses in the year ended 28 February 2020 that included maintenance and licenses. She was very concerned when the Income Statement was produced to notice that the actual costs were R95 000. Discuss 2 possible reasons for this difference and suggest to her 2 measures that she could use in future to prevent these great differences. (8) General Ledger of Elain Square Asset Disposal | 2019 (Aug 31 2019 = ~—_| Accumulated depreciation on Vehicles 80000 | Aug gt, ees 48 800 _ Bank 25 000 _ Loss on sale of asset 6 200 80 000 "80 000 Additional Information: 1. During the year additions were made to the land and buildings by taking out a mortgage loan from NFB Bank. 2. On 31 August 2019 an old vehicle was sold for cash. This money was then used as a deposit on a new vehicle, purchased 1 September 2019, for which the business still owes an amount of R179 000 to MH Motors. The accumulated depreciation on the asset sold was R44 000 on 1 March 2019. 3. Vehicles are depreciated by 20% p.a. on the diminishing balance method. Page 72 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY G2 (30 Marks, 18 Minutes) Elain Square Notes to the financial statements for the year ended 28 February 2020 2.1. Tangible Assets co Land & Buildings ==-s=—=S“Vehicles. Cost price (1/03/19) ee 260 000 360 000 Accumulated Depreciation (1/03/19) 0 (125 000) ; Carrying Value (1/03/08) 14 260 000 Additions at cost i Disposals at carrying value 1 Depreciation for the year 0 "Cost price (28/02/09) 1 450 000 Accumulated Depreciation (28/02/20) 0 : Carrying Value (28/02/20) 1 450 000 Calculation Of Depreciation: _ ; Old / Remaining Vehicles | Sold Vehicle New Vehicle Total Depreciation i 2.2 2.2.1 Which GAAP principle is used when assets are depreciated? Explain the purpose of the principle (3) decision. 2.2.2 Elain has suggested to the bookkeeper that in future vehicles must be depreciated by 50% on cost, in order to get the greatest tax benefit. Explain to her whether this is feasible or not as well as the consequences of this Page 73 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.2.3 Elain budgeted R50 000 for motor expenses in the year ended 28 February 2020 that included maintenance and licenses. She was very concerned when the Income Statement was produced to notice that the actual costs were R95 000. Discuss 2 possible reasons for this difference and suggest to her 2 measures that she could use in future to prevent these great differences. Possible reasons: (4 marks) Suggestions: (4 marks) ACTIVITY G3 (68 Marks, 41 Minutes) Jenny Khuzwayo owns Jenny's Transport Services. This business provides transport for pensioners’ who cannot drive and need assistance with their shopping, doctor's visits etc. The businesses financial year ends on 31 January 2020. Required: 3.1 Identify the GAAP concept that is applied in the following cases: 3.1.1 Penny's vehicles need to be recorded at their original cost price (1) 3.1.2 Each vehicle's value depreciates annually due to wear and tear (1) 3.2 Complete the Fixed Asset Register to calculate the Accumulated Depreciation on ONE Toyota Corolla on 1 (16) December 2019 by completing the table in your answer sheet. (see bottom of page for information) 3.3 Complete the following General Ledger Accounts, correctly balanced / closed off, for the year ended 31 January 2020: 3.3.1 Accumulated Depreciation on Vehicles (21) 3.3.2 Asset Disposal (12) 3.4 The Tangible Assets note to the Balance Sheet on 31 January 2020 (10) 3.5 Did this Jenny make a good decision regarding the sale of one Corolla and replacing itwith a Kombi? Give a (3) reason for your answer. 3.6 Identify TWO things that Penny can do to ensure that her employees drive her vehicles in a responsible manner. (4) Information: Jenny started this business, by purchasing THREE identical Toyota Corolla’s, at a cost price of R120 000 each on 1 August 2016. No additional vehicles have been bought or sold between 1 July 2016 and 1 February 2019, the beginning of the financial year. Vehicles are depreciated at 20% per annum according to the diminishing balance method. On 1 December 2019, Penny decided to replace ONE Toyota Corolla with a second hand Kombi costing R180 000. The Corolla was traded in for R50 000. The sold Corolla had a book value of R57 600 on the date of sale. Page 74 of 122

ACTIVITY G3 (68 Marks, 41 Minutes) Vinee 6 3.1 Identify the GAAP concept that is applied in the following cases: 3.1. Penny's vehicles need to be recorded at their original cost price 6U2U WIP DOUUIVIEN | 3.1.2 Each vehicle’s value depreciates annually due to wear and tear 3.2 Complete the Fixed Asset Register to calculate the Accumulated Depreciation on ONE Toyota Corolla on 1 (16) Make December 2019 by completing the table in your answer sheet. Toyota Cost price Model Corolla Depreciation Method | Registration number ND 638 - 376 Depreciation Rate | Date Bought Depreciation SE Accumulated Depreciation Carrying Value | 31 January 2017 31 January 2018 31 January 2019 | 1 December 2019 3.3.1 Accumulated Depreciation: Vehicles ____| (21) Page 75 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 3.3.2 Asset Disposal (12) 3.4 Notes to the Financial Statements for the year ended 31 January 2020 (10) Vehicles Carrying value at the beginning of the year Cost Accumulated Depreciation Movements Additions at cost Disposals at carrying value Depreciation Carrying value at the end of the year Cost Accumulated Depreciation 3.5 Did this Jenny make a good decision regarding the sale of one Corolla and replacing it with aKombi? Give a (3) reason for your answer. 3.6 Identify TWO things that Jenny can do to ensure that her employees drive her vehicles in a responsible manner. (4) Page 76 of 122

NEI ALUUUIN TING GRAVE 12 2020 MIP DOCUMENT H. COST ACCOUNTING ACTIVITY H14 (50 marks, 30 minutes) 14 CHUNKY CHAIRS Chunky Chairs produces kitchen chairs. The financial year ended on 31 May 2019. REQUIRED 1.1.1 Calculate the total purchases of raw material for the financial year ended 31 May 2019. (4) 1.1.2 Complete the Production Cost Statement on 31 May 2019. (9) 1.1.3. Calculate the following for the financial year ended 31 May 2019: e Number of units sold during the year (5) e Cost of sales (5) e Net profit for the year (8) INFORMATION A. The business uses the FIFO-method to value their stock and the periodic inventory system. B. Balances: 31 May 2019 1 June 2018 Raw material stock 2? R325 000 Work in Progress R94 000 2 Finished Goods ? R285 000 9 500 units 15 000 units C. Carriage on raw materials amounted to R27 000 for the year. D. Raw Material available for production was R1 450 000, while raw materials used in the factory were R1 140 000. E. Salaries and wages amounted to R650 000 for the year. 40% of this was wages of workers who worked on the chairs. The rest was divided equally between Factory overheads and Administrative cost F. 80.000 chairs were completed during the year at a unit cost of R21,25. G. Sales: chairs were sold at R42,50 per unit. H. After all expenses above were taken into account, the Distribution cost was R625 600 and Administrative cost R787 400. 1.2 GLITTERATI BAGS AND PROBLEM SOLVING Glitterati Bags manufactures exclusive evening handbags. REQUIRED 1.2.1 Calculate the following: (a) the variable cost per unit. (4) (b) the breakeven point. (5) 1.2.2 After an analysis of cost and efficiency, the internal auditor is concerned about a few points. Refer to Information C and answer the following questions: (a) Direct material: Identify ONE problem and suggest ONE possible solution for the problem. (2) (b) Direct labour and Sewing machine maintenance: |dentify TWO different problems with each item and suggest a solution for EACH separate problem. 8) Page 77 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT INFORMATION A. The business manufactured and sold 23 400 handbags during this year. The bags were sold at R299 each. B. Analysis of cost: Total Per unit Direct Material R1 989 000 R85 Direct Labour R2 527 200 R108 Factory Overhead R842 400 R36 Administrative cost R538 200 R23 Selling and distribution R795 600 R34 Cc. After an analysis of cost and efficiency, the internal auditor is concerned about the following points: e Direct material: o 50. cmof material is needed to produce one handbag. o Itwas determined that 1 meter of material was used per handbag. e Direct labour: co 8 workers are employed that produce the handbags. o The average production per worker is 2 925 handbags. o The wage records reflected that one worker, Tarren, produced 2 100 handbags and she earned the highest overtime pay. e — Sewing machines maintenance: co The maintenance cost increased significantly in the last year. o The maintenance on two workers’ machines, those of Roger and Gary, were three times higher than the other machines. 11 CHUNKY CHAIRS 1.414 Calculate the total purchases of raw material for the financial year ended 21 May 2019. | 4 1.1.2 Production cost statement for the year ended 31 May 2019 1 140 000 Prime cost Total cost of production 1712000 Total cost of production of complete products 9 Page 78 of 122

1.1.3 Calculate the following for the financial year ended 31 May 2019: Number of units sold during the year. Cost of Sales Calculate the Net Profit for the year ended 31 May 2019. 1.2 GLITTERATI BAGS AND PROBLEM SOLVING 121 Calculate the following: (a) _ the variable cost per unit. (b) the breakeven point. Page 79 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 1.2.2 After an analysis of cost and efficiency, the internal auditor is concerned about a few points. Refer to Information C and answer the following questions: (a) Direct material: Problem Solution 2 Direct labour: Problem Solution (b) Sewing machine maintenance: Problem Solution 4 4 ACTIVITY 2 MANUFACTURING (45 marks; 25 minutes) 2.1. VUMA MANUFACTURERS You are provided with information relating to VUMA Manufacturers for the year ended 28 February 2019. The business produces handbags. Page 80 of 122

REQUIRED: 2.1.1 2.1.2 Prepare the following notes to the Production Cost Statement: e Direct labour cost e Factory overhead cost Prepare the Production Cost Statement for the year ended28 February 2019. INFORMATION: A. Stock on hand on 1 March 2018 (6) (10) (10) Raw Materials R138 000 Work in progress 79 000 Finished goods 68 000 Stock on hand on 28 February 2019: Raw Materials R142 000 Work in progress 0 Finished goods 172 000 Raw materials e Raw materials purchased during the year amounted to R1 450 000. e Raw materials costing R19 000 were returned to the supplier. Labour e — The factory has five workers involved in production. Together they worked a total of 800 hours per month at R50 per hour (normal time). Only three workers worked 60 hours each per month for overtime during the current financial year. 1 overtime rate is 1% times the normal rate. e The employer contributes 1% of normal wage to UIF for all employees. e = Indirect labour amounts to R135 340 including benefits. Figures obtained from the Trial Balance: Water and Electricity R77 000 Rent expense 288 000 Depreciation on factory equipment 18 900 Depreciation on office equipment 5 300 Insurance 108 000 Sundry expense 84 000 Page 81 of 122

KZN ACCOUNTING GRADE 12 Additional information relating to the above: e The water and electricity bill are shared among factory, office and sales departments in the ratio 4:2:1. 75% of all sundry expenses relates to the factory. 2020 MIP DOCUMENT Rent remained unchanged throughout the financial year. Rent is allocated according to floor area occupied, as follows: 1 500 square meters, 500 square meters and 400 square meters for factory, sales and office departments respectively. e — Insurance cost on equipment is split amongst factory, sales and office as follows. o Factory R48 500 o Sales 37400 o Office 22 100 2.2. JPC MANUFACTURERS You are provided with information relating to JPC Manufacturers consisting of two factories producing different products: Suitcases and Laptop bags. The owner, JP has found out that his profit has declined from 2018 to 2019. He asks for advice. REQUIRED: 2.2.1 Identify ONE variable cost that was not well controlled in each department. Quote figures. In each case, provide a solution for the problem identified. (8) 2.2.2 Calculate the break-even point of suitcases for 2019. (5) CA] Explain whether the business should be satisfied with the production of suitcases. Quote figures to support your answer. (3) 2.2.4 JP wants to adjust the selling price of ONE of the products. What advice would you offer him? Provide a valid reason for your suggestion by quoting relevant figures. (4) ACTIVITY 2 2.14 DIRECT LABOUR COST Workings Answer 6 FACTORY OVERHEAD COST Indirect Material 128 000 Indirect labour 135 340 10 Page 82 of 122

2.1.2 2.2.1 even UUMUWLINE PRODUCTION COST STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019 Prime Cost Total cost of production Work in process at the beginning of the year 79 000 10 Cost of production of finished goods 2.690 190 each case provide a solution for the problem identified. Identify ONE variable cost that is not well controlled in each department. Quote figures. In Suitcases Laptop Bags Cost Identified Figures Solution Page 83 of 122

KZN ACCOUNTING 2.2.2 2.2.3 2.2.4 GRADE 12 2020 MIP DOCUMENT Calculate the break-even point of suitcases for 2019. Workings Answer Explain whether the business should be satisfied with the production of suitcases. Quote figures to support your answer. : JP wants to adjust the selling price of ONE of the products. What advice would you offer? Provide a valid reason for your suggestion, quoting relevant figures. ACTIVITY H3 3.1 (35 marks; 20 minutes) KLEMISH MANUFACTURERS The business produces study desks. REQUIRED: Prepare the following for the financial year ended 28 February 2019: 3.1.1 3.1.2 Production cost statement Abridged Income Statement INFORMATION: A D Stock on hand: (13) (11) 28 February 2019 28 February 2018 Work-in-progress . R500 800 Finished goods R18 000 R672 000 e 10800 tables were produced at a unit cost of R495 each. e Sales of 16 000 tables amounted to R8 160 000. Prime cost: R4 600 000 (after adjustments) The bookkeeper calculated the following costs before taking into account the adjustments below: Administration R296 800 Factory overheads R974 400 Direct materials R3 100 000 Direct labour 2 Selling and distribution R844 000 Page 84 of 122

eeu per gt alas ea 2U2U WII VUUUIVIEINE 3.2 e — Anamount of R204 000 for raw materials, purchased on credit, was not taken into account. e — Stationery valued at R1 000, purchased for the Administration department was incorrectly allocated to the Selling and Distribution department. e — Rent Expense, R252 000, was shared between the Factory and Selling and Distribution department in the ratio of 2:1. 85% should have been allocated to the Factory. Correct the error. DAMARA’S JEWELLERY Damara owns a jewellery business. REQUIRED: 3.2.1 Break-even point: (a) Calculate the break-even point for February 2019. (4) (b) Damara is satisfied with the results. Explain ONE reason with figures to support Damara’s satisfaction. (3) 3.2.2 Refer to the unit costs. (a) Explain why the fixed costs per unit decreased. (2) (b) Provide ONE possible reason for the change in Direct Material Costs. (2) INFORMATION: February 2019 February 2018 Total units produced and sold 18 000 units 15 000 units Break-even point in units 2 13 500 units Selling price per unit R407,00 R330,00 TOTAL VARIABLE COSTS R4 410 000 R3 510 000 VARIABLE COSTS PER UNIT R245,00 R234,00 Direct material cost per unit R128,00 R135,00 Direct labour cost per unit R80,00 R62,00 Selling and distribution cost per unit R37,00 R37,00 TOTAL FIXED COSTS R1 296 000 R1 296 000 FIXED COST PER UNIT R72,00 R86,40 Factory overhead cost per unit R62,00 R62,40 Administration cost per unit R20,00 R24,00 35 Page 85 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY 3.1 3.1.1 PRODUCTION COST STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019 Direct material cost Direct labour cost Prime cost Factory overhead cost Total cost of production 13 3.1.2 ABRIDGED INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019 Sales 8 160 000 Cost of Sales 11 3.2 DAMARA’S JEWELLERY 3.2.1 Break-even point: (a) Calculate the break-even point for February 2019. 4 (b) Damara is satisfied with the results. Explain ONE reason with figures to support Damara’s satisfaction. 3 Page 86 of 122

KLIN AQUUUUIN INO VNAVE 12 4UZU MIF DUOUUIVIEINT oad Refer to the unit costs. (a) Explain why the fixed costs per unit decreased. 2 (b) Provide ONE possible reason for the change in Direct Material Costs. 2 ACTIVITY H4 MANUFACTURING (50 marks; 25 minutes) 41 CONCEPTS Indicate whether the following statements are TRUE or FALSE. Write only ‘true’ or ‘false’ next to the question number (2.1.1-2.1.3) in the ANSWER BOOK. 4414 Commission on sales will be classified as an administration cost. (1) 4.1.2 Advertising is part of factory overhead costs. (1) 4.13 Carriage on raw materials purchased increases the cost of raw materials issued for production. (1) 4.2 STAR WHEELS MANUFACTURERS You are provided with information relating to Star Wheels Manufacturers for the year ended 31 December 2015. The business manufactures one type of bicycle. REQUIRED: 4.21 Prepare the following notes to the Production Cost Statement: e Direct labour cost (9) e Factory overhead cost (13) 42.2 Prepare the Production Cost Statement. (10) INFORMATION: This business produces and sells one type of breakfast cereal. The sole owner is Craig Manning. The financial year-end is 31 October. REQUIRED: 431 Calculate the break-even point for the year ended 31 October 2015. (4) 4.3.2 Should the business be satisfied with the number of units that they produced and sold during the current financial year? Explain. Quote figures. (3) 4.3.3 Give TWO possible reasons for the increase in the direct material cost per unit in the current financial year. (4) 43.4 Craig suggests that, in order to improve financial results in the new financial year, the quantity of cereal per box must be reduced by 10% and the selling price must remain the same. Give TWO valid reasons why he should not do this. (4) Page 87 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT INFORMATION: The following information was taken from the accounting records: 31 October 2015 31 October 2014 Total Per unit Total Per unit Sales R1 792 000 R28,00 R1 794 000 R23,00 Variable costs R1 024 000 R16,00 R975 000 R12,50 Fixed costs R736 000 R11,50 R630 000 R8,08 Direct material cost R656 000 R10,25 R592 800 R7,60 Break-even point ? 60 000 units Number of units produced 64 000 units 78 000 units and sold INFORMATION: SUITCASES LAPTOP BAGS 2019 2018 2019 2018 General information: Total fixed costs R3 500 000 R3 500 000 R2 100 000 R2 100 000 Net profit (118 000) 14.050 000 1 692 000 1 932 000 Variable costs per unit: R242 R218 R92 R82 Direct material cost R68 R70 R54 R40 Direct labour cost R150 R130 R32 R32 Selling & distribution cost R24 R18 R6 R10 Additional information Selling price per unit charged by JP R420 R400 R250 R250 Selling price per unit charged by competitors R405 R405 R265 R260 Number of units produced & sold 49 000 25 000 24 000 24 000 Break-even units ? 19 231 13 292 12 500 ACTIVITY H4 41 444 41.2 41.3 3 42 STAR WHEELS MANUFACTURERS Page 88 of 122

REN RUUUUIN IV VINAUL 12 4U2U WIP UUUUIWICINE 4.2.1 DIRECT LABOUR COST 9 FACTORY OVERHEAD COST 13 4.2.2 PRODUCTION COST STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2015. 10 43 NUTRITIOUS EATS 4.3.1 4 4.3.2 Should the business be satisfied with the number of units that they have produced and sold during the current financial year? Explain. Quote figures. 3 4.3.3 Give TWO possible reasons for the increase in the direct material cost per unit in the current financial year. 4 Page 89 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 43.4 Craig suggests that, in order to improve financial results in the new financial year, the quantity of cereal per box must be reduced by 10% and the selling price must remain the same. Give TWO valid reasons why he should not do this. 4 I] RECONCILIATIONS A. BANK RECONCILIATION (30 minutes) ACTIVITY 11. You are provided with information relating to Simms Traders for July 2019. REQUIRED: ale Indicate whether the following statements are TRUE or FALSE. Write only 'true’ or ‘false’ next to the question number (a)-(d) in the ANSWER BOOK. (a) Acheque that is more than six months old will not be cashed by the bank because it is a stale cheque. (b) Service fees and interest on bank overdraft will be recorded as bank charges in the Cash Payments Journal. (c) Adebit balance on the bank statement reflects an unfavourable balance. (d) An internal auditor should inspect the bank reconciliation statement at the end of each month, (4) 1.2 Calculate the correct totals for the Cash Receipts Journal and the Cash Payments Journal for July 2019. Use the tables provided. (14) 1.3 Prepare the Bank Reconciliation Statement on 31 July 2019. (10) 1.4 Explain how cheque No. 908 should be treated when preparing the financial statements on 34 July 2019, the financial year-end. (2) 1.5 Refer to information F. The bookkeeper has decided to write off the amount of R50 000. e Identify the GAAP principle applied by the bookkeeper. (1) ¢ — Provide TWO suggestions on how a similar problem can be prevented in the future. (4) INFORMATION: A. BANK RECONCILIATION STATEMENT ON 30 JUNE 2019 Debit Credit Balance as per Bank Statement R19 310 Outstanding deposit (10 May 2019) R50 000 Outstanding cheques: No. 892 (1 January 2019) 12 340 No, 897 (22 June 2019) 8 700 Balance as per Bank Account 9 650 50 000 50 000 Page 90 of 122

