Accounting Grade 12 P1 Eastern Cape June 2022 QP (Eng)

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE GRADE 12 JUNE 2022 ACCOUNTING P1 MARKS: 150 TIME: 2 hours This question paper consists of 12 pages, including a formula sheet and a 11-page answer book.

Downloaded from hlayiso.com 2 ACCOUNTING P1 (EC/JUNE 2022) KEEP THIS PAGE BLANK. Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/JUNE 2022) ACCOUNTING P1 3 INSTRUCTIONS AND INFORMATION Read the following instructions carefully and follow them precisely. 1. Answer ALL questions. 2. A special ANSWER BOOK is provided in which to answer ALL questions. 3. Show ALL workings to earn part-marks. 4. You may use a non-programmable calculator. 5. You may use a dark pencil or blue/black ink to answer the questions. 6. Where applicable, show ALL calculations to ONE decimal point. 7. If you choose to do so, you may use the Financial Indicator Formula Sheet attached at the end of this question paper. The use of this formula sheet is NOT compulsory. 8. Write neatly and legibly. 9. Use the information in the table below as a guide when answering the question paper. Try NOT to deviate from it. TIME QUESTION TOPIC MARKS (minutes) Statements: Comprehensive Income and 1 60 45 Financial Position Financial Indicators and Cash Flow 2 40 30 Statement Interpretation of Company Financial 3 35 30 Information 4 Corporate Governance 15 15 TOTAL 150 120 Copyright reserved Please turn over

Downloaded from hlayiso.com 4 ACCOUNTING P1 (EC/JUNE 2022) QUESTION 1: STATEMENTS: COMPREHENSIVE INCOME AND FINANCIAL POSITION (60 marks; 45 minutes) The information relates to John-Vos Ltd for the financial year ended 28 February 2022. REQUIRED: Complete the following: (NOTE: Some information is printed in the ANSWER BOOK.) 1.1 Statement of Comprehensive Income for the year ended 28 February 2022. (40) 1.2 Retained income note on 28 February 2022. (7) 1.3 EQUITY and LIABILITIES section of the Statement of Financial Position on 28 February 2022. (13) INFORMATION: A. Amounts extracted from the records on 28 February 2022. R Loan: Sparks Bank 610 320 Creditors’ control 562 500 Fixed deposit: Winde Bank 150 000 Trading stock 900 000 Bank (favourable balance) 469 500 Debtors’ control 593 000 Provision for bad debts (1 March 2021) 34 120 SARS: Income tax (Dr) 660 000 SARS: PAYE 36 000 Pension fund 13 500 Sales 8 085 500 Insurance 48 750 Bad debts 33 260 Rent income 85 100 Directors’ fees 825 000 Consumable stores 33 900 Interest on fixed deposit 11 090 Bad debts recovered 11 760 Ordinary share dividends 237 500 B. Additional information: (i) Mark-up: A mark-up percentage of 100% on cost was maintained during the financial year. Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/JUNE 2022) ACCOUNTING P1 5 (ii) Ordinary share capital and dividends • On 1 May 2021 an additional 300 000 shares were issued. • On 1 September 2021 the company repurchased 40 000 shares at 80 cents above the average share price of R8,50 each. • 950 000 shares were in issue on 28 February 2022. • The total dividend for the year amounted to R570 000. C. Adjustments not taken into account: (i) Totally damaged goods returned on 26 February 2022 was incorrectly recorded as R7 200. The amount according to the credit note issued is R2 700. (ii) Consumable stores on hand on 28 February 2022, R5 900. (iii) An amount of R2 240 received from F. Solomon, whose account had been written off as irrecoverable, was posted in error to the bad debts account. (iv) Provision for bad debts should be adjusted to R29 660. (v) The insurance account includes an annual premium of R22 500 paid for the period 1 July 2021 to 30 June 2022. (vi) The premises has been rented since 1 April 2021 with an agreement that rent will be reduced by R1 000 per month with effect from 1 January 2022. The rent for February 2022 is still outstanding. (vii) The company pays the same monthly fee to all directors. One of the three directors resigned on 30 November 2021 and a new director was appointed on 1 February 2022. The fees of the new director is still outstanding. (viii) Sundry expenses is the missing figure in the Statement of Comprehensive Income. (ix) After taking all adjustments into account, the operating profit was accurately calculated as R1 602 190. (x) Extract from the loan statement received from Sparks Bank: Interest capitalised ? Repayments (including interest) 161 280 Balance at the end of the financial year 703 800 R100 000 of the loan will be paid back in the next financial year. (xi) The income tax rate is 30%. 60 Copyright reserved Please turn over

