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

NATIONAL SENIOR CERTIFICATE GRADE 12 SEPTEMBER 2022 ACCOUNTING P1 MARKS: 150 TIME: 2 hours This question paper consists of 13 pages, including a formula sheet and an 11-page answer book.

2 ACCOUNTING P1 (EC/SEPTEMBER 2022) INSTRUCTIONS AND INFORMATION Read the following instructions carefully and follow them precisely. 1. Answer ALL the 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 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) Concepts, Statement of 1 Comprehensive Income and 60 45 Statement of Financial Position Financial Indicators, Share Capital 2 40 30 note and Cash Flow calculations Interpretation of Company 3 35 30 Financial Information 4 Corporate Governance 15 15 TOTAL 150 120 Copyright reserved Please turn over

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4 ACCOUNTING P1 (EC/SEPTEMBER 2022) QUESTION 1: CONCEPTS, STATEMENT OF COMPREHENSIVE INCOME AND STATEMENT OF FINANCIAL POSITION (60 marks; 45 minutes) 1.1 Choose an explanation in COLUMN B that matches the term in COLUMN A. Write only the letter (A–E) next to the question numbers (1.1.1 to 1.1.4) in the ANSWER BOOK. COLUMN A COLUMN B 1.1.1 Prudence A This reflects the assets, liabilities and equity of the company. 1.1.2 Statement of B Directors’ fees should be disclosed Comprehensive Income separately in the financial statements and not as part of salaries and wages. 1.1.3 Materiality C This shows the inflow and outflow of funds for the year. 1.1.4 Statement of Financial D The provision for bad debts should be Position adjusted to 5% of outstanding debtors. E This shows the profit or loss for the financial period. (4 x 1) (4) 1.2 JULA LIMITED You are provided with the information for the financial year ended 30 June 2022. REQUIRED: 1.2.1 Refer to Information B (i): Calculate the following: • The value of the closing stock using the specific identification method. (4) • The number of microwave ovens missing. (2) 1.2.2 Refer to Information A and B: Use the table provided to calculate the correct net profit after tax for the year ended 30 June 2022. Indicate ‘+’ for increase and ‘–’ for decrease at each adjusted amount. (17) 1.2.3 Complete the Statement of Financial Position (Balance Sheet) on 30 June 2022. (33) NOTE: • Adjustments from Information B must be considered when completing the Statement of Financial Position. • Show workings. Certain figures are provided in the ANSWER BOOK. Copyright reserved Please turn over

(EC/SEPTEMBER 2022) ACCOUNTING P1 5 INFORMATION: A. List of balances before taking into account the errors and omissions listed below. 30 June 2022 30 June 2021 Balance sheet accounts section (R) (R) Ordinary share capital 3 948 000 2 673 000 Retained income ? 1 100 300 Fixed assets at carrying value ? Fixed deposit 300 000 Bank (favourable) 276 000 Mortgage loan: BBS Bank 2 057 000 2 431 400 SARS: Income tax (Provisional tax) 947 620 Shareholders for dividends 296 000 250 000 Trading stock 2 757 000 Debtors control 1 595 000 Provision for bad debts ? 78 300 Creditors control 1 264 000 B. The net profit before tax, R3 199 890, was calculated before taking into account/correcting the following: (i) The following stock items were omitted from the annual stock-take figures: NOTE: The specific identification-method is in use for stock valuation. During the year Stock on 30 June Purchases Sales 2022 Item Quantity Unit price Quantity Quantity Total value Televisions 1 200 R7 000 1 118 ? ? Microwave ovens 2 000 R1 500 1 800 198 R297 000 (ii) The provision for bad debts must be increased by R1 450. (iii) Refer to the following pre-adjustment accounts: Nominal accounts section Directors’ fees R 992 000 Rent income 76 000 Advertising 54 000 • The company has five (5) directors who earn the same monthly fee. They were all entitled to a bonus equal to one month’s fee. The bonus of ONE (1) director is still outstanding. The outstanding bonus was not recorded. • Rent for May and June 2022 has not been received. This has not yet been recorded. Note that the rent increases by 10% p.a. on 1 June each year. • An advertising contract for R12 400 was paid for the period 1 March 2022 to 31 October 2022. The prepaid portion was not recorded. Copyright reserved Please turn over