11 1.2 a rs eveu wir BDUCUMIENT B. Before receiving the July 2019 Bank Statement, the following provisional totals appeared in the Cash Journals for July 2019: e CRJ R127 670 e CPJ R 68900 Cc. The Bank Statement for July 2019 reflected the following: e — Bank charges R1 300 e — Interest on overdraft R920 e — Debit order for insurance R600 © — Direct deposit of R1 800 for rent from a tenant. D. Cheque No. 892 was issued as a donation. It was not cashed. E. Cheque No. 897 did not appear in the July 2019 bank statement. F. The outstanding deposit (10 May 2019) cannot be traced and the cashier at that time has since disappeared. It was decided to write off this amount. G. A cheque received from Redman Traders dated 25 November 2019 for R15 000 was not recorded in the July 2019 Cash Receipts Journal. It was also not deposited during July. H. The following items appear in the July 2019 Cash Journals but not on the July Bank Statement: ¢ Adeposit of R18 000, dated 27 July 2019 ¢ — Cheque No. 905, dated 31 July 2019 e — Cheque No. 908, R3 100, dated 15 December 2019 was issued to a creditor D. Hart for supplying goods. I, The Bank Statement on 31 July 2019 reflects a credit balance of R44 040 ACTIVITY 11. BANK RECONCILIATION (a) (b) (c) (a) 7 Calculate the correct totals for the Cash Receipts Journal and the Cash Payments Journal for July 2019. Use the tables provided. Cash receipts journal. | Cash payments journal 127 670 68 900 z 14 ssaguuauaauuuumuauuaaauuuuuiduauuuuuuuuuuiimamedanamanmmmmmmmiii | mmmmmmnmmmmanmmmmmmmmnanammnnnnnnnnnnme nn Page 91 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 1.3 Bank reconciliation statement on 31 July 2019. 10 1.4 Explain how cheque No. 908 should be treated when preparing the financial statements on 31 July 2019 the end of the financial year. 2 1.5 Identify the GAAP principle applied by the bookkeeper. Provide TWO suggestions on how a similar problem can be prevented in the future. 5 ACTIVITY 12 (40 MARKS; 25 MINUTES) BANK RECONCILIATION, GAAP, INTERNAL CONTROL 21 Indicate whether the following statements are TRUE or FASLE. Write only ‘true’ or ‘false’ next to the question number 1.1.1 - 1.1.4 in the answer book. 2c A post—dated cheque issued by the business on 20 May 2019 but dated 24 August 2019, will only be entered in the Cash Payments Journal of Quick Traders on 24 August 2019. (1) le A debit balance on the bank statement reflects an unfavourable balance. (1) 2.1.3 Service fees and interest on an overdraft will be recorded as bank charges in the Cash Payment Journal. (1) 2.1.4 An internal auditor will want to inspect the bank reconciliation statement at the end of each month. (4) Page 92 of 122

NZI AUUUUIN TING GRALE 12 2U2U MIP DOCUMEN | 2.2 You are provided with information related to Quick Traders on 31 May 2019. REQUIRED: 2.2.1 Calculate the correct totals for the Cash Receipts Journal and Cash Payment Journal for May 2019. (9) 2.2.2 Prepare the Bank Reconciliation Statement on 31 May 2019. (10) 2.2.3 Explain how cheque No.908 should be treated when preparing the financial statements as at 31. (2) May 2019 the end of the financial year. 2.2.4 Refer to information G. The bookkeeper has decided to write off the amount of R50 000. e Which GAAP principle will the bookkeeper apply in this case? ¢ The bookkeeper wants to prevent a problem such as this in future. Give TWO solutions to (1) improve internal control in this regard. (4) INFORMATION: A. The following items appeared in the Bank Reconciliation Statement on 30 April 2019: DEBIT CREDIT Debit balance as per Bank statement 19 310 Outstanding deposit (10 January 2019) 50 000 Outstanding cheques: No.892 (1 November 2018) 12 340 No.897 (10 April 2019) 8 700 Debit balance as per Bank Account 9 650 50 000 50 000 Before receiving the May 2019 Bank Statement, the following provisional totals appeared in the Cash Journals on 31 May 2019: e CRJR146 970 ¢ CPJR 68 900 The Bank Statement for May reflected the following: e Bank charges R2 100. e Interest on an overdraft R920. ¢ Debit order for insurance R600. Direct deposit of R1 800 for rent received from tenant. The bank charges was over stated by R800 for May 2019. The bank has agreed to correct the error during June 2019. Cheque no. 892 must be cancelled. Cheque no. 897 did not appear in the May 2019 Bank Statement. Page 93 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT G. The outstanding deposit (10 January 2019) cannot be traced and the cashier at that time has since disappeared. It was decided to write off this amount. H. A cheque received from Zulu Traders dated 25 August 2019 for R15 000 was not recorded in the May 2019 Cash Receipts Journal. It was also not deposited in May. The following items appear in the May 2019 Cash Journals but not on the Bank Statement: e Adeposit of R18 000, dated 27 May 2019. e Cheque No. 905, R1 200, dated 31 May 2019. e Cheque No. 908, R3 100, dated 15 September 2019. J; The Bank Statement on 31 May 2019 reflects a favourable bank balance of R42 440. ACTIVITY 12 2 Indicate whether the following statements are TRUE or FASLE. Write only ‘true’ or ‘false’ next to the question number (i) - (iv) in the answer book. (27 Calculate the correct totals for the Cash Receipts Journal and Cash Payment Journal for May 2019. _ Cash Receipts Journal ] | Cash Payment Journal 146 970 68 900 | Page 94 of 122

NZIN AUUUUIN TING ORAUE 12 2U2U WII VUUUWIENT 2.2.2 2.2.3 2.2.4 NO —— —— Refer to information G. The bookkeeper has decided to write off the amount of R50 000. internal control in this regard. Prepare the Bank Reconciliation Statement on 31 May 2019. | Debit Credit Explain how cheque No. 908 should be treated when preparing the financial statements as at 31 May 2019 the end of the financial year. e Which GAAP principle will the bookkeeper be applying? ¢ The bookkeeper wants to prevent a similar problem in future. Give TWO suggestions to improve Page 95 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT CREDITORS RECONCILIATION ACTIVITY | da CREDITORS’ RECONCILIATION The information relates to Kirsten Traders for August 2019. Kirsten Traders buys goods on credit from Amla Suppliers. REQUIRED: Use the table provided to indicate the changes that must be made: e Inthe Creditors' Ledger Account in the books of Kirsten Traders e Inthe Creditors' Reconciliation Statement on 31 August 2019 (9) INFORMATION: The following differences were discovered when comparing the account in the Creditors' Ledger with the statement received from Amla Suppliers: A An invoice for R14 800 was recorded incorrectly as R1 480 on the statement received from the creditor. B The bookkeeper of Kirsten Traders recorded an invoice for R1 350 as a credit note. c The discount of R850 was in error, overstated by R350 in the Creditors’ Ledger. D A cheque for R7 200 issued by Kirsten Traders did not appear on the statement due to the statement been processed early. E Goods for R2 700, returned by Kirsten Traders, was not recorded. ACTIVITY 1 Creditors’ Reconciliation Statement Balance 28 370 25 300 Creditors’ Ledger Page 96 of 122

24 ACTIVITY 2 Veli Traders buys goods on credit from Pillay Suppliers. The information presented is for May 2019. REQUIRED: Reconcile the Creditors Ledger account of Pillay Suppliers in the books of Veli Traders with the statement received. Commence with the opening balances as provided in the ANSWER BOOK. INFORMATION: A. Creditors Ledger of Veli Traders Pillay Suppliers (CL6) (13) DATE DETAILS FOL DEBIT CREDIT BALANCE May 1__| Balance bid 34 200 Invoice No. 443 CJ 4770 38 970 10_| Cheque No. 2810 CPJ 15 000 23 970 Discount CPJ 750 23 220 12_| Invoice No. 568 CJ 5 640 28 860 18 | Debit Note No. 114 CAJ 980 27 880 28 _| Invoice No. 667 CJ 7120 35 000 B. Statement received from Pillay Suppliers PILLAY SUPPLIERS STATEMENT OF ACCOUNT No. A732 Customer: 112 Willow Street Veli Traders Statement date: Willowmore 25 May 2017 5 570 DATE DETAILS DEBIT CREDIT BALANCE April 28 | Account rendered 38 830 30_| Invoice No. 376 3370 42 200 May 1_| Receipt No. 1144 8 000 34 200 5 _| Invoice No. 443 7740 41.940 10 | Receipt No. 1328 15 000 26 940 12_| Invoice No. 568 6 640 33 580 18 | Credit Note No. 743 980 34 560 22_| Invoice No. 772 3 860 38 420 Includes transactions up to 25'* of each month Differences noted: (i) Invoice No. 443 was recorded incorrectly in the creditors ledger. (ii) The statement did not reflect the discount for early payment on the 10". This will be rectified on the next statement. (iii) It was discovered that Invoice No. 568 on the statement included goods valued at R1 000 ordered by the warehouse manager. The manager is facing disciplinary action. (iv) Goods valued at R980 were returned on the 18". It is shown as a debit entry in both the creditor's ledger account as well as the statement of account. (v) Invoice No. 772 on the statement was an error made by Pillay Suppliers. These goods were not purchased by Veli Traders. (vi) The statement was received on 25 May 2019. Page 97 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY 2 CREDITOR’S LEDGER ACCOUNT NO. BALANCE STATEMENT BALANCE Balance 35 000 38 420 i) ii) iii) iv) v) vi) TOTAL DEBTORS RECONCILIATION AND DEBTORS AGE ANALYSIS ACTIVITY 1 (30 Marks; 18 Minutes) ILLOVU TRADERS The debtors’ age analysis on 31 May 2018 is provided. Credit terms are 30 days REQUIRED: 11 Explain how a debtors’ age analysis can assist with internal control over debtors. (2) 1.2 Calculate the percentage of total debts exceeding the credit terms. (4) 1.3 Explain ONE problem (with figures) relating to each of the following debtors: e Mswane P (3) e Hambrok V (3) INFORMATION: DEBTORS’ AGE ANALYSIS ON 31 MAY 2018: CREDIT AMOUNT CURRENT 30 DAYS | 60 DAYS 90 LIMIT OWING MONTH DAYS R R R R R R P. MSWANE 10 000 11.000 1980 9 820 W. SMITH 14 000 13 450 4 100 3.902 5 448 N. CELE 2 800 2 550 2550 V. HAMBROK 14 000 11 192 9112 2.080 K. PRICE 5 000 2608 1 408 1 200 41 600 7488 17 472 14 560 2 080 100% ? ? ? 2 Page 98 of 122

ACTIVITY 4 11 Explain how a debtors’ age analysis can assist with internal control over debtors. 1.2 Calculate the percentage of total debts exceeding the credit terms. 1.3 Explain ONE problem (with figures) relating to each of the following debtors: Mswane P Hambrok V Eq ACTIVITY 2 : DEBTORS' RECONCILIATION 2.1 DEBTORS’ AGE ANALYSIS The information below relates to Witbank Hardware. REQUIRED: 2.1.1. Explain why the debtors’ age analysis is considered to be an effective internal control measure. State ONE point. 2.1.2 Explain TWO different problems highlighted by the debtors' age analysis. In EACH case, provide the name of a debtor and figure(s). INFORMATION: A. Debtors are granted 30 days to settle their accounts. Page 99 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT B. Debtors’ age analysis on 31 October 2017: CREDIT | AMOUNT | CURRENT 30 60 90 ee LIMIT OWING MONTH DAYS DAYS DAYS Z Zulu 6 000 5.000 2 100 2.900 P Botha 3 500 4 200 3.800 400 M Valley 7 000 1 450 500 950 S Walker 13 000 12 500 1000 3.000 4500 | 4000 O Klein 3.000 3.000 1900 1 100 26 150 9300; 6300 5 600 4950 100% | 36% | 24% | 21% | 19% 2.2 DEBTORS' RECONCILIATION Information from the records of Amber Traders for November 2017 is presented. Some errors and omissions were noted. See information B. REQUIRED: 2.2.1 Calculate the correct Debtors’ Control Balance on 30 November 2017. Show figures and indicate '+', '-' or 'No change’ at EACH adjustment. (7) 2.2.2 Calculate the correct total of the debtors’ list on 30 November 2017. (10) INFORMATION: A. Balances on 30 November 2017 before errors and omissions: (i) Debtors' Control, R25 700 (ii) Debtors’ list: DEBIT CREDIT L Nkosi R5 700 S Muller R11 100 M Welthagen R1 900 B Sandleni R15 900 R32 700 R1 900 B. Errors and omissions: (i) The total of the Debtors’ Journal was undercast by R2 700. (ii) Interest of R350 must be charged on the overdue account of S Muller. (iii) | An amount of R3 100 received from L Nkosi was incorrectly recorded as R1 300 in the Cash Receipts Journal and posted as such to the General Ledger and the Debtors’ Ledger. (iv) Trading stock returned by B Sandleni was posted to the wrong side of his Debtors’ Ledger Account, R1 200. (v) No entry was made for a credit sales invoice issued to M Welthagen, R1 500. Page 100 of 122

NZI ALUUUN TING ACTIVITY2 2.1 2.1.1 2.1.2 2.2 22 DEBTORS' AGE ANALYSIS URALE 12 2UZU WIP VUUUIVICIN Explain why the debtors’ age analysis is considered to be an effective internal control measure. State ONE point. 2 Explain TWO different problems highlighted by the debtors' age analysis. In EACH case, provide the name of a debtor and figure(s). PROBLEM DEBTOR AND FIGURE(S) 6 DEBTORS' RECONCILIATION CORRECTIONS TO THE DEBTORS' CONTROL ACCOUNT ON 30 NOVEMBER 2017 Balance before errors and omissions 25 700 (i) (ii) (iii) (iv) (v) Correct Debtors’ Control balance 7 a Page 101 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.2.2 DEBTORS’ LIST ON 30 NOVEMBER 2017 L Nkosi (5 700 S Muller (11 100 M Welthagen (-1 900 B Sandleni (15 900 Correct total of Debtors’ List 10 ACTIVITY J1: VAT 14 Bigshow Traders is registered for VAT. The VAT rate is 15%. The business is owned by Des Damons. ACTIVITY J2: VAT 2.1. 2.2 REQUIRED: 1.4.4 Calculate the amount of VAT receivable or payable to SARS. Indicate whether it is receivable or payable. (13) 1.1.2 Des suggests that the business should charge VAT but stop submitting returns to SARS in future. Give your opinion regarding this matter. State ONE relevant point (2) INFORMATION: INCLUSIVE EXCLUSIVE VAT Total sales 368 000 (i) Total cost of goods bought 174 560 (ii) Goods returned by debtors 2500 Goods returned to suppliers 11.201 9 740 (iii) Bad debts 2.000 Goods taken by the owner for 5750 750 personal use Discount given to customers 1059 VAT CONCEPTS REQUIRED Indicate if the following items are VAT Exempt or Zero Rated items. (3) 2.4.1 | Public road transport 2.1.2 __| Vegetables 2.1.3 | Residential rent WINSTON TRADERS The following information was taken from the accounting records of Winston Traders. The financial year end is 28 February 2018. All goods bought and sold are subject to 15% VAT. REQUIRED Use the information below to answer the following questions: 2.2.1 Calculate the amount that would be entered next to Debtors Control on the credit side of the VAT Output account. (3) 2.2.2 Calculate the VAT amount owed to SARS on 28 February 2018. 220 In which section of the Balance Sheet will you record the amount calculated in 2.2.2? (1) Page 102 of 122

NZI AUUUUNN LING GRAVE 12 2020 MIP DOCUMENT INFORMATION A The General Ledger reflects the following accounts: VAT Input Feb’? | 28 | Bank CPJ 8 600 | Feb‘) 28 | Creditors Control | _CAJ 150 Creditors Control CJ 6 000 VAT Output Feb"® |15 | Debtors Control GJ 276 | Feb" 28 | Bank CRJ 18 000 28 | Debtors Control DAJ 350 Debtors Control | DJ ie B_ Additional information: ¢ Total cash sales for February 2018 was R120 000 (excluding VAT). 75% of all goods were sold for cash and the rest on credit. ACTIVITY J3 CASH BUDGET, AGE ANALYSIS AND VAT 3.1. CASH BUDGET You are provided with an incomplete cash budget and additional information in respect of Fashion Expression Ltd. The financial year-end is 28 February each year. REQUIRED: 3.1.1 Calculate the Debtors’ Collection for June 2018. 3.1.2 Calculate the figure that would appear in the Cash Budget for Salaries and Wages for May 2018. 3.1.3 The purchases payment policy needs to be changed. e — Explain the need to change the policy. e — Provide TWO points of change that would benefit the company. 3.1.4 The directors took significant decisions to address their concerns about the cash balance. Mention TWO Strategies used to improve the cash balances. Explain why you agree or disagree with these strategies. INFORMATION: FASHION EXPRESSION LTD Extract of the Cash Budget for the period 1 April 2018 to 30 June 2018 RECEIPTS April May June Commission income 60 000 65 000 : Sale of Land and Buildings 0 380 000 0 Proceeds from 50 000 shares issued 239 000 0 0 TOTAL RECEIPTS 443 000 i 195 000 PAYMENTS - extract Salaries and wages 48 000 * ig TOTAL PAYMENTS 204 500 : 340 700 Surplus (Deficit) 238 500 110 000 (145 700) Bank balance at beginning of month (60 000) 178 500 288 500 Bank balance at end of month 178 500 288 500 142 800 Page 103 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2 AGE ANALYSIS The Debtors’ Age Analysis of Multiplex Ltd was prepared on 30 June 2018. REQUIRED: 3.2.1 The internal auditor is concerned that the credit controller is not managing the debtors effectively. 4 © — Provide TWO points of evidence from the Age Analysis, to substantiate his (4) concern. Quote figures. e — Suggest TWO ways in which the problems identified can be rectified. 3.2.2 What would H. Jacob’s outstanding balance be on 31 July 2018 if he paid R1 310 during July (2) 2018? INFORMATION: A. _ DEBTORS’ AGE ANALYSIS Debtor Limit Total due Overdue 60 days+| 30 days+ Current H., Jacob R 10 000 R 15 310 R 9800 R 1200} R 1000 R3310 W. Grey R 15 000 R 15 000 R 12 000 R 3000 L. Conrad R 8000 R 4254 R 3000 R 1 254 Total R 34 564 R 21 800 R 4200 R 4000 R 4564 100% 63% 12% 12% 13% Credit terms: Strictly 30 days from date of statement B ADDITIONAL INFORMATION: (i) Debtors and sales: e Debtors are expected to settle their accounts as follows: - 25% of debtors will settle their accounts in the same month as the credit sale, subject to a 5% discount. - 68% of debtors will settle their accounts in the month following the credit sale. (ii) Purchase of stock: e Goods are replaced monthly to maintain a fixed stock level. © Goods are purchased as follows: 25% for cash and 75% on credit. ¢ Allcredit purchases are settled during the following calendar month. iil) Salaries and wages: © The manager will receive an increase of 30% on his present monthly salary of R6 000 from 1 May 2018. © The ten shop assistants, who receive an equal salary, will each receive an increase of R300 per month, from 1 May 2018. 3.3 VAT 3.3.1 Choose the correct word from those within brackets. Write only the word next to the question number in your ANSWER BOOK. (i) VAT is a/ an (direct / indirect) tax. (ii) VAT on purchase of R35 400 will (increase / decrease) the amount payable to SARS. (iii) VAT refundable by SARS is a/ an (asset / liability) to the business. (3) 3.3.2 The bookkeeper of Cooper Ltd. calculated the amount payable to SARS to be R112 539. The internal auditor found discrepancies in the calculation. REQUIRED: Calculate the correct amount payable to SARS. VAT is charged at 15%. Page 104 of 122