Downloaded from hlayiso.com 6 ACCOUNTING P1 (EC/JUNE 2022) QUESTION 2: FINANCIAL INDICATORS AND CASH FLOW STATEMENT (40 marks; 30 minutes) REQUIRED: 2.1 Calculate the following financial indicators for the financial year ended 30 April 2022: 2.1.1 Debt-equity ratio (3) 2.1.2 Earnings per share (EPS) (4) 2.1.3 Dividend pay-out rate (%) (3) 2.1.4 % return on average equity (ROSHE) (5) 2.2 Complete the following section for Cash generated from operations: • Cash effects of changes in working capital. (Cash outflows must be shown in brackets.) (9) 2.3 Calculate the following amounts for the Cash Flow Statement: 2.3.1 Taxation paid (5) 2.3.2 Proceeds from sale of fixed assets (5) 2.3.3 Funds used for the repurchase of shares (2) 2.4 Complete the following section of the Cash Flow Statement: • Net change in cash and cash equivalents (4) INFORMATION: A. Extract from the Statement of Comprehensive Income on 30 April 2022: Depreciation R 280 800 Interest expense 151 200 Net profit before tax 1 660 000 Net income after tax 1 162 000 Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/JUNE 2022) ACCOUNTING P1 7 B. Extract from the Statement of Financial Position and notes: 30 April 2022 30 April 2021 Fixed assets (carrying value) 11 434 000 9 984 400 Fixed deposits 120 000 600 000 Current assets 1 202 400 906 000 Trade and other receivables (Note 1) 481 800 352 500 Cash and cash equivalents 6 000 67 800 Shareholders' equity 10 776 400 8 893 800 Non-current liabilities 1 080 000 1 440 000 Current liabilities 900 000 1 156 600 Trade and other payables 432 000 814 600 Bank overdraft 264 000 0 Shareholders for dividends 144 000 192 000 Note 1: Trade and other receivables Net trade debtors 448 000 323 800 Accrued income 28 400 SARS (Income tax) 5 400 28 700 481 800 352 500 C. Fixed assets: • The total cost for the acquisition of a new vehicle and extensions to the buildings during the year amounted to R1 632 000. • During the year equipment was sold at carrying value. D. Share capital and shares: • Additional shares were issued on 1 May 2021. • On 30 April 2022 shares were repurchased. The value of the shares as per the average issue price amounted to R25 000. The asking price was 10% more than the average issue price. E. Dividends and earnings per share: 30 April 2022 30 April 2021 Interim dividend (per share) 45 cents 25 cents Final dividend declared (per share) 25 cents 15 cents Earnings per share ? 94 cents 40 Copyright reserved Please turn over

Downloaded from hlayiso.com 8 ACCOUNTING P1 (EC/JUNE 2022) QUESTION 3: INTERPRETATION OF FINANCIAL INFORMATION (35 marks; 30 minutes) 3.1 Choose the financial statement(s) in COLUMN B that matches the financial indicator in COLUMN A. Write only the letter (A–D) next to the question numbers (3.1.1 to 3.1.3) in the ANSWER BOOK. COLUMN A COLUMN B 3.1.1 solvency A Statement of Comprehensive Income 3.1.2 return on capital employed B Statement of Financial Position 3.1.3 profitability C Statements of Comprehensive Income and Financial Position D Cash Flow Statement (3 x 1) (3) 3.2 MIGUELE LTD The information for this company relates to the financial year ended on 28 February 2022. REQUIRED: 3.2.1 The directors are satisfied with the improvement in the liquidity of the company. Quote and explain THREE financial indicators with figures and trends that show an improvement of the liquidity position. (6) 3.2.2 Explain why the shareholders should be satisfied with their return on investment in the company. Quote figures and trends in your explanation. (4) 3.2.3 One of the directors feels that the company should pay back the loan as soon as possible. Explain why you disagree with him. Quote TWO financial indicators with figures and trends. (6) 3.2.4 One of the shareholders wants to sell her shares at R6 each. • Provide ONE reason why you would agree with her to sell her shares. Quote a financial indicator with figures and trends. (2) • Provide ONE reason why you disagree with her to sell her shares. Quote a financial indicator with figures and trends. (2) 3.2.5 The shareholders should be happy with the earnings per share (EPS) because it is better than the previous year. Explain why you agree with them. Quote figures and calculations. (4) Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/JUNE 2022) ACCOUNTING P1 9 INFORMATION: A. Financial indicators, interest rates and market price of shares: 28 February 28 February 2022 2021 Current ratio 2,1: 1 2,9 : 1 Acid test ratio 1,4 : 1 1:1 Average debtors’ collection period 35 days 28 days Average creditors payment period 65 days 90 days Stock turnover rate 10,2 times 9,1 times Debt/equity ratio 0,3 : 1 0,3 : 1 Dividends per share 80 cents 55 cents Earnings per share 104 cents 75 cents % return of shareholders’ equity 15,3% 10,4% % return on total capital employed 17,2% 12,1% Net asset value 650 cents 625 cents Interest rate on loans 14% 13% Interest rate on fixed deposits 7% 7% Market price of shares 600 cents 640 cents Copyright reserved Please turn over