6 ACCOUNTING P1 (EC/SEPTEMBER 2022) (iv) Extract from the loan statement received from BBS Bank on 30 June 2022: Balance on 1 July 2021 R 2 431 400 Repayments (including interest) for the period 374 400 1 July 2021 to 30 June 2022 Balance on 30 June 2022 2 246 000 • The interest on loan has not yet been recorded. C. After taking into account the adjustments / corrections above, it was determined that the business paid R17 400 over, for income tax for the year. D. Shares and dividends: • The company repurchased 90 000 shares during the year at a total cost of R698 000. This was R275 000 above the average share price. • Dividends on ordinary shares for the year amounted to R570 000. E. A part of the fixed deposits will mature on 30 July 2022. F. A portion of the loan will be paid in the next financial year. G. The amount for fixed assets is the balancing figure. 60 Copyright reserved Please turn over

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8 ACCOUNTING P1 (EC/SEPTEMBER 2022) QUESTION 2: FINANCIAL INDICATORS, SHARE CAPITAL NOTE AND CASH FLOW CALCULATIONS (40 marks; 30 minutes) The information relates to Terresa Ltd for the financial year ended 28 February 2022. REQUIRED: 2.1 Calculate the following financial indicators on 28 February 2022. 2.1.1 Acid-test ratio (4) 2.1.2 % Return on average capital employed (5) 2.1.3 Dividend per share (DPS) (4) 2.2 Complete the Ordinary Share Capital Note on 28 February 2022. (3) 2.3 Calculate the following: 2.3.1 Change in receivables (indicate if it is an inflow or outflow of cash) (5) 2.3.2 Income tax paid (5) 2.3.3 Fixed assets purchased (4) 2.4 Complete the following sections of the Cash Flow Statement. 2.4.1 Cash effects of financing activities (7) 2.4.2 Net change in cash and cash equivalents (3) INFORMATION: A. Extract from the Statement of Comprehensive Income for the year ended 28 February 2022: Sales R3 500 000 Depreciation 810 700 Profit before interest expense 1 726 000 Net profit before tax 1 600 000 B. Income tax was calculated at 30% for the current financial year. Copyright reserved Please turn over

(EC/SEPTEMBER 2022) ACCOUNTING P1 9 C. Extract from the Statement of Financial Position on 28 February: 2022 2021 Fixed assets (carrying value) 7 296 200 6 117 800 Fixed deposit ? ? Current assets 1 536 500 1 461 200 Inventories 671 000 590 000 Trade debtors 829 000 796 200 Prepaid expenses 33 000 0 SARS: Income tax 0 13 800 Bank 0 61 200 Petty cash 3 500 0 Ordinary shareholders equity 7 134 500 5 520 000 Ordinary share capital 6 240 000 5 100 000 Retained income 894 500 420 000 Non-current liabilities 1 050 000 1 400 000 Current liabilities 1 048 200 959 000 Trade creditors 700 700 777 000 SARS: Income tax 28 600 0 Shareholders for dividends 292 500 182 000 Bank overdraft 26 400 0 D. No fixed assets were sold but there were additions to fixed assets during the financial year. E. Share capital and dividends: 1 March 2021 1 700 000 shares were in issue. 30 August 2021 Interim dividend paid, R323 000. 31 December 2021 R1 620 000 received for additional shares issued. 27 February 2022 150 000 shares repurchased at 20c above the average share price. These shares do not qualify for final dividends. 28 February 2022 A final dividend of 15 cents per share declared. 40 Copyright reserved Please turn over