KZN AUUUUN TING GRADE 12 2020 MIP DOCUMEN I INFORMATION: VAT on shop rent paid was not taken into account. The rent amount of R15 525 was inclusive of VAT. VAT of R22 500 on a vehicle purchased by the company was recorded as output VAT. VAT of R7 500 was incorrectly added to a sale of R50 000. The sale of R50 000 was subject to a trade discount of 8%. ACTIVITY J4: BUDGETS 41 42 Choose an explanation from COLUMN B that matches a concept in COLUMN A. Write only the letter (A-D) next to the question number (4.1.1 to 4.1.4) in the ANSWER BOOK. COLUMN A COLUMN B 4.44 Cash budget A Outlay of funds for large projects 41.2 Forecast Income B Used to determine the expected bank balance Statement 41.3 Capital budget c No reference is made to any previous budget estimates 414 Zero based budget D Used to determine the expected net profit SHELDON TRADERS The information provided relates to Sheldon Traders, owned by Sheldon Tumer. The business specialises in electrical products. 4.2.1 4.2.2 4.23 424 4.2.5 Identify an incorrect entry in the cash budget and explain why it is incorrect. State THREE ways in which the purchasing of Land and Building will be financed. Complete the Debtors’ Collection Schedule for the budgeted period. Some figures have already been entered. Calculate the missing figures denoted by A — E on the cash budget. Refer to information F Sheldon is concerned about certain aspects of the business. ¢ Comment on the cash and credit sales. Explain how these amounts are affecting the cash flow of the business? Quote figures. Has the Advertising campaign been beneficial to the business? Explain. Quote figures. Do you think the collection from debtors is well controlled? Explain. Quote figures. Give TWO points of advice (4) SG Page 105 of 122

KZN ACCOUNTING GRADE 12 INFORMATION: A. EXTRACT FROM CASH BUDGET FOR SEPTEMBER AND OCTOBER 2019: 2020 MIP DOCUMENT September October Cash Receipts Cash Sales 110 000 E Additional Loan 800 000 Fixed deposit matured 500 000 Collections from debtors Total Receipts Cash Payments Cash Purchases 70 000 77 000 Payments to Creditors D 143 000 Salaries c 118 800 Advertising 22 000 30 000 Telephone 16 800 18 000 Vehicle expenses 13 812 14 226 Rent expense 24 000 Land and buildings 2 400 000 Municipal rates on property 2.000 Depreciation 10 000 Interest on loan 8 000 Equipment Repairs 16 400 20 400 Drawings of cash 60 000 60 000 Total Payments Cash Surplus/Deficit B Opening Bank Balance 4 100 000 Closing Bank Balance A (71 406) Debtors Debtors are granted 30 days to settle their accounts as per policy. However, debtors’ pattern payment is as follows: e 20% pay in the month of sale subject to a discount of 5%. e 30% pay in the month following the month of sale. e 48% pay in the following month. The remaining 2% must be written off in the third month following the sale. 75% of all sales are on credit. Creditors and Trading Stock e The business keeps a fixed base stock of R350 000. (Goods are replaced monthly.) e The business uses a mark-up of 100% on cost. © 35% of all stock is purchased on credit. e Creditors’ terms are strictly 30 days. The business complies with these terms. Salaries: There was a general salary increase of 8% from 1 October 2019. of Page 106 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT Ee Extract from the August 2019 Cash Budget: Budgeted Actual Cash Sales 110 000 84 000 Credit Sales 270 000 360 000 Collection from debtors 282 300 173 000 Advertising 22 000 44 000 ACTIVITY J4 44 444 41.2 41.3 414 4 4.2 SHELDON TRADERS 4.2.1 | Incorrect entry: Reason: 2 4.2.2 | State THREE ways in which the purchasing of Land and Building will be financed. 3 Debtors' Collection Schedule: 4.2.3 MONTH CREDIT SALES SEPTEMBER OCTOBER July R270 000 R129 600 August R300 000 September October R68 400 9 Page 107 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 4.2.4 Item Calculations Answer 12 4.2.5 Comment on the cash and credit sales. Explain how these amounts are affecting the cash flow of the business? Quote figures. Comment: Explanation: 6 Has the Advertising campaign been beneficial to the business? Explain. Quote figures. YES/NO Explanation: 5 Page 108 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 4.2 BUDGET 4.2.1 Explain the importance of comparing the actual figures to the budgeted figures in the cash budget. 4.2.2 Calculate the values marked (A) — (F). Calculations 4.2.3 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. 4.2.4 No new workers were employed during July and August 2018. What could possibly be a 3 reason for the change in each of the actual figures for those two months? Reason July August 4.2.5 The owner feels that the business pays less money by renting equipment than purchasing | 2 Page 109 of 122

KZN ACCOUNTING 4.2.6 4.2.7 GRADE 12 2020 MIP DOCUMENT the equipment. Do you agree with her opinion? Provide TWO points to support your answer, 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 4.2.5), identify TWO other items, with figures, that needs attention. Also provide advice how these items can be managed. Item Figure Advice 6 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 Finance officer 2 Page 110 of 122

ACTIVITY J5 You are provided with information relating to Billy Traders, a business owned by Billy Willy. The business sells catering equipment for cash and on credit. REQUIRED: 5.1 Complete the following statements: 5.1.1 The main purpose of a Projected Income Statement is ... 5.1.2 The main purpose of a Cash budget is ... 5.2 Complete the partially completed Debtors’ Collection Schedule. 5.3 Calculate the following amounts for the Cash Budget: 5.3.1 The percentage increase in rent income. §.3.2 Payments to creditors during December. 5.3.3 The amount of the loan to be received on 1 December. 5.3.4 The salaries and wages for December. 54 An amount of R123 000 for staff training. Provide ONE reason why this is considered to be a necessary expense. 5.5 Refer to information G: The manager is of the opinion that some items in the budget are not well controlled. He identified the following 3 items: . Cash sales . Delivery expenses ° Rent income . Provide a possible reason for the variance. In each case, give one point of advice to address this problem. INFORMATION A. Sales: . 50% of the total sales are for cash. . Goods are sold at a profit mark-up of 60% on cost. B. Debtors pay according to the following trend: . 40% settled in the same month of transaction. They qualify for a 5% discount for prompt settlement. . 45% settled in the one month after the transaction month. ° 13% settled in the two months after the transaction month. . 2% is written off as bad debts in the third month after sales. C. Purchases and payments to creditors . The business maintains a fixed stock base level. Goods sold in a month are replaced in the same month. . 80% of all merchandise purchased is on credit. Creditors are paid the month following the month of sales. SS Ga = = a. Page 111 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT D. Extract for the cash budget for November and December 2019: CASH RECEIPTS NOVEMBER DECEMBER Cash sales 160 000 165 000 Cash from debtors 2 7 | Rent income 18 000 19 440 Loan from Mashonisa Bank ? CASH PAYMENTS Cash purchases of stock 40 000 41 250 Payments to creditors 152 000 2 | Interest on loan 70 3375 Salaries and wages 48 000 ? Staff training 123 000 Sundry expenses 23 000 45 000 | Surplus/Deficit ‘| Opening balance 69 090 | (103 310) Closing balance (103 310) 9915 | E. A loan will be received on 1 December 2019. Interest at 9% p.a. will be paid commencing on 31 December 2019. F. The four workers receive the same monthly salary. Three of them will receive a bonus equal to 75% of their monthly salary and the last one will receive 50%. G. Actual and budgeted figures for August 2019: BUDGET ACTUAL R R Cash sales 160 000 105 700 | Delivery expenses 11.990 17 600 Rent Income 18 000 12000 | 35 Page 112 of 122

ACTIVITY J5 5.1.1 | The main purpose of a Projected Income Statement is ... 2 5.1.2 | The main purpose of a Cash budget is ... 2 5.2 DEBTORS’ COLLECTION SCHEDULE Month Credit Sales November December September 150 000 19 500 October 152.000 68 400 ‘November 160 000 60.800 | 7 December 165 000 5 5.3 Calculate: 5.3.1 % increase in Rent Income. 4 5.3.2 Payments to creditors in December. 4 Page 113 of 122

KZN ACCOUNTING 5.4 5.5 GRADE 12 2020 MIP DOCUMENT 5.3.3. The amount of the loan on 1 December. 4 5.3.4 Salaries and wages for December. 5 An amount of R123 000 for staff training. Provide ONE reason why this is considered to be a necessary expense. Provide a possible reason for the variance. In each case, give one point of advice to address this problem. ITEMS REASON ADVICE Cash sales Delivery expenses Rent income Page 114 of 122

KZN ALUUUN TING ORAUT 12 ACTIVITY J6 You are provided with information relating to Magic Traders. The business is owned by Tony Salotte. REQUIRED: 61 6.2 6.3 64 Complete the following statements: 6.1.1 The main purpose of a Cash Budget is to ... 6:2 The main purpose of a Projected Income Statement is to ... Debtors’ Collection Schedule and Projected Income Statement: 6.2.1 Complete the Debtors' Collection Schedule for June 2018. 4U2U WIP DUUUIWIEINE 6.2.2 Determine the following amounts that will appear in the Projected Income Statement: e Discount allowed for May 2018 e Bad debts written off in June 2018 Calculate the following: e Cash sales for May 2018 e Payment to creditors in June 2018 e Salaries for May 2018 Tony compared the budgeted figures to the actual figures for April 2018. BUDGETED ACTUAL Sales R480 000 R576 000 Advertising R8 000 R11 000 Wages of cleaners R9 000 R12 500 Cleaning materials R1 200 R2 700 Payment to creditors R224 000 RO 6.4.1 Tony is not concerned about the overspending in advertising. Explain why this is so. Quote figures to support your answer. 6.4.2 State ONE consequence of not paying the amount due to creditors in April 2018. 6.4.3 Refer to the figures above and to Information F. State TWO points in favour of appointing Gentex Cleaning Services. Also explain ONE point that Tony should consider before making this decision. Page 115 of 122

KZN ACCOUNTING INFORMATION: A. Total sales: GRADE 12 2020 MIP DOCUMENT ACTUAL BUDGETED March 2018 R420 000 April 2018 R480 000 May 2018 R300 000 June 2018 R360 000 Cash sales amount to 40% of the total sales. Debtors are expected to pay as follows: 30% in the month of sales. They receive a 5% settlement discount. 60% in the month following the sales month 9% in two months after the sales month . . e © — 1% is written off as bad debts in the third month after sales Pi urchases and payment to creditors: Salaries: Total salaries are R101 500 for April 2018. There are 7 employees who earn the same monthly salary. 1 employee will resign and leave on 30 April 2018. 4 employees will each receive a bonus of 80% of their salaries in May 2018. The business maintains a fixed-stock base level. Goods are sold at a mark-up of 50% on cost. 80% of all merchandise purchased is on credit. Creditors are paid in full in the month following the purchase month. The business pays wages to two cleaners, one of whom has been on sick leave in April and a substitute had to be employed. Tony is concerned that too much money is wasted on cleaning. He thinks that he should contract Gentex Cleaning Services to take over the cleaning process entirely. They will charge R8 000 per month. ACTIVITY J6 6.1.1 6.1.2 40 The main purpose of a Cash Budget is to ... The main purpose of a Projected Income Statement is ... Page 116 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 6.2.1 Debtors' Collection Schedule: CREDIT SALES MAY 2018 JUNE 2018 March 2018 252 000 22 680 April 2018 288 000 172 800 May 2018 51 300 June 2018 216 000 Cash from debtors 246 780 1 6.2.2 6.3 crest Determine the discount allowed for May 2018. Workings Answer 3 Determine the bad debts written off in June 2018. Workings Answer 3 Calculate the cash sales for May 2018. Workings Answer 2 Calculate the payment to creditors in June 2018. Workings Answer 4 Page 117 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT Calculate the salaries for May 2018. Workings Answer 5 6.4.1 Tony is not concerned about the overspending in advertising. Explain why this is so. Quote figures to support your answer. 4 6.4.2 State ONE consequence of not paying the amount due to creditors in April 2018. 2 6.4.3 State TWO points in favour of appointing Gentex Cleaning Services. Point 1: Point 2: Explain ONE point that Tony should consider before making this decision. 6 Page 118 of 122

ACTIVITY J7 7.14 Tee 7.1.3 7.14 715 7.1.6 TE 4Uéu WIT DUUUIVICINE Hayley Westra owns Boxes Etc., a business selling packing material. Her business is experiencing cash flow problems and she asked you to assist in correcting this. Budgeted and actual figures were provided in the cash budget. REQUIRED Explain the importance of comparing the actual figures to the budgeted figures in the cash budget. ( Calculate the values marked (A) — (F). (8) Refer to the figures for “Cash received from debtors”. Are the debtors adhering to the credit (3) terms of the business? Provide figures to support your answer. 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? (2) The owner feels that the business pays less money by renting equipment than purchasing (5) the equipment. Do you agree with her opinion? Provide TWO points to support your answer. 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 7.1.5), identify TWO other (6) items, with figures, that needs attention. Also provide advice how these items can be managed. The owner, Hayley, 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 (2) reason for each. INFORMATION Boxes Etc — Cash budget for July and August 2018 July August Cash receipts Budget Actual Budget Actual Cash sales (40% of total sales) 720 000 840 000 360 000 378 000 Receipts from debtors 864 000 624 000 (A) 920 000 Rent income (F) (F) 49 680 49 680 Fixed deposit 360 000 360 000 = - Sundry income 2 i ? ai Loan: FNB 300 000 300 000 - - Sale of vehicle 189 000 120 000 - = TOTAL RECEIPTS 2? 2? a 0 Cash payments Payments to creditors 960 000 960 000 (B) 1200 000 Wages and salaries 144 000 180 000 144 000 108 000 Fixed deposit (ABSA) - - (C) (C) Drawings 150 000 210 000 150 000 168 000 Repayment of loan - - 30 000 30 000 Rent of equipment 507 000 459 000 511 080 ? Interest on loan 2? 2 TOTAL PAYMENTS 1761 000 1 809 000 ? ? Surplus (Deficit) 720 200 483 200 (675 400) (757 070) Bank opening balance (432 000) (432 000) (D) 51 200 Bank closing balance 288 200 51 200 (E) (705 870) Page 119 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT Additional information: e Debtors must pay their outstanding debts after 30 days and will receive a 5% discount for prompt payment. e — Allstock is bought on credit and a fixed basis of stock is maintained. Creditors’ accounts are settled after 30 days. e Agross profit margin of 60% is used. ¢ Half of the fixed deposit received in July, was reinvested in August 2018. Interest is receivable every 6 months (at the end of June and December) ¢ The loan was obtained to help solve the cash flow problem. It is repayable in monthly instalments. ¢ The monthly rent increased on 1 August 2018 with 15%. «Inthe past, when the business wanted to sell a business vehicle, the driver of that vehicle usually had first option to purchase it at carrying value. No deposit was required and the balance would have been deducted in monthly instalments from his salary. ACTIVITY J7 711 Explain the importance of comparing the actual figures to the budgeted figures in the cash budget. 712 Calculate the values marked (A) — (F). Calculations (13 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. Page 120 of 122

ROI UU UIN IW VINAUL 12 714 7.1.5 7.1.6 4U4U WIT DUUUIVICINT 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 August 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. 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 7.1.5), identify TWO other items, with figures, that needs attention. Also provide advice how these items can be managed. Item Figure Advice Page 121 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT TAT 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 Finance officer Page 122 of 122

education Department: Education PROVINCE OF KWAZULU-NATAL CURRICULUM GRADE 10 -12 DIRECTORATE LEARNER SUPPORT DOCUMENT ACCOUNTING GRADE 12 SOLUTIONS 2020 KZN ACCOUNTING GRI2 1. A: INCOME STATEMENT 2020 SOLUTIONS TO SUPPORT DOCUMENT ACTIVITY A1 KHUMALO FASHIONS LTD. INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019 Sales 1225 700 Cost of sales (4 169 700 x 1/149) B21+ (56 000 x 1/425) B21 1 (880 300) Gross profit (Sales — Cos), operation 1345 400 : Other operating income operation, one part correct 0112 560 Commission income (89 200- 64010 operation £88 560 Rent income (4 x 6 000) #24 000 8 Gross operating income operation 1457 960 Operating expenses Gross operating inc — Operating £ (151 535) profit Bank charges (3 260 + 340) lg 3 600 Bad debts (5 600 + 800) vv 6400 Discount allowed (2 940 — 4001) operation 82540 Stationery (3 860 + 1001-2801) one part correct 63.680 Insurance (14 250 — 2 400 &) operation #11850 Director's fees (50 000 + 60 000) 110 000 Sundry expenses (balancing figure, one part correct, 15345 can be negative based on candidate's answers) 22 Loss of damaged stock (4 800 — 1 680 1) operation 13120 Trading stock deficit £3200 Provision for bad debts adjustment (3 800 — 2 000) © 1 800 Operating profit (1 225 700 x 25%) 306 425 Interest income (11 350 + 670) 12020 Profit before interest expense operation 1318 445 10

ACCOUNTING GRI2 +2020 SOLUTIONS TO SUPPORT DOCUMENT. KZN ACCOUNTING. GRI2 ‘2020 SOLUTIONS TO SUPPORT DOCUMENT interest expense Profit before int exp — NPBT, 1 (55 795) ‘Any one valid points vv" operation © Check the fixed asset register agrees with an actual physical inspection of the tangible assets. Profit before tax NBPT + Tax, operation, must be greater than 1262 650 © Check that all controls are adequate and are actually being implemented. © Check the documentation and financial records to ensure that all purchase and sale of fixed NBAT assets have been recorded correctly. Income tax (78 795) Profit after tax (1 225 700 x 15%) ff 183 855 2 CTIVITY A2 2.2 Income Statement for the year ended 28 February 2019 Sales 7 540 00 HeOrTOOM 12. 480V 212.051 520 AA Calculate the profit or loss on disposal of the computer on 31 August 2019. Cost of sales 7 540 000V -7 800V @ (7 532 200) 30 000 - 13 680 x 20% x 6/12 —ane methad mark one part correct 30000 -(13680 +1632) 8000 = 6 688 Gross profit s SALE v v vi v WZ one part correct Other operating income 1205 680 OR Commission income 31 580 Asset disposal Rent income 158 200 + 15 400v v 173 600 Equipment 30 000 | Accumulated depreciation a : on equipment (13 680 + 1 15312 Provision for bad debts adjustment. vv500 632) Gross operating profit 7 4 725 000 Bank 8.000 t 7 Loss on sale of asset 6 688 Operating expenses &(1 875 000) Di 932 400 30000 30.000 sith Audit fees 64000 Salaries and wages 320 000 Insurance ¥56 250 Bad debts 2779 Vv +15 225 vv 218 004 vw 1.2 | Calculate the total depreciation for the year. Suny expels aa Loss on sale of asset s86:3.1.4 (could be profit) 16 688 164 500: four marks v- vy 950.000 x 20% x 3/12 = 47 500 1 one partoorrect inie pila oS aie 1 520 000 - 950 000 x 20% = 114 000 ~ #1 one part correct 1.287 000 v + 7 800 MI - 37 500 v - 1 234 800 22 500 Depreciation §063:1:2 1256 268 (660 000 — 30 000) v’ — (178 000~ 13 680) v x 20% = 93 136 Operating profit ca {22 850 000 Asset disposal (see 3,1.) = 1632 Interest Income balancing figure 21158 200 Total: 256 268 & Profit before interest expense 13 008 200 8 Interest expense 2 398 200 + 510 000 - 2 620 000 ¥ 1 (288 200) 1.3 | Suggest ONE internal control measure that the internal auditor can perform to verify the tangible Net proft before tax NEAT Siete stra assets figure in the’Balance Sheet. 3 4