Downloaded from hlayiso.com 10 ACCOUNTING P1 (EC/JUNE 2022) 3.3 SOCKER LTD AND BOLL LTD The information relates to two companies competing in the same industry. The financial year of each company ends on the last day of May. NOTE: Alton Flan is a shareholder in both companies: Both companies will issue new shares in the new financial year. Alton Flan considers buying new shares in Socker Ltd only. REQUIRED: 3.3.1 Explain what effect this consideration will have on the % shareholding of Alton Flan in EACH company. Quote figures and trends. (6) 3.3.2 Calculate the number of shares Alton Flan could buy in Boll Ltd. (2) INFORMATION: A. Extracts from accounting records on 31 May 2022. SOCKER BOLL LTD LTD Number of shares in issue 980 000 1 000 000 Number of shares owned by Alt Flan 450 800 550 000 B Shares to be issued in the new financial year. SOCKER BOLL LTD LTD Total number of shares 120 000 80 000 Number of shares Alton Flan considers buying 110 200 0 Issue price R5 R4 35 Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/JUNE 2022) ACCOUNTING P1 11 QUESTION 4: CORPORATE GOVERNANCE (15 marks; 15 minutes) You are provided with an extract of the audit report for Tantass Ltd for the financial year ended 28 February 2022. 4.1 Explain the role of the remunerations committee and give a reason why there is a need for this committee. (3) 4.2 Explain why the auditor referred to pages 7 to 22 in this report. (2) 4.3 Identify the type of audit report that the company received and give a reason for your answer. (2) 4.4 Explain the effect of this type of report for the image of the company. Provide TWO points. (4) 4.5 State TWO possible consequences for the independent auditor if he had NOT referred to the increase in directors’ fees. (4) INFORMATION: Extract from the Auditor Report: Basis for Opinion In the course of the audit, it was found that the increase in directors’ fees had not been authorised by the Remunerations Committee. Audit Opinion We have audited the financial statements, as set out on pages 7 to 22. In our opinion, the financial statements fairly present the financial position of the company at 28 February 2022, except for the increase in directors’ fees, which was not authorised. Rivas and Miller Registered Accountants and Auditors 31 May 2022 15 TOTAL: 150 Copyright reserved Please turn over

Downloaded from hlayiso.com 12 ACCOUNTING P1 (EC/JUNE 2022) GRADE 12 ACCOUNTING FINANCIAL INDICATOR FORMULA SHEET Gross profit x 100 Gross profit x 100 Sales 1 Cost of sales 1 Net profit before tax x 100 Net profit after tax x 100 Sales 1 Sales 1 Operating expenses x 100 Operating profit x 100 Sales 1 Sales 1 Total assets : Total liabilities Current assets : Current liabilities (Current assets – Inventories) : Current liabilities Non-current liabilities : Shareholders' equity (Trade and other receivables + Cash and cash equivalents) : Current liabilities Average trading stock x 365 Cost of sales . Cost of sales 1 Average trading stock Average debtors x 365 Average creditors x 365 Credit sales 1 Cost of sales 1 Net income after tax x 100 Net income after tax x 100 Number of issued shares 1 Average shareholders' equity 1 (*See note below) Net income before tax + Interest on loans x 100 Average shareholders' equity + Average non-current liabilities 1 Shareholders' equity x 100 Dividends for the year x 100 Number of issued shares 1 Number of issued shares 1 Interim dividends x 100 Final dividends x 100 Number of issued shares 1 Number of issued shares 1 Dividends per share x 100 Dividends for the year x 100 Earnings per share 1 Net income after tax 1 Total fixed costs . Selling price per unit – Variable costs per unit NOTE: * In this case, if there is a change in the number of issued shares during a financial year, the weighted average number of shares is used in practice. Copyright reserved Please turn over