10 ACCOUNTING P1 (EC/SEPTEMBER 2022) QUESTION 3: INTERPRETATION OF COMPANY FINANCIAL INFORMATION (35 marks; 30 minutes) The information relates to two companies which operate in the computer industry. The financial year ends on 30 September each year. NOTE: Where comments or explanations are required, quote financial indicators, figures and trends to support your answer. REQUIRED: 3.1 Profitability: Identify the company with the better profitability financial indicators. Quote TWO financial indicators. (3) 3.2 Liquidity: 3.2.1 Explain which company’s liquidity position will make shareholders happy. Quote TWO financial indicators in your explanation. (6) 3.2.2 Explain TWO points on how the other company can improve their liquidity position. Make reference to a specific financial indicator. (4) 3.3 Dividend pay-out policy: Comment on the change in the dividend pay-out policy of EACH company. In EACH case, provide a possible reason why the company has decided on a change of policy. Quote figures. (6) 3.4 Risk and Gearing: Comment on how each company is managing their risk and gearing. Quote TWO financial indicators in your explanation. (8) 3.5 Percentage shareholding and share price: The Bravo family sold some of their shares back to Dally Ltd and Nana Ltd. 3.5.1 Comment on the price paid for the repurchase of shares by Dally Ltd. Provide TWO points. Quote figures. (4) 3.5.2 Explain the effect of the share repurchase on the % shareholding of the Bravo family in EACH company. Provide a calculation to support your explanation. (4) Copyright reserved Please turn over

(EC/SEPTEMBER 2022) ACCOUNTING P1 11 INFORMATION: A. Extracts from the accounting records at the end of each financial year: DALLY LTD NANA LTD Sept 2022 Sept 2021 Sept 2022 Sept 2021 Number of shares in 1 500 000 1 750 000 1 950 000 2 100 000 issue Repurchase price R15 R15 Number of shares owned by Bravo 765 000 1 015 000 942 000 1 092 000 family at end of year % Shareholding of ? 58% ? 52% the Bravo family B. Financial indicators, interest rate and market price of shares: DALLY LTD NANA LTD Sept 2022 Sept 2021 Sept 2022 Sept 2021 Mark-up % achieved 45% 50% % Operating expenses 31% 35% on sales % Operating profit on 25% 16% sales Acid-Test ratio 1 :1 0,6 : 1 0,7 : 1 0,9 : 1 Average debtor’s 28 days 46 days 40 days 45 days collection period Debt-equity ratio 0,4 :1 0,7 :1 0,6 :1 0,2 : 1 Dividend pay-out rate 20% 60% 80% 25% % Return on capital 16% 12% 9% 13% employed Interest on loan 12% 12% 12% 12% Net asset value per 1 260 cents 1 120 cents 1 000 cents 1 160 cents share Market price 1 420 cents 1 390 cents 1 100 cents 1 380 cents 35 Copyright reserved Please turn over

12 ACCOUNTING P1 (EC/SEPTEMBER 2022) QUESTION 4: CORPORATE GOVERNANCE (15 marks; 15 minutes) REQUIRED: 4.1 The following is an extract from the independent auditor’s report of Xuba Ltd. In our opinion the financial statements present fairly, in all material respects, the financial position of the company as at 28 February 2022. 4.1.1 Identify the type of report issued by the auditor. Provide ONE reason for your answer. (3) 4.1.2 Explain the impact of such a report on the image of the company. State ONE point. (2) 4.2 BRUCE Ltd received one of the tenders to build houses worth R10 million in the Matolo community. The Chief Financial Officer (CFO) of Bruce Ltd offers to pay 10% of the amount in cash to the Chief Executive Officer (CEO) of the housing project if awarded the tender. The CFO wants to disclose this as corporate social responsibility. 4.2.1 Explain why it is unethical for the CEO to accept this offer. State TWO points. (4) 4.2.2 Mention possible implications for the CEO should he accept this offer. Explain TWO points. (4) 4.2.3 Suggest TWO ways in which corporate social responsibility can be achieved through good corporate governance. (2) 15 TOTAL: 150 Copyright reserved Please turn over

(EC/SEPTEMBER 2022) ACCOUNTING P1 13 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 Non-current liabilities: Shareholders' equity liabilities (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