GR12 2020 SOLUTIONS TO SUPPORT DOCUMENT fae KZN ACCOUNTING fa GR12 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING Income tax = 2.040 000 x 25/75 v¥ (680 000) 34 CONCEPTS Net profit for the year 7 2040 000] Le 3.4.4 limited Me 3.1.2 _| receivables ‘e 3.1.3 | liability v 3.1.4 | internal 4 23 Retained income 4 Balance at beginning of year 765 000 Funds used for shares repurchased (125 000 x 0,50) v¥ (62 500) Net profit after tax v¥2.040 000 Ordinary Share dividends ‘operation one part correct 3.2 PIXIE LTD must @ (2 182 500) be in brackets 3.2.1 NOTES TO THE FINANCIAL STATEMENTS ON 28 FEBRUARY 2018 Interim v982 500 Final (1 500 000¥ ¥ x0,80) operation one part correct 1 200 000 ORDINARY SHARE CAPITAL 7560 000 AUTHORISED Balance at the end of year ‘operation one part al 400 000 ordinary shares ISSUED 300 000 | Ordinary shares in issue on 1 March 2017 1275000 ORDINARY SHARE CAPITAL (85 000) Ignore brackets ue 20 000) shares repurchased during the year (x R4,25 one part correct 5 Number of authorised ordinary shares: 3 000 000 shares é vv) ) do not accept 120.000 as final answer ISSUED R 40 000 | shares issued during the year 220000 vv 2.000 000 Ordinary shares beginning of the year 5.000 000 Ordinary shares in issue on operation vv 320 000 4410000 250 000 ¥ Ordinary shares issued during the financial 21 750 000 28 February 2018 8 year at @R7 each” operation 10000” Ordinary shares repurchased at the average 1 (30 000) share price *R3v ¥ any one part correct RETAINED INCOME 2.240 000” Ordinary shares in issue at the end of the year 6 720 000 9 Balance at the beginning of the year 28 900 operation See Inc St = 5000 00041 750 Net profit after tax ee one part correct p __ 288.000 Shares repurchased (120 000 v - 85 000 &1 $6 OSC) (ere a Dividends on ordinary shares bse er Z dll Miaka Interim dividends paid (300 000 vx 0,1) one partcomect 33 AUDIT REPORT Final dividends declared (280 000 vx 0,2) onepartcomect gy)

‘ACCOUNTING R12 ‘2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING GRI2 ‘2020 SOLUTIONS TO SUPPORT DOCUMENT Balance at the end of the year Operation, one part correct 195900 322 PIXIE LTD INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2018 Sales 1800 000 Cost of sales (1.000000) | vw Opera Gross profit 3 |e Other operating income Operation 21710; 4 1750x10 — 1925x2 Rent Income (17 500 Vv +3 850 v) eel Provision for bad debts adjustment 360] VY Gross operating income 6 821710 Operating expenses GOl-OP (425710)| 2 Consumable stores 2750) ¥ Advertising (62 545 v - 28 800 Vv) 33745] fa Audit fees (5 720 x 100/40) 14300] vv Director's fees (67 350 ~ + 60 000 vv’) 127350] H* Salaries and wages (128 450 v’ + 2 700 v’) 131150] Sundry expenses missing figure 7165) 4 Bad debts (2 900 + 600) 3500} vv Loss due to water damage 4000] vv# Trading stock deficit 23400] v# Depreciation 78350] ¥ Operating profit 24 396.000} VY Interest income 13180] v Net profit before interest expense Operation 409180] Interest expense (76 500 - 12 500 ~ 73 180) (9 180) | vv Net profit before tax Operation 400000| 4 Income tax (19 500 v + 64 650 v + 27 850 v) (112000) | &* Operation Net profit after tax 10 | 2 Foreign items “1 max -2 B:; BALANCE SHEET ACTIVITY B14 CALCULATION OF FINAL PROFIT, BALANCE SHEET AND NOTES 1.1 Correct net profit after tax for the year ended 30 June 2018 Incorrect Net Profit before Tax 4 234 335 Insurance 10 800 + 12 = 900x6 5.400

KZN ACCOUNTING R12 2020 SOLUTIONS TO SUPPORT DOCUMENT 7 KZN ACCOUNTING . GR12 2020 SOLUTIONS TO SUPPORT DOCUMENT Loss due to fire 42 000 X 25% (10 500) Provision for bad debts adjusted 2 475 — (4% x 54 000) =2 475 - 2 160 315 EQUITY AND LIABILITIES 1.2 | Rent income (a) SHAREHOLDERS EQUITY 4804 000 1.050 X 6 = 6 300 / 136 950 — 6 300 = 130 650 + 13 = 10 050 + 1 050 (11.100) Ordinary Share Capital [ ue 4290 000 Interest on loan =X == x (6250) Retained Income [aus 514 000 Profit on sale of asset 21 750 (correct entry) + 21 750 (make correct enti 43 500 360.000 Correct Net Profit before a ™ 1256-700, NON-CURRENT LIABILITIES inGoina TOE (G74 700 [Loan from JSE Bank 420 000 + 5 250-5 250 ~ 60 000 I al 380 g00] Net Profit after Tax 885 000 : CURRENT LIABILITIES ee Trade and other payables 9 (0) Authorised: 87 150 + 11 100 +5 250 + 7 500 + 15 000 + 396 000 522 000 500 000 ordinary shares Bank overdraft 1.050 000 - 15 000 - 1 025 000 10 000 Issued: Current loan portion 60 000 300 000 shares on 30 June 2017 @ R12 each 3.600 000 TOTAL EQUITY AND LIABILITIES 5 756 000 (60% x 500 000) = 300 000 shares / 3 600 000 + 300 000 = R12 each a 100 000 shares issued @ R16 each 1600 000 70 000 shares repurchased @ R13 each (910 000) (3.600 000 + 1 600 000) + (300 000 + 100 000) = R13 330.000 shares on 30 June 2018 R4 290 0000 Retained Income Balance at end of the previous year 465 000 ACTIVITY B2 Net profit after tax for the year 885 000 Repurchase of 70 000 ordinary shares @R2 each _ (R15 - R13) (140 000) 24 CONCEPTS Dividends on ordinary shares (696 000) Paid 400 000 X 75 cents 300 000 iC) Recommended 330 000 X 120 cents 396 000 2.1.1 | Directors v Balance at end of current year 514 000 aT Trade and other receivables eer | Ua a 21.3 | IFRS if Trade debtors 54 000 54 000 3 Provision for bad debts 2 475 - 315 (4% x 54 000) (2 160) Net Trade Debtors 51 840 SARS (Income Tax) 0 Expenses Prepaid 5 400 5400 Income Accrued 31 660 31 660 88 900 2.2.1 FIXED ASSETS 4.3 BALANCE SHEET KAYZEE LIMITED AT 28 FEBRUARY 2018 (a) | 285.000 91 200 193800 v¥ ASSETS Note R - NON-CURRENT ASSETS 5.474 000 96 900 2 marks 44.535 2 marks ne part Fixed/Tangible Assets 4 684 000 + 525 000 - 215 000 3 4994 000 (©) | 442.500 v= 45 600 ~~ (96 900 vx 20% x 9/12 v) comet Financial Assets 510 000 480 000 82 365 CURRENT ASSETS 282 000 Remaining: Inventories 198 500 + 1 100 - 10 500 4 489 100 (285 000 - 142 500) - (91 200 - 45 600) ons pet a Trade and other receivables 5 88 900 (c) 142500 ¥ - 45600 = Seed Cash and Cash equivalent 4000 6 4.000 = 96 900 x 20% = 19 380 &2 ore part correct ee TOTAL ASSETS 5 756 000 13 9 10

ACCOUNTING R12 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING. GRI2 ‘2020 SOLUTIONS TO SUPPORT DOCUMENT New: 7 243 220 180 000 x 20% x 1/12 = 3.000 vf one part correct TOTAL EQUITY AND LIABILITIES @ sgeenci+or Sold: (12) 14535 21 see (b) 5.21 (a) ORDINARY SHARE CAPITAL Authorised shares: 2.2. BALANCE SHEET ON 30 JUNE 2019 1000 000 ordinary shares : Issued share capital: ASSETS > 7 v inary shi 1d 2 100 000 NON-CURRENT ASSETS TACA ic) 5777 280 00-000 tials de Fixed assets NCA=FA Fe] 5 127 280 (30000) v" | Shares re-purchased R3 7 v” (20 000) aa Financial assets: Fixed deposit (aA v 650 000 100 000 ¥ Shares issued at R7 each 700 000V” (3) 770000” | Ordinary shares on 30 June 2019 27100000 CURRENT ASSETS a 4 465 940 7] Inventories (450 000 ¥ - 5 000 vv + 15 300 V) a 460 300 Trade and other receivables “ane part correct 412.800 3 marks a 492 600 “one part correct (430 000 v-¥- 17 200 v +79 800 v) Cash and cash equivalents (510 640 v +2400 v) a 513 040 (b) RETAINED INCOME 7 243 220 Balance on 1 July 2018 (Balancing figure) 483160 Mt TOTAL ASSETS a STE andl Net profit affer income tax 900 000 Ba 1250 000 v - 350 000 v (15) (4.250/000 onte mark x 72/100 one mark) EQUITY AND LIABILITIES 30 000 shares re-purchased at R6 each (180.000) vi* 7 Ordinary share dividends (403.500) * ORDINARY SHAREHOLDERS’ EQUITY (800 000 x 6,36) : ee 5088 000 Interim dividends 670 000 x 0,20 v” 134 000_ : Final dividends 770 000 B*x 0,35 269500 Ordinary share capital ase Balance on 30 June 2049 799 660 7 Retained income OSE-OSC a 1341 500 @ 5.2.2 SAHARALTD NON-CURRENT LIABILITIES 452.000 SAAN SHEET ON 30 JUNE 2019 Loan: Gaga Bank (752 000 v - 300 000 v) a 452.000 NON-CURRENT ASSETS 3168 660 I" a Fixed Assets 2580 000 4275 000v’ + 300 000Vv +720 000V +600 000 v’- 315 CURRENT LIABILITIES a 1703 220 00 vv Trade and other payables “could include SFD/SARS:IT/STL. . ne ‘ : (661 600 v + 103 600 vv +14 520 Vv) 4) 779 720 Financial assets: Fixed Deposit v” 588660 HI} 11 Current portion of loan is baa CURRENT ASSETS (1.090 000 x 7,5) 7635 000 af Shareholders for dividends (800 000 x 0,75) ve 600 000 Inventory 790 000 HA* Trade and other receivables ‘SARS: Income tax v 23 500 36 (530.000 V + 24 000 v + 50.000 Vv) 604 000 ZI* 11 12

+ KENACCOUNTING 2020 SOLUTIONS TO SUPPORT DOCUMENT GR12 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING GR12 Cash and cash equivalents ACTIVITY B3 Me wv 241 000 H* (66 000_v +175 000 ) 000 3.1 CONCEPTS TOTAL ASSETS 4803 660 hI** “(Must be the same figure as Total Equity and 344 BY Liabilities) 13 1. 3.1.2 DY EQUITY AND LIABILITIES 3.1.3 AY SHAREHOLDERS EQUITY 3.509 660 b* 341.4 EV Ordinary share capital v” (s00.4.2.1 (a)) 2710 000 a 4 Retained income v7 799 660V | 5 3.2 PHAMBILI LIMITED NON-CURRENT LIABILITIES 204 000 Loan: Quality Bank 3.2.1. Prepare the following notes for the financial year ended 28 February 2019. (300 000 v +8 000 vv - 56 000 v - 48 000 vv’) 204 000 ZI* 7 (a) ___ Ordinary share capital CURRENT LIABILITIES _(**SEE ALTERNATIVE) 4.090 000 ba" 500 000 Y | Ordinary shares at beginning of the year 4 220 000 ¥ Trade and other payables (720 000 v + 35 500 v +17 000 vv’) 772.500 2* v is R 7 y Shareholders for dividends {see 4.2.1:(b)) 269 500 MI* oe a ee ie 7 . Current portion of loan ¥ 48 000 io (150 000) v Shares repurchased @ at R2, oe Ae — ‘ (420 000) 2 LIAI 4803 * TOTAL EQUITY AND ABILITIES e+ NOLECL) > |= 4 250 000 v | Ordinary shares in issue at the end 3.500 000 1 | Faq *one part comect ASP = average share price *AL TERNATIVE FOR CURRENT LIABILITIES: (b)___Retained income CURRENT LIABILITIES 4090 000 bat Balance at the beginning of the year 355 500 Trade and other payables (720 000 35 500 v + 269 500 B1*(see 4.2.1.(b)) 772 500 H* Net profit after tax 1 148 000 v x7#/2ev" 2952000 +17 000 Vv) Current portion of loan v7 48 000 M*| 10 Funds used for repurchase of shares (112 500) v2 TOTAL EQUITY AND LIABILITIES 4803 660 21" (150 000 x RO,75) Ordinary share dividends operation, one part correct (975 000) @ Interim 350 000 v ‘See above Final (1 250 000 fx RO,50 “’) operation; on pet correct 625 000 Balance at ie end of the year inspect or oe 28 scssnesin ners 2 220 000 1 T74 3.2.2 [Complete the Balance Sheet (Statement of Financial Position) on 13 28 February 2019. Where notes are not required, show ALL workings. 14

J ACCOUNTING GRI2 ‘2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT BALANCE SHEET ON 28 FEBRUARY 2019 44 aia ci ASSETS 44.2 | ED NON-CURRENT ASSETS TACA | 651980041 441.3 | Al Fixed Assets 4.499 500 Vv 414 |Ba Financial Assets (Fixed Deposit) balancing figure | 5020 300 M1 445 | D0 5 3 CURRENT ASSETS 1 400 200 4.2.4 [RETAINED INCOME Inventory (480 000 + 16 000) 496 000 vv Trade and receivables (400 000 v -5400v +32000vv) | 426 600% Balance at the beginning of the year 468 0001 Cash and cash equivalents (1010 100 Y - 532 500 &) 477 600 & Net profit after tax (1 085 500 x 70% or - 325 680) a 759 920 TOTAL ASSETS 7920 000m |‘ mark two marks Re-purchase of shares (50 000 ix 55cz) or 237 500 - 210 000 50 000 x EQUITY AND LIABILITIES 4,20 (27 500)" ORDINARY SHAREHOLDERS’ EQUITY 5 720 000 ZI Ordinary share dividends (480.000) Ordinary share capital $063.21 | 35000004 ¢ _ Interim dividend (800 000 x 30c) 240 000% 12 Relained income meant | 22200000 | 3 «Final dividend (1 000 000* x 22c) 220 0008" NON-CURRENT LIABILITIES 992 000 Balance at the end of the year 740 420%" Loan (1 376 000Y -—384 000 vv) 7 5 (32000 x 12) Operation, one part correct coud * Ifthe question is sllenton CURRENT LIABILITIES 1208 000 dividends, itis“ implied Trade and other payables trpheeed D (177 500 V+ 10 000%+ 11 500V + 625 000M See 3.2.1) 1 208 000/ “**583 000 4.2.2 Current portion of loan Be 384 000 STATEMENT OF FINANCIAL POSITION ON 28 FEBRUARY 2019 ASSETS Shareholders for dividends Se0 3:21 625 000 NOTE: CURRENT PORTION OF LOAN *: DS Non-current assets operation 4 767 240 SAN BE ADDED:TO.TRADE: AND. THER PAYABLES OR SHON i " = 177 500 + 10 000+ 11 500 = 199 000 Fixed assets (4 919 040 - 201 520) 4717 5201 ** 177 500 + 10 000+ 11 500 + 625 000 + 384 000 = 1 208 000 inanci balancing figure 49.720 f ***177 500 + 10 000 + 11 500 + 384 000 = 583 000 Financial assets TOTAL EQUITY AND LIABILITIES 7920000 | 7 Current assets operation 634 180 29 Inventory (255 340 v'+ 1 580 v/) 256 920 1 Trade and other receivables (235 0001 - 35 000 1+ 6 000 i+ 7 840 ff + 17 300 3+ 14 320 m) (~4 000 - 2 000) one mark 233 460 * Cash and cash equivalents (381 300 !- 237 500 5) 143 800 s* ACTIVITY B4 — TOTAL ASSETS ifsameas TE. 5401 420 t 15 16

« KZNACCOUNTING R12 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT - ——— EQUITY AND LIABILITIES C: CASH FLOW STATEMENTS AND D: ANALYSIS (COMBINED) Shareholder’s equity operation 4730 420% ACTIVITY C1 Ordinary share capital (4 200 0001-210 000 v’) 50 CASH FLOW STATEMENT, RATIO ANALYSIS 000 x 4,20 3.990 000s" Retained income $004.24 740.4203 ‘41 LEWISLTD. Non-current liabilities 270 000 444 [Calculate the total dividends paid that will be reflected on the Cash Flow Loan: Central Bank (420 000 s- 150 000 1) Statement on 30 June 2019. 352 400 + 67 600 270 000 I Current liabilities operation 401 000 3 143 000 i + 333 000 0— 108 000 1 = 368 000 1 one part correct Trade and other payables (22 0008+ 9 000 1) 31000" OR Shareholders for dividends 004.21 220 000 1 — Shareholders for dividends : 6 BANK™ * 368 000 | Balance 143 000 Current portion of loan 150 000 2 Balance 108 000 | Ord Sh Div 333 000. 4 TOTAL EQUITY AND LIABILITIES operation 5 401 420 76000} 476 000_ Trade and other payables can combine the elements under current liabilities. *One part correct 4.1.2 | Calculate the balance on the SARS (Income Tax) account on 1 July 2018. | 532 000 t— 376 000 i— 23 9001 = 132 100 8” one part correct OR SARS (Inc tax) - Bank 532 000 | Balance* (payable). *132 100 Inc Tax 376 000 Ba ance 23.900 532 000 10 ACTIVITY B5 1.1.3 [| Movements in fixed assets: . culate the it of cash received i Id duri 5A Choose @ GAAP principle in COLUMN B that matches the description in COLUMN A. Dees CS. 544 Ev’ historical cost eT 160 000 - 54 500 = 105 500 vv 5.1.2 Dv materiality 5.1.3 B v matching : 5.14 Fv going concer (b) Calculate the cost of the new assets purchased during the financial year. 1. CY busi i See (a) ats ee ; 6 480 0001+ 136 0001+ 105 500 E — 5 324 000 8 = 1397 500 J one part corect VW 18

{ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT Or. one mark if 1 580 000 is 800 000 (one mark) one mark — one mark also used (4.900 000 — 4 100 000) + (1 580 000 + 136 000 + 105 500 — 1 224 000) = 1 397 500 one method mark Complete the “Cash flow from Financing Activities” section of the Cash Flow Statement on 30 June 2019. Cash flow from financing activities (211 000) Shares issued balancing figure; one part correct 1147 000 Shares repurchased (50 000 ¥ x R5,40V ) © (270 000) Repayment of loan (1 038 000 v — 950 000) i (88 000) Note: If brackets are incorrect on final figure, candidate loses one mark per line. Calculate the closing balance of Retained Income as on 30 June 2019. (1 144 000-376 000) (50 000 x 0,60) 970000 ¥ + 768 000 w— 30 000 #333 0001 = 1375 000 fone part correct On the AGM of Lewis Ltd. there was interest shown in purchasing additional machinery and equipment. The company will have to obtain a loan of R2 million at an interest rate of 14%. (a) Calculate the Return on total capital employed (ROTCE). 4 284 000 (2 marks) 4.444 000s + 140 000 x 100 ¥4i [(6 470 0001 + 1 038 0001) + (5 782 0008 + 950 000) | 6 508 000 (2 marks) 6 732 000 (2 marks) = 1284 000 x 100 6 620 000 K2N ACCOUNTING 1.2 TAYLOR LTD. 41.2.1 R12 2020 SOLUTIONS TO SUPPORT DOCUMENT = 19,39% fv (accept 19%, or 19,4%), must be x 100, must be %, one part correct) {b) Show how the proposed additional loan will impact on the debt/equity ratio. Provide a calculation. 950 000i + 2 000 000 4: 5 782 0005 2.950 000 : 5 782 000 0,51 : 1 Jone part correct Calculate the following financial indicators on 28 February 2019: (a) Net Asset Value per share R1 690 000 ) x 100 = 221,78 J one part correct, accept 222c, must be x 100 762 000 i ({b) % Retum on average Shareholder’s Equity (ROSHE) 457 200 v x 100 % ¥ (1510 000 v’ + 1 690 000 v) = _ 457 200__x 100 1.600 000 = 28,58 % M1 must be a % sign, one part correct Comment on the liquidity of the company. Quote THREE financial indicators (with figures and trends) to support your answer. Financial indicator ¥ 1 trend and figure ¥ 3 # Comment il — one mark: must indicate liquidity is healthy/good ‘one mark: must indicate it is possibly too good, not good to have so much current assets / 20

KZN ACCOUNTING . GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING R12 2020 SOLUTIONS TO SUPPORT DOCUMENT money locked up in stock, debtors or cash Reason: (iit Part marks for an unclear or partial answer ‘Current ratio, increased from 2,4:1 to 4,1:1 (or by 1,7:1) There could have been a decision made at the AGM that the company has enough ¢ Acid-test ratio, increased from 1,4:1 to 1,6:1 (or by 0,2:1) reserves and does not have to retain any more funds / The company does not need © Stock tumover rate, increased from 6 to 10 times (or by 4 times) reserve funds for repurchasing of shares / The company has increased their Debtor's collection period, remained on 30 days (or no change) investments in the previous year and does not require additional funds for further © Creditor’s payment period, decreased from 60 days to 30 days (decreased by 30 investments. days) Comment: The liquidity of the company is healthy/acceptable/good, although some indicators could possibly be too high 4.2.3 [Tricia Harper is a shareholder and she is unsure if she should sell her shares ornot. She asks for your advice. Provide figures in your answer. Decision 1 Compare NAV (see 4.2.1 a) to market price 1 Figure(-s) § (either NAV and Market price mentioned together, or difference between the two) © Tricia should sell her shares/not sell her shares e NAVis less than Market price * NAVis 221,8c per share and Market price is 252c per share (or Market price exceeds NAV by 30,2c, or Market price is 18,9% higher that NAV) 1.2.4 [Refer to Information C. Calculate the total dividends Charlie Williams received during the year. 3 10400 ishares x 20c0= 208 000c = R2080 16 600 (40 400 + 6 200)IW shares x 25¢1= 415 000 = R4 150 R6 230 1 6 one part correct 4.2.5 [The dividend pay-out policy has changed from the previous year. Provide calculations to show the change and provide ONE possible reason for the change. Comparing 2018 DPS vs EPS by % Comparing 2019 DPS vs EPS by % # In 2048 they paid out '5/ss, thus 27%. In 2019 they paid out 45/¢9, thus 70%. One mark: In 2018 they paid out 15c of 55c. In 2019 they paid out 45c of 60c. 21 22

| ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT CTIMITY C2 4 : 244 False” 24.2 | Tue” 241.3 | Tue” 244 | Tue” 4 .24 _Calculate the following for the Cash Flow Statement: Income tax paid 1 240 000 - 892 800 367 700 BA 12.000 ¥+ 347 200 v +8 500V OR ‘one part correct -12000 -347200 -8500 mark theline Accept brackets Dividends paid 1 400 000 x 0.15 510 000 Bt 300 000 ¥ +210 000 vv ‘one part correct Cost of new delivery vehicles purchased 801 800 10 152 700 + 425 000 + 389 500 - 7 915 400 - 2 250 000 one part correct v v v v v 14 2.2 Cash effects of financing activities M1 732 000 one part correct Proceeds from shares issued (400 000 x 8.60) ¥¥3 440 000 Funds used to repurchase shares 840 000 v + 168.000 v (1 008 000) Repayment of loan v¥(700 000) 9 Net change in Cash and Cash equivalents pe A ; fe v1 43 300 Cash and cash equivalents in the beginning 45 300 - 2.000 one past connect Cash and cash equivalents at the end ¥ (34 200) || 4 2.3 | Calculate the debt/equity ratio 1 300 000’ : 9 209 000” 00,11 ‘one part correct 5 23 KZN ACCOUNTING. GRI2 Calculate the net asset value per share 9209 000_v’ X 100 21719 cents 1 280 000v One part correct Calculate the return on average shareholders’ equity 892800 __v_ x 100 % (6 458 200 + 9 209 000 114% 7 833 600 “1 one part correct one part correct The management decided to change the mark-up % in the current financial year. Was this a good decision? Explain. Quote figures. YesiNo~ Explanation ¥’ figure ¥° e Adecrease in the mark-up% resulted in an increase in sales by 1650 000 © The gross profit has increased by R262 500 « Gross profit on sales dropped from 43% to 38% . Operating profit on sales did not change, 16% Comment on the management of expenses. Quote TWO relevant financial indicators to support your comment. Financial indicators and'figures vv = Comment vv” Operating expenses on sales has decreased from 23% in 2018 to 22% in 2019. The operating profit on sales however, remained unchanged at 16%. Comment on the issue price of the new shares issued on 30 June 2018. Was this fair? Quote figures. Any three relevant comments vv vv © They issued the new shares at 860 cents. e NAV per share is R7,19 at the end and R6,46 in the beginning. «Market price per share was R6,30 in the beginning and R7,28 at the end. 24 2020 SOLUTIONS TO SUPPORT DOCUMENT

22.7 [Comment on the pay-out policy of the company by comparing 2018 to 2019 and quote relevant KZN ACCOUN| figures i‘ GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING GR12 2020 SOLUTIONS TO SUPPORT DOCUMENT 2018 60/62 = 96,8% VY Buildings Vehicles Equipment Carrying value - 2019 41169 = 594% VY nnipenst 3.452 000 413.400 83 200 ‘Any relevant comment “7 uly ¢ _ 96,8% of the earnings was paid out in 2018 but was decreased to 59,4% in 2019 (by 38%). Cost 3.452 000 872.000 340 000 « The business decided to retain 40,6% of the earnings in 2019 for further growth. Accumulated depreciation 0 (458 600) (256 800) 6 Movements 2.2.8 [Comment on the degree of risk and gearing of the business. Quote TWO financial indicators Additions at cost 1070 800 ¥ 0 116 000 ¥ ith fi 5 Financ indicators —with figuresvv vv Explanationcomment ¥¥ Disposal at carrying value 0 (102 800) ¥ 0 © Debt-equity ratio has improved from 0,3 to 0,1:1 (99 399)B21 (22 630)B2 ROTCE has increased from 13,0% to 15,3% e . Comment: The risk has decreased/the company is low geared Depreciation 0 (One part correct | One part correct Itwas not necessary to pay a large portion of loan as the company is positively geared — the return 14.999 vv + 12.480 v + is greater than interest on loan (13%). 70 400 v + 10150 vv 14.000 Vv” 6 ‘ 211201 176 570 Carrying value - 30 June 2018 ee . 2.2.9 [How many shares will a shareholder, having 45% of the issued share capital, have to buy to operation operation gain control of the company? cy 4522800 Shares owned = 45% x 1280 000 = 576 000” i ra naads On al leaal Accumulated depreciation 15 50% + 1 = 640 001 shares OR 50% + 100 = 640 100 shares OR 7 vv 4 CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2018 Ifa working is shown as a final answer, award working mark only if brackets correctly applied for that item If item is incorrectly placed, award no marks for details or figures Signs may be reversed; apply consistently; mark one line only to benefit candidate Workings may be done as T-accounts; inspect answer booklet for these workings If workings not shown but figure is correct without brackets, award marks to cover workings and penalise on answer Correct use of brackets to eam the mark on the final answer for each item in this column *one part correct and ACTIVITY C3 correct use of brackets CASH FLOW FROM OPERATING ACTIVITIES Operon a ul eae Cash generated from operations 1295 760 3.44.4 FIXED ASSET NOTE TO THE BALANCE SHEET ON 30 JUNE 2018 Interest paid (86 760) 25 25 26

ACCOUNTING GR12 2020 SOLUTIONS TO SUPPORT DOCUMENT Dividends paid 170 000 v + 60.000 v - 30 000 or * - 170 000 ~ 60 000 + 30 000 a 2 140 000 two marks + 60 000 one mark Income tax paid (625 000) Operation CASH FLOW FROM INVESTING ACTIVITIES (1.084 000) if Purchase of fixed asset \* (11070 800 Bf see FA Nota + 116 000 v) ao ¥ Proceeds from sale of fixed assets 102 800 A CASH FLOW FROM FINANCING ACTIVITIES Spereton (114 000) ~ Repurchase of shares (336000) vv Proceeds of new loans 920 000 ¥ + 86 760 v - 164 760 Vv - 1.142 000 v 300 000* 4) Or 1 142 000 + 164 760 - 86 760 - 920 000 Repayment of loan (164 760 v’ - 86 760 V) (78 000)* Operation Net change in cash and cash equivalents (814.000) if Cash and cash equivalents beginning of year (91 000) . Operation Cash and cash equivalents at the end of year (905 000) icf 27 3.1.3 KZN ACCOU! Calculate the percentage operating profit on sales TING GRI2 1410550% x 100 5611000 ¥ = 25,1 % M1 One part correct in % 2020 SOLUTIONS TO} {UPPORT DOCUMENT Calculate the debt-equity ratio = 1142000 v : 4 607 300 ¥ = 0,3/ 0,25: 1 1 One part comect in ratio Calculate the net asset value per share 4607300% 100 750 000 = 614,3 cents MI One part correct in cents ¢ Provide a reason supported by information from the Cash Flow Statement as to why the shareholders are concerned over the directors’ decision to repurchase 80 000 shares. Any valid explanation ~~ Part marks can be awarded for partial answers Possible answers: «The business has a very big overdraft because of the fixed assets purchased. They cannot afford to buy back the shares. © The business had to take out another loan. e After an investigation, it has come to light that Jim Jeffs, the shareholder from whom the company repurchased the shares, is a close friend of the financial director. Explain briefly why you as a shareholder may find this to be a problem. Any valid explanation v~ Part marks can be awarded for partial answers Possible answers: © This is a conflict of interest and unethical to repurchase only the shares of Jim Jeffs. © The shares were repurchased at a price higher than the average issue price although the business has a very big overdraft. 28

3.2) INTERPRETATION OF FINANCIAL INDICATORS 3.2.3 | Although the market price of the shares of Lauren Ltd is higher than those of Thabiso Ltd, Phakamile is of the opinion that Thabiso Ltd’s shareholders are more satisfied with the KeNAS9°KNT" Which company uses more loans? Quote a financial indicator to support youranswer, a rannccomTttsmarket price of their shares. Explain, quoting?fiffancial indicators to support Hs @pIHRUR!® 94 70% ooCUMENT : : . Comparing market price and NAV of Thabiso vv” v Thabiso Ltd Comparing market price and NAV of Lauren Vv i - i : vv Mae i ES sealed al Market price of Thabiso Lid is 630 cents which is higher than the Net Asset Value of §20 cents Explain whether this is a good idea or not. Quote a financial indicator to support your answer. Their shares are in demand and investors have confidence in the company. No, they did not benefit ” Market price of Lauren Ltd is 680 cents which is lower than the Net Asset Value of 790 cents. r Return on Capital Employed for Thabiso is 12,4 % which means that the retum he is eaming is lower than the interest he is paying on the loan, 14% (negative gearing) vv” 6 3.2.4 [in which company is Phakamile a major shareholder? 3.2.2 [According to Phakamile the liquidity indicators of Thabiso Ltd are better than those of Lauren Lauren Ltd v7 Ltd. Explain, fing THREE financii icators t rt his opinion. td. Explain, quoting THREE financial indicators to support his opinion. Support your answer with a calculation. Quoting of indicator ¥ ¥ ¥ juous indicator (Le. three i eens Supers {os ive a toe inners 1 He owns 300/500, 60% ofthe shares. v'” 5 Comparison with figures ¥ ¥ ~ Explanation ¥ ¥ ¥ Current ratio of Thabiso is 1,7 : 1 and of Lauren is 5,8 : 1. Thabiso has enough current assets to cover his current liabilities whereas Lauren Ltd is holding too much of his funds in the form of current assets which may not result in a return for the business. Acid test ratio of Thabiso is 0,8 : 1 and of Lauren is 3,7 : 1. Even if Thabiso is not able to sell all of his trading stock he should still be able to cover his short term debt. Lauren is holding much of her current assets in the form of trading stock (stock piling). Period for which enough stock is on hand for Thabiso is 80 days and for Lauren is 140 days (almost 5 months). Thabiso has enough stock for almost 3 months which is appropriate. Lauren is holding stock for too long, resulting in obsolete stock. ‘© Debtors collection period of Thabiso Ltd is 26 days which is within the acceptable period of 30 days. Debtors’ collection period for Lauren is much longer, 55 days. 7 ACTIVITY C4 44 Calculate the missing figures indicated by (a) - (e) in the Fixed Asset Note. AT 29 30

| ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING R12 2020 SOLUTIONS TO SUPPORT DOCUMENT CALCULATIONS AMOUNT (a) _} R6 800 000 - R5 800 000 R1000000 vv 7 CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019 (b) ] R840 000 + R960 000 R1 800000 vv R CASH EFFECTS OF OPERATING ACTIVITIES (©) | R850 000 - R180 000 R670000 vv ispiration (344 715) v v vv Cash generated from operations ; R150 000 - (R15 000 + R15 000) - R7 500 (2.854 800-198 615 v) one part correct 2.656 185 v R30 000 i i @) R112500 Z perce hae (208 800) RI50 000 10 6 Dividends paid ; T Foo * 7 = 27500 (676 500 + 1 458 000VV) one part correct (2134 500) 2 Income Tax paid 12 See (d) (23 700-713 250¥'+ 31 950v ) one part correct (657 600) R7 500 HJ + R70 000% M1 + R20 000% CASH EFFECTS FROM INVESTING ACTIVITIES Sold old / remaining new operation (187 500) €) R97 500 Fixed assets purchased se04.1 R850 000— R150 000 X 10% = R70 000 (900 000 + 400 000) one part correct (1.300 000) “1 Proceeds on sale of fixed assets se04.4 6 sees 722 = RRO 000 (112 500 + 1 000 000 E21) 4112 500 CASH EFFECTS FROM FINANCING ACTIVITIES ‘operation 1944 000 BI Proceeds from the sale of shares 4,800 000v" Repurchase of shares 36 000 (3 marks) (676 000) ¥ (720 000 YY X 5% “X R16 v’) One part correct 40% X 300 000 = 120 000 + 600 000 Proceeds of loan 9 (2. 100 000 - 1 380.000) 720 000 Vv Net change in cash and cash equivalents if 1411 7851 Cash and cash equivalents at beginning of year sargae5v| 3 Cash and cash equivalents at end of year 2841250 v 30 43 Calculate the Debt-Equity ratio for 2019. 2100 000v : 11000 250v 3 0,19: 1v 31 32

KZN ACCOUNTING : eR12 44 45 46 2020 SOLUTIONS TO SUPPORT DOCUMENT The directors decided to increase the loan during the current financial year. Explain TWO financial indicators to indicate why this was a good decision. Quote figures. Financial indicator Vv V Trend and figures Vv Comment vv Vv ROTCE This has decreased from 21,3% to 20.9%. Positively geared as ROTCE is higher than the interest rate of 12% Debt-Equity This has increased from 0,13 : 1 to 0,19 : 1. Low financial risk / lowly geared / not making use of loans / relies more on own. capital The board of directors is of the opinion that the shareholders should be happy with their percentage return and the market price of their shares. Quote and explain Two financial indicators with figures to support their opinion. Financial indicator Vv ¥ Trends and figures Vv ¥ Comments Vv ¥ ROSHE improved from 12,3% to 15,7% and it is 8,2% more than the interest (7,5%) in altemative investments. NAV NAV per share of 1 608 cents is less than the market price of 1 680 cents. The Cash Flow Statement reflects some important decisions taken by the Directors. Apart from the loans, identify TWO good decisions. Explain the effect of this decision ‘on the company. Quote figures. 33 KZN ACCOUNTING. GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT Decision v Figures VV DECISION EFFECT i eta Sale of land and building, Increased the cash flow. / Used funds to buy R1 000 000 / Selling of fixed assets other fixed assets. Rt 112 500 Issue of shares R1 800 000/ Increased the cash flow. / Used funds to buy 120 000 shares assets. Purchase of fixed assets Leads to capital growth (future productivity). 6 900 000 + 400 000 = 1 300 000 / More assets in the company. / Generates more income. ACTIVITY C5 QUESTION 5 CASH GENERATED FROM OPERATIONS Net profit before tax 4.230 000) Adjustments in respect of: Depreciation 950 000 Interest expense 144 150 v Operating profit before changes in working capital operation 2.324 150 1 Changes in working capital operation 59400 0 Decrease in inventory (1 044 700 - 903 900) 140 800i Increase in debtors 70 950 two marks 208 150 v— (70 000 1 + 950 ) (137 200)" 889 000 two marks Increase in creditors (944 800v — (860 700i +28 300 v) (55 800): Cash generated from operations operation 2 383 550 1 15 eam the mark in the money column. *one part correct = CASH FLOWS FROM INVESTING ACTIVITIES operation (1.853 900) _¢ Purchase of fixed assets (3.616 400i + 225 000: + 950 000 f - 2 300 0003 (2.491 400) ¢ Proceeds of sale on non-current assets 225 000 & Decrease in investments (712 500 - 300 00) 41250080] 10 34

ACCOUNTING R12 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING R12 ‘2020 SOLUTIONS TO SUPPORT DOCUMENT 5.1.3 514 CASH FLOWS FROM FINANCING ACTIVITIES operation 988.000 53 It was a good decision for the directors to increase the loan. Explain and quote TWO financial indicators with figures to support the director's decision. Proceeds from the issue of share capital 520000 3 Repurchase of shares Financial indicatori and Figure tt Explanation (588 000 t+ 266 0001) (854 000) i Proceeds from long-term borrowings The debt-equity ratio increases from 0,1:1 to 0,5: 1. (1 622 000 - 300 000 ) 1322 000 m he retum on tofal capital employed increase from 21,2% to 32,0% (see 5.2) u REP CHANTE IN CRT AND CASH ECUNVALENTS cuoratin’ (eee Exafdhaad fash equivalents — beginning of year rn of loans than last year hs reflectd@ bP ! ngeaasaria than ebemuitntalin ROFGEds much higher than the intgrest rate (qasbepthe loan). Debt- equity ratio is lowly geared and the retum on capital employed is 32,6% and is much higher than the 15% interest on loan. Positively geared. 131000_! 5.2 Calculate the following financial indicators for 2019: Acid test ratio 327 150 two marks (944 800 + 193 200) 1 231 050!-903 900): 1 138 000M any one part correct 0,3 :1 tone part correct, accept 0,28 : 1 4 Debt-equity ratio 3.345 800 two marks 1 622 0008: 1 932 0001+ 1 413 8008 0,48 :itone part correct accept 0,5:1 4 Net asset value per share 3 345 800 two marks ; 1932 0008 + 1413 8001x100 = 363,67 or 364 cent wone part correct 920 0001 7 Percentage return on total capital employed: 4 230 000 t+ 144 15088 x 100 = 32, (4 967 800IM + 3 456 0000) 4211 900 five marks 35 36

> KZNACCOUNTING 5.6 ACTIVITY C6 ORI2 2020 SOLUTIONS TO SUPPORT DOCUMENT 5.4 ‘One of the shareholders want to sell his shares at 550 cents per share. Explain why the business should not repurchase these shares. Quote TWO financial indicators (with figures) to support your opinion. Calculate the amount of money she received this year in the form of dividends. ‘Quoting NAV (with figure) i and Market Price (with figure) 3 Exptonatignggerpparison with 550 cents) ff = 2 Erol ha na aus RSS eSADe ERS MANN oUF 2) ploy ti tual 2 This sagsptoicer would not even be able to sell these shares on the JSE at 55 er lal lahation Altho: nice MP. ng Rede aah not good prpctice They decided to retain 58,8% (distributed 41%; 33/80) of the EPS this year as they have plans to expand the business which will in tum result in greater profits in the long run. They want to use funds from operations to improve the business rather than increase the loan or issue new shares. Their plans would have been explained in the directors’ report so that shareholders would buy inbieheretPPWAG major decisions taken by the directors, as evident from the Cas} in future. Decision11 Decision 23 Benefit 1 !iBenefit 22 Figures 1#iFigure 210) Part marks for incomplete answer Fixed assets were bought for R2 491 400. | These could generate profits in future if see 5.1.2 they are well used and maintained. Loan was increased by R1 322 000. see | The still low risk can attract potential 5.1.3 investors. This could be used to finance fixed assets. New shares were issued. This increased the capital, there-fore no Cash increase by R520 000. need to go back into overdraft. Shares were re-purchased, R854 000 was | This would raise the NAV, EPS + DPS spent. see 5.1.3 because the numbers of shares are lower. Fixed assets were sold for Got rid of unused or high maintenance R225 000. assets, The money could be used better elsewhere. 37 KZN ACCOUNTING R12 64 6.2 6.21 6.1.1 | Directors v 6.1.2 | Intemal auditor ~ 6.1.3 | Shareholder Vv 6.1.4 | External auditors v” SO-FINE LTD ORDINARY SHARE CAPITAL AUTHORISED SHARE CAPITAL [1.200 000 ordinary shares | ISSUED SHARE CAPITAL 900000 | Ordinary shares on 1 September 2016 Balancingfigure | 4725000 150.000 | Issued on 1 May 2016 at R6,30 each 945000 Re-purchased 30 August 2017 (378 000) w (70.000) | (asp: R5,40v v) 5 262.000/980:000 980.000 | Ordinary shares on 31 August 2017 5292 000 RETAINED INCOME Balance on 1 September 2016 147 370 Net profit after income tax 438 130 ‘Shares repurchased (437 500 v — 378 000 7) 59500 70.000 x 0,85 Or 70 000 x (6,25 - ASP) 437 500/70 000 ( Ordinary share dividends (276 000) uw Interim dividends (900 000 v’ x 0,12) 108000 + Final dividends 168.000 %, Balance on 31 August 2017 250000 M* SO-FINE LTD: CASH FLOW STATEMENT FOR YEAR ENDED 31 AUGUST 2017 CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations Interest paid 38 2020 SOLUTIONS TO SUPPORT DOCUMENT

ACCOUNTING R12 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING GRIZ 2020 SOLUTIONS TO SUPPORT DOCUMENT The shares could have been issued at the market price of R12,00 or the NAV of R10,73 Dividends paid Las (they have diluted the value of the shares). Income tax paid #-2400 v + 187 770 v - 11800 Vv 4 OR 2400-187 770 + 11 800 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of fixed assets 2 (173 570) 6.3.2 Explain how the issue of new shares has affected the financial gearing and risk of Castro Ltd. Quote TWO financial indicators. # 6 177 000 v +320 000 v +324 000 v - 4 975 000 v ? (1846000) MZ Explanation” ¥ Financial indicators v v Figures vv 6177000 - 320000 -324000 +4975000 © Gearing has improved — less risk (as there was an issue of new shares) debt-equity ratio decreased from 0,8 : 1 to 0,5: 1 (by 0,3 : 1) v v ? 7 Proceeds from sale of fixed assets Ge « ROTCE improved (due to increased efficiency / profits on new branch) 7| Change in investments : from 15 % to 20 % (by 5% or 33,3%) 6 SASHEEOWS [hOe TNANSIG DEIMIES 6.3.3 If Henry wanted to retain his 60% shareholding in the company, how many shares would 2 v Proceeds from issue of share capital ? 945000 he have had to buy? Q wz ? v Repurchase of shares 2? (437500) ¥ {700 000 x 60%) - (500 000 x 60%) = 120 000 : Se 420 000 300 000 4] Change in non-current liabilities two marks one method mark (ifx 60%) 200 000 x 60% = 120000 3 Net change in cash and cash equivalents 7 ~~ +86000 mt How much would he have had to pay? : = 120 000 shares at R9,10 each = R1 092 000 HIM 2 Cash and cash equivalents - opening balance (2500-65100) |? (62600) vv Henry decided NOT to buy these shares. Apart from the 4 | Cash and cash equivalents - closing balance i 23400 ¥ 19 % shareholding, explain TWO reasons why he has made a mistake by not taking up this option. lanation vv vv Fi Ae 23 | Calculate the percentage operating profit on sales. ee eee Any two canes a © His dividends would have increased by R61 200 (51c x 120 000 shares). This is more OTE x 100 = 81% 3 than the interest he eamed on the savings account R54 600 - (1.092 000 see above x 5%) Calculate the debt-equity ratio. He could buy the shares for capital growth - bought the shares for R9,10 and then could 5 542 000 two marks sell them on the JSE for R12,00 / total profit could have been R348 000 / would be a good 985 000 v : (5 292 000 v +250 000 M1) =0,2:1M 4 buy as R12,00 exceeds NAV R10,73 « He would have eamed more dividends on bigger investment (51c/910c = 5,6%) TF ROSHE would be 23% on a bigger investment. 24 Calculate the dividends per share (DPS) of a shareholder who owned the same number : of shares for the entire financial period. + _He would lose 120 000 votes at the AGM. & 900 000 + 150 000 (168 000 v/1 050 000 v x 100) +12 cents v =28 cents 7 16 cents two marks aS RONKILTD 63 CASTROLTD 6.3.4 Comment on the liquidity of Ronki Ltd. Quote TWO financial indicators. 6.3.1 | Comment on the price of R9,10 charged by Castro Ltd for the new shares issued. Explanation: vv : : The liquidity situation has improved / is able to meet current debts / liquidity ratios have Compare issue price to market price or NAV “~” decreased / liquidity ratios are more efficient Figures R12,00 or R10,73 ¥ Expected responses: : : : Financial indicators any two ¥ ¥ Figures vv © The shares were issued at the average share issue price. © Current ratio has improved/decreased (from 3,5 : 1) to 1,9: 1 The existing shareholders are being rewarded as the price is lower than the R12,00 Acid-test ratio has improved/decreased (from 1,7 : 1) to 1,1:1 charged on the JSE and the NAV of R10,73. 7 *_ Stock-holding period appears to be efficient at 54 days (less than 2: months) 8 39 40

+ KENACCOUNTING R12 2020 SOLUTIONS TO SUPPORT DOCUMENT | 6.3.5 ‘Comment on the price paid by Ronki Ltd for the repurchase (buy-back) of shares. Expected response: vv Partimarks for partial or incomplete explanation ‘The company is paying a premium above the average share price in order to entice shareholders to give up their shares / they wanted to increase retums by decreasing equity / this is a fair value same as the price on the JSE. Compare price paid (R15,00) to Any one figure ¥” market value R15,00 © netasset value R13,30 * _ average issue price of shares R10,20 6.3.6 Explain THREE ways in which Henry has benefited from the repurchase of the shares by Ronki Ltd. Explanation Vv vv Figures Y¥ ¥v v Expected responses: Three different responses He has now become a majority shareholder. His 300 000 shares are 51,7% of the total shares (33,3% before the share buy-back) Due to the reduced number of shares, his retum has improved i.e. EPS has increased by 95c / from 171c to 266c / ROSHE increased from 13% to 16%. (NOTE: EPS and ROSHE reinforce the same point). The reduced number of shares could have contributed to an increase in the DPS by 57c | by 55,3% / from 103c to 160c (Directors may have maintained the dividend pay-out policy). E: AUDITING ACTIVITY E1 1. AUDITING 4A Explain why the shareholders would be satisfied with this audit report. Any ONE relevant answer vv" This is a positive report / clean report / in accordance with IFRS or Companies Act. This is an unqualified report / the report was fairly presented as per the auditor's opinion. ¢ The auditors did not mention any irregularities / shortcomings in the financial statements. 41 KZN ACCOUNTING. GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT 1.2 Tello Motioung, the managing director, has informed the auditors that he intends to buy the unissued shares for himself without informing the other shareholders. What advice should the auditors give to Tello? Explain. Valid explanation vv © Advice — This is unethical and the issue of new shares should be advertised to all according to the Memorandum of Incorporation / Companies Act. [tis unethical as it constitutes insider trading. Explain why the auditors found it necessary to stipulate the page numbers in the report. Any ONE valid explanation V~ © They are only responsible for the pages that they have stipulated in the report J only financial statements on Pages 23 - 89 were subjected to audit / examination. © They are not accountable for the other information in the annual report. Explain TWO major consequences for Mxo and Frank should they be negligent in performing their duties. Any TWO explanations Vv Vv Not to be re-appointed as auditors Face disciplinary procedures by the professional body Lose clients / fired by shareholders (because their integrity would be questioned) Can be sued ACTIVITY E2 24 Provide ONE reason why public companies must be externally audited. Any valid answer vw Because they work with public funds. To be accountable to stake holders e.g. shareholders. To discourage fraud. Requirement of the Act/IFRS (compliance). 42

{ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT 2 What type of report did Giovanni Ltd receive from the independent auditors? Explain your answer. Type: Unqualified report ¥ Explain your answer: Vv ¥ The auditors found that the financial statements were accurate. The financial statements fairly present the financial performance and financial position of the company. The financial statements are in accordance with Intemational Financial Reporting Standards and the Companies Act of South Africa. 3 Refer to information B. One of the directors says that “the company must not waste money on things like this.” Provide THREE reasons against his opinion. Any TWO validanswers viv vv vv This forms part of their corporate social investment/responsibility which is necessary as the company relies on the goodwill (support/positive image/good publicity) of the community in which they operate. Creates a safer environment which encourages customers to visit the business/creates better working environment. In accordance with the King Code. ‘TIVITY E3 AUDIT REPORT 34 What is the purpose of an independent auditor report and to whom is it addressed? Purpose: Vv To report on the company’s financial records and determine whether there is a fair presentation of facts, and whether the policies are consistent with the previous year Addressed to: ¥ 43 44 42 KZN ACCOUNTING 3.2 3.3 ACTIVITY E4 GRI2 ‘2020 SOLUTIONS TO SUPPORT DOCUMENT Shareholders Explain the difference between a qualified and an unqualified audit report. Qualified: ‘A qualified report reveals problems in certain areas of the company — all is not well. vv Unqualified: ‘An unqualified report is a report without any problems — good report vv” Predict THREE implications for the company or directors after PWC release their report. One mark perpointv vv ¢ Existing shareholders would lose faith in the company and possible sell their shares Potential shareholders would not invest in the company Could result in a drop in the market price of the shares The financial statements would not be fairly presented Suppliers will lose faith in the company Internal control measures should be improved in order to prevent unethical transactions. ¢ Directors could lose their jobs AUDIT REPORT Explain why the auditors did specifically address the report to shareholders? They are the owners of the business. v Explain why the independent auditors referred to pages 25-51 in the report. Any valid explanation HEgPart-marks for unclear / incomplete answers ¢ Auditors are responsible for only parts / certain pages of the annual report. They are not accountable for the other information in the annual reports. «Financial statements on pages 25-51 were subjected to audit / examination. * Additional information, such as corporate social investment matters, is nat audited. Do not accept statistical sampling as a reason.

KZN ACCOUNTING GR12 ‘2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING. R12 2020 SOLUTIONS TO SUPPORT DOCUMENT F1.1.2 | Gross profit for the year ended. Workings Answer see 2.1.1 see 2.1.1 COS: 4 191 500M - 1 111 000 Hf =3 080 500 (195 424 + 4 034 660 — 38 584) one mark 369 800M Gross profit: 3 450 300¥ — 3 080 500M one pert correct | FF 43 The directors claimed that the value of the buildings increased over the years and that the value must be increased and shown as additions in the fixed asset note. 241 th kK 28 Fi 1 thi As the independent auditor, what advice would you give? Provide ONE point. Lill eae a stock vale on ‘ebruary 2019 using the FIFO ONE valid point “¥ Part-marks for unclear / incomplete answers Workings coi 200-7 {tis fraudulent to indicate revaluation as an addition ey ne 5512¥ = 1063 816M + No audit evidence exists, so there is no proof of the actual value of the buildings 2TH x5 145V = 138 915M 1202 7314 © GAAP prescribes the historical (original) cost principle when recording assets Be aware of alterative arrangements 7 © Only physical manag can be shown as additions 2 F1.2.2 [Explain the effect on gross profit if the FIFO method is used. - 7 - i 73 Any valid point v~ ay The company received alan (unqualified/qualified/disciaimer) audit repo A larger closing stock will result in a smaller cost of sales and hence a greater (an increased) gross profit. Qualified ¥ The gross profit will be more compared to when weighted average . method is used. Give a reason for your answer. 5 The auditors queried the increase of the assets in the Balance sheet. v 2 F1.2.3 [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. F] INVENTORY SYSTEMS 4 F1.3 Ching Lee feels that she was not able to achieve her targeted mark-up % for 2019. ACTIVITY F1 F414 Calculate the following on 28 February 2019: Do (or perform) a calculation to confirm whether she is correct. F1.1.1_ | Value of closing stock. Workings Answer Workings Answer'| 4191 500 four marks (5 512 x 7) two marks see 2.12 12% 4 195 424v + 4 034 660V — 38 584V¥ 369 800 21x 100 ecto 49 V+ 788¥ -7¥ 830 three marks 3 = a a eight marks: 5 5 050 Wx 220¥ Tan acs 3 OR: 3.080 500 x 25% = 770 125 (targeted); Actual was 369 800 (2.1.2) 10 Did not achieve target by 400 325 45 46

| ACCOUNTING . R12 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT. Provide TWO suggestions that can be implemented in order to improve profitability. F2.4.1| Calculate the Stock Holding Period in days. Use Closing Stock in your i i calculation. Any TWO valid suggestions v¥ vv Give less trade discounts 4 56 950 M ‘seechsingstockin23 X 365” Support local suppliers 264 650M sea COS in2.3 1 Supervise sales to ensure correct prices are applied. Consider after-sales services such as maintenance, repairs, = 78,5 days¥ installations. 4 «TIVITY F2 F2.1 | 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, retums and carriage on purchase, divided by the total number of units in relation to the above. 2 - Therefore, final closing stock will be calculated on the average cost of the joods. F2.2 | Provide a calculation to show the number of cooler boxes missing. 3 900% (520 + 4 300 — 850 - 20) vv” = 50M 50 cooler boxes were missing. 4 F2.3 | Calculate the following in respect of cooler boxes: The value of the closing stock of cooler boxes. 850vx R67”= R56 950M 3 Cost of sales of cooler boxes. 290 400 (31 200%+ 291 400¥— 1 000’) — 56 950v’ se closing stack above = R264 6502) 5 Gross profit on cooler boxes. 387 000— 264 650 ¥ =R122 350M 3 47 48

KZN. ACCOUNTING 2 GRI12 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING GR12 2020 SOLUTIONS TO SUPPORT DOCUMENT (a) The value of closing stock using the weighted-average method. F2.4.2] Comment on your findings in response to the manager's feelings. ‘Stock holding period decreased / improvedy from 125 days to 78,5 daysY a 4 sez 08 Goma) Bie) 220) (2iriarks) Stock Tumover rate increased / improvedY _ from 2.9 to 5.7 timesv” 238 600 V + (1298 000 + 94400)Y_ -12 800VV 860Y + 4400V - 40v One mark for incomplete answer 5220 (marks) = R310 1 check operation Stock is selling faster ¥ @ mi ‘Suitable answer: accepted fay wre, answer cer be 3 420 x R310 = R130 200 HZ one part correct 9 (b) Cost of sales: F2.5 | Calculate the value of the closing stock of tents. (R238 600 + RY ee tortsineve} 800) V— R130 200 & 14 x R1400 = R19 6007 ae 7 x R1680 = R 11 760¥ ‘ectbunty table. 4 7 x R1540 = R10780¥ Cece R 42 140@ : ry R1 680 000 v—R1 488 000M = R192 000M one part correct F2.6 | Ifthe mark-up percentage is 25% on cost price, calculate the total sales | Accapt ledger account / table. 3 of tents for the period. 14x 1260 x 1,25¥ = R22 050V 28x 1400 x 1,25 R49 000Y 28 x 1 680 x 1,25 R58 800¥ 35x1540x1,25 = R67 375V R197 2251 (operation, one part correct) OR: (17 640¥ + 39 200¥ + 47 040 + 53 900v’) x 1,25V = R197 225M (One part correct) 6 ACTIVITY F3 F3.1 Choose the correct word(s) from those given in brackets. Write only the word(s) next to the question number (5.1.1-5.1.4) in the ANSWER BOOK F3.1.1. | periodic v F3.1.2 | specific identification “ F3.1.3 | asset ¥ F3.1.4 | weighted-average Vv F3.2 KROOKED SKATEBOARD TRADERS F3.2.1 | Calculate the following on 28 February 2019: 49 50

KZN ACCOUNTING R12 2020 SOLUTIONS TO SUPPORT DOCUMENT F3.2.2 | G Gonzales the owner of Krooked Skateboard Traders wants to alternate between using the weighted-average method and a FIFO method, depending on which will result in the higher cost of sales. (a) In your opinion, why do you think G Gonzales wants to increase the value of cost of sales in the financial statements? It decreases gross / net profit and therefore decreases tax liability.“ v” Any acceptable answer Vv” « The business must stay consistent from one year to the next in order to compare results. Itis not ethically correct to manipulate profit by changing policies. « Needs permission from SARS to change from one inventory valuation method to another (b) | Provide ONE reason why the bookkeeper says that alternating between two methods of valuing stock does not comply with the requirements of GAAP. F3.3. PROTEC TRADERS Identify a different problem in each store. Quote figures to support the problem identified in each case and give Patrick Ace advice on how to solve each problem. Problem (Quote figures.) Solution / Advice Problem Vvv_Figurevvv Va ve Lucas spent R30 000 on Lucas should review his | advertising and his turnover advertising and promotional : ‘ore 7: | amounted to R280 000 strategies in order to increase chem sales volume. Advertising is 10.7% of sales. The retums of R28 000 is too | Change supplier for better high / 8,24% of sales is quality if the product is returned. inferior / Train the workers to Store 2: provide a better sales service. pies The returns policy of 21 days | Change the returns policy to is too long. 7 days. Control of stock is a problem — | Improve control over stock to 50 units of stock stolen in a | minimize theft. Store 3: | month. Pepe G TANGIBLE ASSETS 51 KZN ACCOUNTING GRIZ G1 (32 Marks, 19 Minutes) Gi G12 G13 G14 G15 Provide TWO advantages of purchasing a caravan for the staff, rather than booking them altemative accommodation. © Cheaper to buy a caravan than accommodate four staff members. ¥ No daily transportation is needed to take the staff members to the work sitew’~” The workers are on hand to protect the site from damaged / theft 24 hours a day. A caravan will have storage space for their belongings, a fridge a bathroom, and a stove built in. ANY LOGICAL ANSWER Is it ethical for Harry Bhengu, the owner of HB Contractors, to use business funds to pay for his personal accommodation in a hotel during the duration of the contract? Yesv — he is the owner of the business so can choose to spend business money on his business related accommodation. ¥ ¥” OR Nov’ — He should stay on site in a caravan like he expects his workers to do.” ~” Any logical answer. Complete the Fixed Asset Register for this caravan. Depreciation : sen ae oie 34 July 2018 16000 48000" 64 000 31 July 2019 12 800Y 28 800V 51 200V 30 January 2020 5 120V 33 920V 46 080V Draft the Asset Disposal account in the General Ledger to calculate whether a profit or a loss was made on the disposal of this caravan. Asset Disposal 2020 ; 80.000} 2020 Acc Dep on 33 920 Jan 30 | Equipment” a Jan 0 Equipment” Profit on Sale of 3920 50 000 Assetv’ ve Bank¥ i. 83 920 0 83 920 Apart from the above caravan, HB Contractors has various specialised tools that are needed for their various construction projects. Discuss THREE control measures that can be implemented to ensure the safety of these tools, as well as the safely of the workers. Ensure all tools are serviced / checked regularly for problemsil Only people who have been trained to use certain tools may use them * _ All tools should be kept in a safe place when not in uselll 52 ‘2020 SOLUTIONS TO SUPPORT DOCUMENT (4) 8) (9) (10) (6)

KN ACCOUNTING : GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT ‘© Workers should be provided with the correct safety gear. « ANY LOGICAL ANSWER, G2 (30 Marks, 18 Minutes) Notes to the financial statements for the year ended 28 February 2020 G21. _ Tangible Assets Land & Buildings Vehicles Cost price (1/03/ 19) 1 260 000 360 000 Accumulated Depreciation (1/03/19) 0 (125 000) Camying Value (1/03/20) 1 260000 235 000% Movements 190 000 107 8001 Additions at cost 190 000%” 204 000V ¥ Disposals at carrying value 0 (34 200) ¥ Depreciation for the year 0 (65 000) Cost price (28/02/20) 7-450 000 484. 000% Accumulated Depreciation (28/02/20) 0 (141 200) Carrying Value (28/02/20) 7-450 000 342 8008 (11 Marks) Calculation Of Depreciation: Old / Remaining (360 000 — 80 000) - (125 000 + 4 800 - 48 800) X20% 39 800% Vehicles = (280 000 - 81000) X 20% Sold Vehicle 48 800 - 44 000 = 4 800 4800¥ New Vehicle 204 000 X 20% X 6/12 = 20 400 20400¥ Total Depreciation 65.000 (3 Marks) G2.2. G2.2.1Which GAAP principle is used when assets are depreciated? Explain the purpose of the principle. (3) Prudence conceptv” * Be realistic as assets loose value over time. v¥” = Better to write off an asset over time than to have a large loss in the year that the asset is disposed of. 2.2.2 Elain has suggested to the bookkeeper that in future vehicles must be depreciated by 50% on cost, in order to get the greatest tax benefit. Explain to her whether this is feasible or not as well as the consequences of (5) this decision. 53 KZN ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT Not feasible = Vehicles last a lot longer than 2 years. ‘SARS stipulates the maximum depreciation to be written off. v Writing off higher amounts would be fraud as this would result in lower profits and therefore less tax. vv” This can result in penalties, fines, and jail sentences. 62.2.3 Elain budgeted R50 000 for motor expenses in the year ended 28 February 2020 that included maintenance and licenses. She was very concemed when the Income Statement was produced to notice that the actual costs were R95 000. Discuss 2 possible reasons for this difference and suggest to her 2 measures that she could use in future to prevent these great differences. Possible reasons: (4 marks) = Higher fuel costs” = Vehicle did more mileage than budgeted. vv” = Fraud - private use. = Any other feasible answer Suggestions: (4 marks) = _ Any other feasible answer. Suggestions must link to reasons = Re-look at budget in view of latest price increases in fuel. v ~” = Set up intemal controls to monitor private use. ~~” G3 (68 Marks, 41 Minutes) G3.1__ Identify the GAAP concept that is applied in the following cases: 3.1.1 Penny's vehicles need to be recorded at their original cost price (1) Historical Cost Concept¥” G3.1.2 Each vehicle's value depreciates annually due to wear and tear (1) Prudence Concept™ 3.2 Complete the Fixed Asset Register to calculate the Accumulated Depreciation on ONE Toyota Corolla on (16) 1 December 2019 by completing the table in your answer sheet. Make Toyota Cost price 120000” Model Corolla Depreciation Method 20%Y Registration number ND 638 - 376 Depreciation Rate Diminishing Balance¥ Date Bought 4 August 2016¥ Depreciation Accumulated Depreciation Carrying Value 34 January 2017 12000V 12000Y 108 000” 34 January 2018 21600 33 600” 86 400V 31 January 2019 17 280% 50 880%” 69 120¥ 54

KZN ACCOUNTING Griz 2020 SOLUTIONS TO SUPPORT DOCUMENT 1 December 2019 11 520v 2.400% 57 600V 63.3.4 Accumulated Dept {50 880Xx3 (21) 2019 Asset ~ | 2019 Pa 152 640 Dec 1¥’ | Disposalv” Gl 62400M | Feb | 1v | Balancev” ‘did. w 2020 | 31 2019 ~~" 11520 Jan v_| Balancev” cid | 135408B1 | Dec _| 1v | Depreciation” Gd a 2020 | 31% | Depreciation” Jan (27 648 +6000Y) | GJ 33 648K 197 808 Z 197 808 2020 135 408 Feb | _iv_| Balance” bid a 63.3.2 Asset Disposal (12) Accumulated 2019 | 1 2019 Depreciation: 62 400 Dec_| ¥ | Vehicles” Gd 120000¥ | Dec | 1v | Vehicles” GJ w Creditors’ Controlv” CJ 50 000v Loss on Sale of Assetv” GJ 7 800M 420.000 w 120 000 3.4 Notes to the Financial Statements for the year ended 31 January 2020 (10) Vehicles Camying value at the beginning of the year 207 360M Cost 360 000Y Accumulated Depreciation (152 640)&4 Movements 77232 From Additions at cost 180 000v" Ledger Disposals at carrying value (57 600)” Depreciation (27 648 + 11 520 + 6000) (45 168) 621 Canrying value at the end of the year 284 5920) Cost 420 000V Accumulated Depreciation (135 408)82 G3.5__ Did this Jenny make a good decision regarding the sale of one Corolla and replacing it with a Kombi? Give a (3) feason for your answer. Yesv’ — She can transport more passengers at one time and therefore make a bigger profit. vv” OR 55 KZN ACCOUNTING GRI2 No - she made a loss on the sale of the Figo. ANY LOGICAL ANSWER 3.6 Identify TWO things that Jenny can do to ensure that her employees drive her vehicles in a responsible manner. © Ask customers to rate their drivingy ¥ Hold employees accountable for damage to the vehicles due to their error’ ¥” ‘© _ Install tracker to monitor the use of her vehicles ANY LOGICAL ANSWER, H] COST ACCOUNTING CHUNKY CHAIRS Calculate the total purchases of raw material for the financial year ended 21 May 2019. H1.1. 1450 000 ~ — 27 000 ~ — 325 000 ~ = 1 098 000 HI one part correct H1.1.2 Production cost statement for the year ended 31 May 2019 Direct material 1140 000 Direct labour (650 000 x 40%) § 260 000 Prime cost DM+DL 41400 000 Factory overhead cost balancing 1312 000 Total cost of production 1712000 Work in process (1 June 2018) balancing 582.000 TCP + WIP begin 51 794 000 Work in process (31 May 2019) (94 000) Total cost of production of complete products #1700 000 80.000 x 21,25 H1.1.3 | Calculate the following for the financial year ended 31 May 2019: Number of units sold during the year. 15 000 1 + 80 000 1— 9 500 3 = 85 500 vt one part correct Cost of Sales 201 875 285 000 8+ 1 700 000 HI — (9 500 x 21,25 &) = 1 783 125 one part correct 56 (4) 2020 SOLUTIONS TO SUPPORT DOCUMENT

KZN ACCOUNTING GRIZ 2020 SOLUTIONS TO SUPPORT DOCUMENT Or: The Finished Goods Stock account Calculate the Net Profit for the year ended 31 May 2019. Net profit Sales (85 500 ! see 2.1.3 x 42,50 j) 13 633 750 Cost of Sales see 2.1.3 4 (1 783 125) Gross profit operation 01 850 625 Less: Distribution cost £ (625 600) Less: Administrative cost § (787 400) 8 1437 625 H1.2 GLITTERATI BAGS AND PROBLEM SOLVING * one part correct H1.2.1 | Calculate the following: (a) the variable cost per unit. 85+ 108 1 + 341= 227 Jone part correct OR: 5 436 000 (3 marks) 23.400 400 4.989 000s + 2 527 200 8 + 795 6001 = 227 per unit ! one part correct, must be divided by 23 | |_4 (b) the breakeven point. 1 380 600 (2 marks) 842 400) + 538 200 se 299 | — 227 I see (a) above 72 (marks) rounded “up” to the next full unit = 19 175 units § one part correct, do not accept fractions of a unit, must be H1.2.2 | After an analysis of cost and efficiency, the internal auditor is concerned about a few points. Refer to Information C and answer the following questions: 57 K2N ACCOUNTING H2 GRIZ (@) (b) Direct material: Problem Solution Material is wasted 1 Use templates when cutting / train workers to work efficiently / any acceptable or correct answer t Direct labour: Problem Solution Tarren is not producing enough (2 400 from 2 925) 0 Give her daily targets / bring in commission if they reach a certain goal / any acceptable or correct answer @ Tarren works the most overtime and still does not reach the average production number / slow worker / exploits overtime 4 Only approve overtime if daily target has just been missed / count and compare the number of bags she produces every hour / any acceptable or correct answer | Sewing machine maintenance: Problem Solution Machines are old / needs to be replaced 0 Replace the machines / buy newer and more productive machines / any acceptable or correct answer & Roger and Gary cannot work the machines property / lack of training 1 Train them again / move them to another part of the production line / any acceptable or correct answer 2.1 Calculate the following on 28 February 2019: 58 2020 SOLUTIONS TO SUPPORT DOCUMENT

KZN ACCOUNTING. GR12 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING GR12 2020 SOLUTIONS TO SUPPORT DOCUMENT H2.1.1 | Value of closing stock. Workings Answer Any valid point tt 4.191500 four marks (5 512 x 7) two marks Alarger closing stock will result in a smaller cost of sales and hence a greater (an 195 424v + 4 034 660v — 38 5B4v v¥ increased) gross profit. The gross profit will be more compared to when weighted average method is used. 49 V+ 788V -7 VV ECE 2 eo ine: maths 1111 000M H2.2.3 | As an internal auditor, explain the benefits of using the FIFO method to the owner eight marks one part and the accountant. State TWO points. 5.050 1 x 220¥ 10 Any TWO valid points t@ #1 —_ part marks for short/incomplete statements H2.1.2 | Gross profit for the year ended. Workings ‘Answer Stock shown at recent prices, realistic. Reflect a higher gross profit 4 see 2.1.1 see 2.1.1 Easy to apply COS: 4 191 500-1 111 000 ZI =3 080 500 deeb dee (195 424 + 4 034 660 — 38 584) one mark 369 800i one part 7 Gross profit: 3 450 300¥ - 3 080 500% H2.2.1 | Calculate the stock value on 28 February 2019 using the FIFO method. Workings Answer 200-7 193 ¥x5512v = 1063 81621 oo i 12027311 Zz : z one 2x5 145v = 138.9158 part | Be aware of alternative arrangements H2.2.2 | Explain the effect on gross profit if the FIFO method is used. 59 60

KZN ACCOUNTING Riz 2020 SOLUTIONS TO SUPPORT DOCUMENT KZNACCOUNTING : GR 12 12020 SOLUTIONS TO SUPPORT DOCUMENT : ACTIVITY H3 : H3.1. KLEMISH MANUFACTURERS Sales 8 160 000 3.1.1 [PRODUCTION COST STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019 See TCP 2.1.1 Could do FGS ‘account Cos 72 000% 000 MH - v) Direct material cost (3100 000 + 204 000) 3304 000 V1 st of sales (6: +5346 18 000v) (6.000 000) 1 Direct labour cost Prime cost—DMC 1 296 000 ignore brackets Fone coy 4600 000 v” Gross profit Sales = COS 2 160 000 Factory overhead cost (974 400 v + 46 200 vv’) — Administration cost (296 800 + 1000) (297 800) v Ea (84.000- 4020 600 one part correct / ignore 37 800) brackets Operation; Se d distributi ne part tomeet ling an ion cost : Sn (844 000 - 1000 v- 46 200 2) operation Prime + FOHC (84000-37800) One part correst / ignore (796 800) 1 brackets Work-in process (beginning) 500 800 ~ Z Net profit operation (subtract AC & SDC) one SAD peda Part | 4.065.400 &2 7 Work-in process (end) ‘operation TCP — subtotal above Check that is deducted / ignore brackets / do not (775 400) 1 accept 500 800 or 0 Total cost of production 10 800 X 495 5 346 000 Vv 13 H3.1.2 [ABRIDGED INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019 61 62

KZN ACCOUNTING R12 H3.2 H3.2.1 H3.2.2 DAMARA'S JEWELLERY 2020 SOLUTIONS TO SUPPORT DOCUMENT Break-even point: (a) Calculate the break-even point for February 2019. v R1 296 000 = R1296000 = 8000units HI one part correct R407 - R245, R162 eee OR R1 296 000 x18000 = R1296000 x18000 = 8000units R7 7326 000 — R4 410 000 R2 916 000 (b) Damara is satisfied with the results. Explain ONE reason with figures to support Damara’s satisfaction. Reason Quote Figures Vv” The break-even point dropped from 13 500 units to 8 000 units. © The business is producing 18 000 units, which exceeds the break-even point of 8 000 units. © This indicates that the business will be making a profit of R4 070 000 (10 000 X R407). Refer to the unit costs. (a) Explain why the fixed costs per unit decreased. Total fixed costs remained the same at R1 296 000 V but the number of units produced increased to 18 000 units ¥ (b) Provide ONE possible reason for the change in Direct Material Costs. Any one valid reasone.g. Vv Reduction in price / exchange rate (if imported) e Greater efficiency in using raw materials / less wastage « Better quality of raw materials leading to less wastage « Found a supplier closer to the factory to reduce carriage 63 KZN ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT H4 H4.1. CONCEPTS 41.4 _| False v 44.2 | False ce 413 | Tue v 3 H4.2 STAR WHEELS MANUFACTURERS H4.2.1 DIRECT LABOUR COST Basic salary (14 x 7 000) ¥ x12 ¥ 1176 000 | 98 000 one part correct Overtime (14 x 144) Vv x65 131.040 | UIF contributions (1 176 000 x 1%) (4%. of basic) 11760] ¥ ‘one part correct 1318 800 | $ FACTORY OVERHEAD COST Indirect materials one part correct (13.200 v+ 38 400 v’~ 15 100 v) haha lag Salaries: foreman 156 000 | ~ Electricity and water (104 000 x 90%) 93 600 | vv Rent expense (115 200 x 600/1 500) 46.080 | vv Insurance (74 200 x 3/7) 31800) vv Depreciation: factory plant and machinery 277 220] ¥ ‘operation 641 200 | 13 H4,2.2 Direct (raw) materials cost 2.100 000 Direct labour cost $00 2.2.1 1.318 800 Prime cost peral 3.418 800 | Factory overhead costs $00 2.2.4 641 200 | Total manufacturing cost operation 4060 000 | 2 Work-in-process (beginning of year) 160 000 operation 4220 000] 2 Work-in-process at end Operation (220 000) | Cost of production of finished goods 4000 000 | M1 (4.015 000 v’ +95 000 ¥ - 110 000 v) One part correct 10 64

R12 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING, GRIZ 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING : i H4.3 NUTRITIOUS EATS (b) | False ¥ H4.3.14 Calculate the break-even point for the year ended 31 October 2015. (c) | Tue” (d) | True v 736 000v : ( (ev 167) = 61 333 or 61 334 unitsBZI one part correct 4 12 4 7 ; 7 12 Calculate the correct totals for the Cash Receipts Journal and the H4,3.2 ‘Should the business be satisfied with the number of units that they have produced and sold during the current financial year? Explain. Quote figures. Cash Payments Journal for July 2019. Use the tables provided. Yes/No Reason with figures 7” Cash receipts Cash payments journal journal Reasons for Yes 127 670 68 900 The business sold (64 000 - 61 334) 2 666 units more than the break-even point. 1800 vv 1300 vv Reasons for No 12 340 vv 920 vv The business sold (78 000 - 60 000) 18 000 more than the break-even point in the previous financial year. 600 vv Production decreased from 78 000 - 64 000 3 8700 F 50 000 VY H4.3.3 Give TWO possible reasons for the increase in the direct material cost per unit in the current financial year. 141 810M | Se pet eoredt 121 720M Any two suitable reasonsY ¥ vv Lanseiataninaeatd ~~ me 14 Due to the effects of inflation, price of raw materials increased. e Storage costs. 1.3 Bank reconciliation statement on 31 July 2019. e Raw material obtained from new suppliers. Increase in wastage Debit Credit increase in carriage 4 Balance as per bank statement 44040 vv i it vv H4.3.4 Craig suggests that, in order to improve financial results in the new financial Outstanding deposit alg year, the quantity of cereal per box must be reduced by 10% and the selling Outstanding cheques: 897 8700 V¥ Lied must remain the same. Give TWO valid reasons why he should not do ae sie 905 20 500 4 908 3100 ¥ Any TWO valid reasons vv vv’ Balance as per bank account [tis not ethical and would lead to a decrease in the customers once this (9 650¥ + ee - 121 720) . maou information becomes public knowedge. see 1.2.2 {ino workings) © This is deliberate product shrinkage to gain higher profits. Could lead to legal Both’ totale must be the nama 62040 62.040 10 action against the business. Product may be removed from the shelves if the contents of the product do — ai = — not correspond with the information on the package. 4 | Brseeueaion f po eas or lncorect dates} 14 Explain how cheque No. 908 should be treated when preparing the A. BANK RECONCILIATIONS financial statements on 31 July 2019 the end of the financial year. ACTIVITY 4 Increase bank and increase creditors Vv Do not accept: Dr bank and Cr Creditors control is for ledger account not financial statement 2 14 WT [They 1.5 [Identify the GAAP principle applied by the bookkeeper. 65 66

KZN ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT Principle of prudence ¥ Provide TWO suggestions on how a similar problem can be prevented in the future. Any TWO valid suggestions Vv vv Division of duties (partial answer) Encourage EFT payments by customers/debtors All cash received must be deposited daily (deposit slips must tally with receipts issued) Daily checks to see that deposits are made. 5 Request notification (sms) from bank for all transactions. Part marks for partia/incomplete answers ACTIVITY 2 2.1 Indicate whether the following statements are TRUE or FASLE. Write only ‘true’ or ‘false’ next to the question number (i) — (iv) in the answer book. 2.1.1 | False” 2.1.2 | truev 4 2.1.3 | Falsev 4 2.1.4 | True 2.2 2.2.1 Calculate the correct totals for the Cash Receipts Journal and Cash Payment Journal for May 2019. 6 970 ~ 68 900, 1 800V 2 100V 12 340” 920Y 600v 50 000VY ‘Operation if one part correct Operation if one part correct 161 11001 122 520M 2.2.2 Prepare the Bank Reconciliation Statement on 31 May 2019. 67 KZN ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT Debit Credit Credit balance as per bank statement 42 440V Credit outstanding deposit 18 000“ Debit outstanding cheques No. 897 8 700V No. 905 1 200” No. 908 3 100 Credit amount wrongly debited 800V¥ Debit balance as per bank account 48 2404 Operation ‘Operation one'part correct 61 240M] 61 240M 40 | 10 2.2.3 Explain how cheque No. 908 should be treated when preparing the financial statements as at 31 July 2015 the end of the financial year. Explanation: Vv” Part-marks for unclear/incomplete explanation ¢ Increase bank and increase creditors in the Balance Sheet notes. e Increase cash and cash equivalents as well as trade and other payables in the notes. e The amount is not recognised as paid and the debt is not reduced. : debit Bank_and credit Creditors control 2.2.4 Refer to information G. The bookkeeper has decided to write off the amount of R50 000. ¢ Which GAAP principle will the bookkeeper be applying? * The bookkeeper wants to prevent a similar problem in future. Give TWO suggestions to improve internal control in this regard. Principle of prudence “ Solutions: Anywo VV Vv Accept short solutions; may be phrased differently Part-marks for unclear/incomplete solution e Division of duties/separation of duties e Encourage EFT payments by customers / debtors 68

‘KZN ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT KZNACCOUNTING if GR12 2020 SOLUTIONS TO SUPPORT DOCUMENT ‘© Allcash received must be deposited daily/deposit slip must agree to receipts/ bank ACTIVITY 1 notifications by SMS or email GREDITOR'S LEDGER Regular and timely check / monitor all large transaction ad ih imely. rg NO. ACCOUNT BALANCE STATEMENT BALANCE Balance 35 000 38 420 ; 2970 B CREDITORS RECONCILIATION i) 7 740-4770 ACTIVITY 1 ii) (750) vv iii) 1000 vv ‘ Creditors’ Reconciliation : (1 960) Creditors' Ledger Statement iv) ae vv 28 370 25 300 Balance v) (3 860) vv x +13 320 VV 13 (14 800-1 480) vi) 7120 vv 13 B +2700VY¥ 1350 +1350 Cc +350 C. DEBTORS RECONCI;IATION AND DEBTORS AGE ANALYSIS D -7200V E -2 700¥ -2700Y Ua Srenetion = bot 287204 28720 9 a4 Explain how a debtors’ age analysis can assist with internal control over debtors. Any ONE valid point. vv” Gives an indication of debtors whose accounts are overdue. The analysis will give a clear idea of reliable debtor. Assist the business to review credit limits allowed to debtors. Assist the business when to refuse additional credit sales until accounts are paid. 1.2 [Calculate the percentage of total debts exceeding the credit terms. 14.560 x 100 af 2.080 x 100 41600 1 41600 1 35% vY Suv OR 16.640 x 100 award 2 marks for 16 640 69 10

KZN ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT 41600 1 award 4 mark for 41 600 4 Give marks for debtor & figures even if problem | identified _ arte : 7 PROBLEM DEBTOR AND FIGURE(S) ‘one part is correct fo award method art vv Debtor ¥ VY Figurev v Debtors exceeding credit limits P. Botha (by R700) Or, balance of 4 200 is above his limit of 3} 1.3 Explain ONE problem (with figures) relating to each of the following debtors: 500 PROBLEM YY” -~v FIGURES Y sal accounts/not complying with credit | S. Walker (R8 500 overdue) lerms/slow payers A MswaneP ay O. Klein (R1 100 overdue); M. Valley (R950 overdue) Ms P ded it lirnt R14 R10 Geka ett alate ELAR lA Poor control of granting credit / Continue M. Valley (R950) el : debtors whose accounts are S. Walker (R8 500) Hambrok V O. Klein (R1 100) 6 * Hambrok V exceeded the credit term of 30 days to 60 days (9 112) and 90 days (2 ee 980) — 22 DEBTORS' RECONCILIATION ACTIVITY 2 224 CORRECTIONS TO THE DEBTORS’ CONTROL ACCOUNT ON 30 NOVEMBER 2017 Balance before errors and omissions 25700 0 42700 24 DEBTORS' AGE ANALYSIS 1) +350 7 241 Explain why the debtors' age analysis is considered to be an effective internal control ii) par-marks = vv measure. State ONE point. i sii oe (iv) Nochange ~ Valid explanation vv’ part-mark for unclear /:incomplete answer 7) +1500 7 . posi slow or defaulting debtors (not abiding to the credit terms) so that action Correct Debtors’ Control balance Highlights debtors in good standing so their credit ratings can be reviewed. 28450 « Itcan expose the problem of allowing debtors to exceed their credit limits. one ‘part correct 7 © It can assist with planning/corrective measures such as sending reminders, writing off = boanbee 7 aG9pl brackets for ve amounls; no sign indicates #va = accept "0 ‘or for ‘no change" 24.2 Explain TWO different problems highlighted by the debtors' age analysis. In EACH case, provide the name of a debtor and figure(s). 1 72

K2N ACCOUNTING GR12 2020 SOLUTIONS TO SUPPORT DOCUMENT 2.2.2 DEBTORS’ LIST ON 30 NOVEMBER 2017 L Nkosi (5 700 - 1 800 /) 3900 ¥ S$ Muller (11 100 + 350 v’) 11450 ¥ MWelthagen _(- 1900+ 1500v) (400) 7 B Sandleni (15 900 - 1 200 v - 1 200 v) 2.400 two'marks must be 13500 & < 15900 Correct total of Debtors’ List operation one part correct 28450 4 70 a J] VAT AND K] BUDGETING ACTIVITY J1: 1.44 Calculate the amount of VAT receivable or payable to SARS. Indicate whether it is receivable or payable. Input : 26 184 ¥v +2500 v +2000V + 1059” Output : 48 000 Vv + 1 461’ v'+ 750 ¥ 50211 - 31743 = 18 468 v1 operation Receivable/Payable: Payable to SARS ¥” 43 Des suggests that the business should charge VAT but stop submitting returns to SARS in future. Give your opinion regarding this matter. State ONE relevant points. Any ONE V¥ According to VAT regulations he is obliged to register as a VAT vendor. If he does not, he can be charged for no compliance. He might lose his license. Even if he does not register, he still has to meet his VAT requirements. Failure to submit correct VAT retums or late submissions attracts penalties, fines and interest. B KZN ACCOUNTING ACTIVITY J2. VAT GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT LI | 24. VAT CONCEPTS 2.1.4 | Exempt ~ 241.2 | Zerov 24.3 | Exempt ” 2.2 WINSTON TRADERS 2.2.1 [Calculate the amount that would be entered next to Debtors Control on the credit side of the VAT Output account. Total sales = 120 000 x 2/75 = 40 000 ¥ x 15% ¥ =6 000 2.2.2 [Calculate the VAT amount owed to SARS on 28 February 2018. (18 000 + 6 000 see 5.2.1) 24 000 MI — (276 + 350) “+ 150 v— (8 600 + 6 000) ¥ = 8924 2.2.3 [Inwhich section of the Balance Sheet will you record the amount calculated in 5.2.27 Trade and other payables ACTIVITY J3 CASH BUDGET 3.1.1. DEBTORS’ COLLECTION SCHEDULE Credit Sales June May 72000 48 960 ¥ June 84 000 19 950 Liv 68 910 3.1.2 Calculate the Wages and Salaries for May 14

KZN ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT 60009 +1 8001 = 7800 42000)+ 30002 = 45 000 ca -Aghe dj ‘ied sind ed about the cash balances shown in the|Cash Budget. "hention OR Twi pHgee to improve the cash balances. Explain why you agree or disagree with these strategies. 5 Any TWO 3.1.3 The purchases payment policy needs to be changed. | . Explain the need to change the policy. Debtors are expected to pay within 30 days: and creditorst are also being paid within 30 days. This could lead to cash flow problems: if debtors do not pay on time. Provide TWO points of change that would benefit the company All purchases to be made on credit'l and negotiate extended 3 terms with creditors. KZN ACCOUNTING ACTIVITY J4 44 42 4.22 R12 411 [BY 412 |/Dv 413 [AVY 414 |CVv SHELDON TRADERS Incorrect entry: Depreciation “ Reason: Itis a non-cash item. ¥ financed. Additional loan R800 000 ~ Fixed deposit matured. R500 000” September closing bank balance R1 100 000” State THREE ways in which the purchasing of Land and Building will be 4.23 Debtors’ Collection schedule: MONTH | CREDITSALES | SEPTEMBER | OCTOBER July R270 000 R129 600 |= ‘August 300 000 vooo00] — ¥ 144.000 September v330000/ vv 62700 99 000 October 7360 000 = R68 400 282 300 311 400 Both totals ¢ 76 2020 SOLUTIONS TO SUPPORT DOCUMENT

KZN ACCOUNTING Ee GR12 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING GR12 2020 SOLUTIONS TO SUPPORT DOCUMENT Yes ¥ Explanation Explanation ~ ~ Quote figures vv” The actual advertising amount R44 000 doubled from 5% to 10% on 424 Item Calculations Answer sales. A The sales increased by R64 000 (R444 000 - R380 000) which is an v 1100000 increase of 14%. ee vv (1171 408) + Therefore, the increased advertising did not increase sales. c 118 800 x 100/108 vv 110000 D v xe vx 400000” X 7) 200 000 “ X ths 70.000 v one part correct E . 4.2.7 [Do you think the collection from debtors is well controlled? Explain. 360 000M x Ev 120 000 Quote figures. one part correct e YESINO No ¥ 425 Comment on the cash and credit sales. Explain how these amounts are affecting the cash flow of the business? Quote figures. Explain Comment ¥ ¥ Quote figures ¥v ¥ Explain” Quote figuresvy v¥ © Cash sales had a negative variance of R26 000. © Collections of R173 000 are much lower than expected, The actual amount of R84 000 is less than the budgeted amount of R110 000 R282 300. © The credit sales had a positive variance of R90 000. The actual amount This will cause a cash flow problem as the variance is R109 300. R360 000 was more than the budgeted amount of R270 000. There were more customers buying on credit R360 000 as compared to cash Give TWO points of advice V¥ Vv sales of R84 000. Ensure debtors adhere to policy by notifying them of outstanding Explanation Vv ¥ balances/SMS. : © Charged interest on overdue amounts. © This will have resulted in a surplus of cash for August. The bank balance will e Donot allow further credit to debtors who do not adhere to the increase by R64 000 {R90 000 - R26 000) positively. required credit policy. ACTIVITY J4 42.6 4.4 | List TWO items on the Projected Income Statement provided, that would not Has the Advertising campaign been beneficial to the business? appear on a cash budget. Explain. Quote figures. Any twovalid points Vv YESINO Cost of sales Discount received 7 7B

KZN ACCOUNTING riz 2020 SOLUTIONS TO SUPPORT DOCUMENT Depreciation Trading stock deficit 42 1A Advertising 132 000 X 2% =R 2.6401 Operation one part correct H B. Net profit after tax 17 625 V - 585 Vv -5 112 v = R11 928 7 Operation one part correct A 4.3 | Calculate the cost of sales for May 2019. Refer to information C and H. 51.000 v X 100 80 = 63 750 7: Operation one part correct . 44 _Creditor's payment schedules. Month Credit purchases July August Septemb er May 51000 48 960 . e June 55 000 52_800 : July 49 200 vv If 96% of 47 duly 232414) 719 KZN ACCOUNTING GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT 4.5.1 45.2 45.3 46 The percentage increase in wage that the cleaners will receive in September 2019. 476 one mark (3376-3200) x 100 3200 = 5.5% & Operation one part correct The monthly salary due to the sales manager in September 2019. (17 100 - 300) /2 =(8400v+300~)X 108 v 100 = 9 396 1 Operation one part correct OR 8 700 x 1.08 = 9 396 Twomarks One mark _ One method mark The total credit sales expected in September 2019. (99 000 x 160%) v’ x 75% v’= 118 800 (Operation ine part correct OR 132 000 x 120% = 158 400 x 75% = 118 800 One mark Onemark © Onemiethod mark OR 3 168/2% = 158 400 x 75% = 118 800 The loan balance on 1 August 2019. (585v x 1200 “) = 78 000 1 Operation one part correct 9 OR 585 x 12 = 7020 X 100/9 = 78 000 One mark Orie fark One method mark Refer to the actual figures for Depreciation and Trading stock deficit for July 2019. In each case, provide a reason for the difference with the budgeted figures. Any valid point’ v” Depreciation: Purchases of a new asset. ¢ Calculation error. Trading stock deficit e Unanticipated stock loss. e Random stock take revealed stock shortage. e Damaged goods noted and taken into account. 80

KZN ACCOUNTING, GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT 47 Refer to the actual figures for July 2019. Comment on any TWO expenses (excluding items mentioned in QUESTION 6.6) that were not well controlled by the business. In each case, quote the relevant figures and give ONE suggestion on how this expense can be more effectively managed. EXPENSE COMMENT( WITH FIGURE) SUGGESTION Any two: Comment and figurev’“ each | Suggestion’ ¥ each No mark for expenses Maintenance Over budget / underspent. Adjust budget or use the money wisely (4000 - 1 650) to maintain the assets. This could extend the lifespan and productivity of the assets. Telephone Overspent/ under budgeted (2 | Control / usage or check for misuse. 000 - 4 280) over 50% Budget correctly if found to be necessary. Advertising Underspent / over budgeted (2 | Spend money allocated. Look at 400 - 1 968) different forms of advertising may result in better sales / profit 81 KZN ACCOUNTING GRI2 ‘2020 SOLUTIONS TO SUPPORT DOCUMENT ACTIVITY J5 5.1.1 The main purpose of a Projected Income Statement is ... To project/plan/estimate the expected net profit for the budgeted period. To plan/project/estimate/monitor/control/expected income and expenses for budget period. vv” 2 5.1.2 The main purpose of a Cash budget is ... To project/plan/estimate the expected bank balance at the end of budget period. To plan/project/estimate/monitor/controV/expected cash received and paid over the budget period.v¥ 2 5.2 DEBTORS' COLLECTION SCHEDULE Month Credit Sales November December September 450 000 19 500 October 152 000 68 400 vv 19760 November 160 000 60 800 ¥¥ 72000 December 165 000 v¥¥ 62700 6 5.3 Calculate: 5.3.1 % increase in Rent Income. 1440-two marks 19 440 - 18.000) ~~ x 100 = 8% M1 one part comect 18 000 ¥ 4 5.3.2 Payments to creditors in December. 320.000 v x 100/160 ¥ x 80% v = 160 000 7 one part correct OR 40 000 x 80/20= 160 000 7 5.3.3 The amount of the loan on 1 December. 3375/1 ¥ x 12/1 ¥ x 100/9 v’ = 450 000 Hone part correct 4 5.3.4 Salaries and wages for December. 48 000/4 = 12 000 x 175% = 21 000 x 3 = 63 000 ~' 1 one part correct 12 000 x 150% 18 000 v1 one part correct Total: 81000 fone part correct 5 82

KZN ACCOUNTING An amount of R123 000 for staff training. Provide ONE reason why this is considered to be a necessary expense. © Better training to provide a better service. e — Giving back to the society. * Commitment to the growth and development of the society. Any ONE valid reason. “~~ 54 5.5 GRI2 2020 SOLUTIONS TO SUPPORT DOCUMENT Provide a possible reason for the variance. In each case, give one point of advice to address this problem. ITEMS REASONY Vv ADVICE Y VY v Cash sales | Too many discounts given to | Encourage more cash sales as clients. this improve the cash flow of the business. Delivery Possible abuse of delivery | Better control/supervisor on expenses vehicle by employees. vehicles. Due to old condition of the vehicle more maintenance | Buy a new vehicle. and repair cost have been incurred. Rent income | Poor collection strategy used | Use debit order/EFT for the by the business. Over budgeted. Possible that the tenant has left and the premises have been left unoccupied. tenants. Ensure that tenants have to place certain number of months’ notice before leaving. 83 KZN ACCOUNTING R12 ACTIVITYJ6 6.1.4 6.2.2 63 The main purpose of a Cash Budget is to ... i Part-marks for incomplete Project / estimate the expected bank balance at end of budget per Project / estimate / monitor / control expected cash received and paid | over budget period. The main purpose of a Projected Income Statement is... v0 Project / estimate the expected net profit for the budgeted, Project / estimate / monitor / control expected income and expenses for budget period. Debtors’ Collection Schedule: CREDIT SALES MAY 2018 JUNE 2018 March 2018 252 000 22.680 April 2018 288 000 172.800 25920 v 108 000 May 2018 180000 vv 51 300 00% of erblt sies June 2018 216 000 61560 vv 195 480 Cash from debtors 246 780 Operation, on Determine the discount allowed for May 2018. Se62im ( v M1 Operation; one part comect 180000 x (30% x 5%) =2 700 OR © 51 300 one mark x 5/95 one mark = 2 700 one method mark © 180 000 x 30% = 54 000 one method mark — 51 300 one mark = 2 700 one method mark Determine the bad debts written off in June 2018. 1% x 252 000 = 2520 Calculate the cash sales for May 2018, Workings Answer 300 000 x 40% OR No part marks 300 000 - 180 000 120.000 vv Calculate the payment to creditors in June 2018. Workings ‘Answer 300 000 vx 100/150 vx 80/100 v 160 000 84 2020 SOLUTIONS TO SUPPORT DOCUMENT

KZN ACCOUNTING. GR12 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING. GR12 2020 SOLUTIONS TO SUPPORT DOCUMENT 200 000 two marks Operation, one part }[ 4 | Calculate the salaries for May 2018. e correct Workings Answer v - v v 14500 + 11 600 (2.x 14 500) + (4 x 26 100) 29.000 404 400 Lebel OR ‘Operation, one part (6x14 500) +(4x 11 600) 87 000 two marks 46 400 two marks 6.4.1 [Tony is not concerned about the overspending in advertising. Explain why this is so. Quote figures to support your answer. Candidates must indicate the (positive effect of advertising on sales ake Provide appropriate figures onemark each Expected response for 4 marks: Advertising increased by R3 000 but Sales increased by R96 000. OR Advertising increased by 37,5% while Sales increased by 20% on bigger base. 4 6.4.2 [State ONE consequence of not paying the amount due to creditors in April 2018. Any ONE valid: consequence ~v’ Part-marks for incomplete / unclear response Credit to the business will be stopped by the creditors. The credit ratings of business will decrease / could be blacklisted / report to credit bureau Business will be charged interest for slow payment. Legal action can be taken by the creditors 2 eoee 6.4.3 | State TWO points in isthe of appointing Gentex Cleaning Services. ‘Any two valid responses v” vv Figures not required but may be provided as part ofan Part-marks for incomplete / unclear response * Outsourced cleaning could cost less than budgeted/actual for wages and cleaning materials Easier to budget (fixed contract amount) Expertise / professionalism / specialisation of the cleaning company No interruption or extra costs due to workers on sick leave etc. No storage space needed for cleaning materials Leads to reduction in administration costs VAT input can be claimed from SARS The cleaners can be rotated between different clients if necessary pee ONE point that Tony should consider before making this decision. Any valid response v~ Par-marks for incomplete unclear response © Whether it will make the current employees redundant / retrench or reassign the existing cleaners (consider the ethics of this) e Reliability of the new cleaning company 6 85 86

K2N ACCOUNTING. GRAZ 2020 SOLUTIONS TO SUPPORT DOCUMENT KZN ACCOUNTING, GRIZ 2020 SOLUTIONS TO SUPPORT DOCUMENT ¢ Honesty of the workers of the outsourced business ¢ Only hires equipment when necessary © Negative image of outsourcing to the company ¢ Does not have to pay maintenance on equipment © Whether outsourcing conflicts with their social responsibility programmes «Any other reasonable answer Instructions to cleaners have to be given through the cleaning firm's managers e Terms of the contract regarding fee increases No By purchasing their own equipment they will save money as the equipment will Response for one mark: last longer than what the repayment period e _\VAT charged on outsourced cleaning services 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 ACTIVITY J7 7.1.6 | The business still faces a cash flow problem in August, even though a loan was obtained in July and the receipts from debtors improved. 7.4.1 | Explain the importance of comparing the actual figures to the budgeted figures in the Sh budget. ee Excluding these two items and the renting of equipment (as in 6.2.5), identify TWO To determine of the items/costs were managed well and within the set limits ¥ other items, with figures, that needs attention. Also provide advice how these items (Any acceptable answer) can be managed. 7.1.2 | Calculate the values marked (A) — (F). ia & Figure vv ‘Advice vv Calculations 1 7 : A 4080 000x 95% = 1026000 77 Item Figure Advice : ee EA Creditors 960.000 or(b) | Buy less on credit, attempt more cash sales D 288 200 7 — 1 125 000 in order to qualify for a cash discount. 1200000 - E | (675 400) + 288 200 (see D) = (387 200) 7 . F 49 680 x 115 = 43 200 ¥ Drawings 150 000 or Urge owner to decrease drawings so that 210 000 or the business can recover the cash flow 168 000 7.1.3 | 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 ~~~ Figures ¥ Salaries and 144.000 to 180 | Pay workers a fixed salary; employ workers wages. 000 or for a fixed term. They should have paid R864 000 and only paid R624 000 144 000 to 108 000 7.1.4 | 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? 3 Reason July Workers worked overtime V August Less workers came to work / Workers were on a strike (Any acceptable answers for both scenarios) 74.5 |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 1 Yes 87 88

KZN ACCOUNTING. GRi2 2020 SOLUTIONS TO SUPPORT DOCUMENT 7.4.7 [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. Concem He was supposed to have first option to buy the vehicle and Driver now he can't go against the owner of the business. The business received R60 000 less (R180 000 — Finance officer | R120 000) than what they would have received if the vehicle was sold fo the driver. 89