Accounting Grade 12 P1 Eastern Cape Prelim 2024 QP (Eng)

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE GRADE 12 SEPTEMBER 2024 ACCOUNTING P1 MARKS: 150 TIME: 2 hours This question paper consists of 10 pages, a formula sheet and a 10-page answer book. Hosted by www.ecexams.co.za.

Downloaded from hlayiso.com 2 ACCOUNTING P1 (EC/SEPTEMBER 2024) 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. A Financial Indicator Formula Sheet is attached at the end of this question paper. 4. Show ALL workings to earn part-marks. 5. You may use a non-programmable calculator. 6. You may use a dark pencil or blue/black ink to answer questions. 7. Where applicable, show ALL calculations to ONE decimal point. 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) 1 Company Financial Statements 55 45 Notes to Financial Statements, Cash 2 40 30 Flow Statement and Financial Indicators 3 Interpretation of Financial Statements 40 30 4 Corporate Governance 15 15 TOTAL 150 120 Copyright reserved Please turn over Hosted by www.ecexams.co.za.

Downloaded from hlayiso.com (EC/SEPTEMBER 2024) ACCOUNTING P1 3 QUESTION 1: COMPANY FINANCIAL STATEMENTS (55 marks; 45 minutes) ZINO LIMITED The information relates to the financial year ended on 30 June 2024. The business sells grass cutting machines. REQUIRED: 1.1 Refer to information B (ii). Calculate the value of the stock that was stolen. (3) 1.2 Complete the Statement of Comprehensive Income for the year ended 30 June 2024. (29) 1.3 Complete the Statement of Financial Position as at 30 June 2024. (23) NOTE: Some amounts are provided in the ANSWER BOOK. INFORMATION: A. Extract: Balances and totals from the records on 30 June 2024. R Ordinary share capital (3 000 000 shares) 19 650 000 Retained income ? Loan: OV Bank 1 304 000 Debtors’ control 495 000 SARS: Income Tax (provisional tax payments) 300 000 Provision for bad debts 2 355 Creditors’ control 529 800 Bank (favourable) ? Trading stock 2 195 550 Shareholders for dividends 1 980 000 Sales ? Cost of sales 15 660 000 Rent income 98 500 Commission income 626 400 Audit fees 81 000 Directors’ fees 450 000 Advertising 36 000 Dividends on ordinary shares 1 010 000 Copyright reserved Please turn over Hosted by www.ecexams.co.za.

Downloaded from hlayiso.com 4 ACCOUNTING P1 (EC/SEPTEMBER 2024) B. Adjustments and additional information: (i) The business uses a mark-up of 75% on cost. Special customers were granted trade discounts amounting to R216 000. (ii) During a burglary at the warehouse, grass cutting machines were stolen. The business received and recorded R35 000 from the insurance company, being 80% of the value of the machines as they were under insured. No other entries were made. (iii) Audit fees still outstanding at the end of the financial year, R9 500. (iv) An annual advertising contract was signed with a local newspaper with effect from 1 October 2023. R24 000 was paid. (v) Provision for bad debts must be adjusted to R1 975. (vi) A customer who overpaid his account by R2 800 requested that the overpayment be transferred to his creditors account as he also supplies the office with stationery. (vii) Zino Ltd earns commission of R25 per unit sold from STIHL manufacturers. Commission on 900 units for June is still owed. (viii) The company paid their TWO directors up to 31 December 2023. They earn the same fees. A third director was appointed on 1 April 2024 on the same monthly rate as the other two directors. No directors’ fees were paid in the second half of the year. (ix) Premises have been rented out since 1 August 2023 with an agreement that rent will be reduced by R800 per month with effect from 1 May 2024. Rent for June 2024 has not been received yet. (x) An additional provisional tax payment of R200 000 was made on 30 June 2024 (this was not recorded). After this, Income tax still owing to SARS at the end of the year was R60 000. Tax is calculated at 28% of the net profit before tax. (xi) Loan from OV Bank: • The loan balance on 1 July 2023 amounted to R1 490 000. • Interest of R120 100 on the loan is capitalised. • A fixed monthly instalment (including interest) was paid in full and recorded. • Due to tough economic conditions, Zino Ltd negotiated with OV bank to extend the original term of the loan. The bank agreed to this request and thereby reducing the capital portion of the loan repayment by 5% over the next financial year. (xii) The following financial indicators were calculated on 30 June 2024, after taking into account all adjustments: Net asset value per share 675 cents Current ratio 1,3 : 1 55 Copyright reserved Please turn over Hosted by www.ecexams.co.za.

Downloaded from hlayiso.com (EC/SEPTEMBER 2024) ACCOUNTING P1 5 QUESTION 2: FINANCIAL INDICATORS AND CASH FLOW STATEMENT (40 marks; 30 minutes) The information relates to Shabba Ltd for the financial year ended 30 April 2024. REQUIRED: 2.1 Calculate the following financial indicators for the financial year ended 30 April 2024: 2.1.1 Debt-equity ratio (3) 2.1.2 Earnings per share (4) 2.1.3 Dividend pay-out rate (%) (3) 2.1.4 % return on average equity (ROSHE) (5) 2.2 Prepare the Retained Income note. (7) 2.3 Calculate the change in Trade and other receivables. Indicate whether it is an inflow or outflow of cash. (4) 2.4 Calculate the following amounts for the Cash Flow Statement: 2.4.1 Taxation paid (5) 2.4.2 Proceeds from sale of fixed assets (5) 2.5 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 2024: R Depreciation 190 900 Interest expense 69 500 Net profit after tax 1 022 000 B. Taxation is 30% of Pre-Tax profit. Copyright reserved Please turn over Hosted by www.ecexams.co.za.

Downloaded from hlayiso.com 6 ACCOUNTING P1 (EC/SEPTEMBER 2024) C. Extract from the statement of financial position and notes: 30 April 2024 30 April 2023 R R Fixed assets (carrying value) 11 434 000 9 890 600 Fixed deposit 120 000 600 000 Current assets 1 202 400 906 000 Trade and other receivables (see Note 1) 568 700 459 400 Cash and cash equivalents 7 800 85 300 Shareholders’ equity 12 624 400 9 319 200 Retained income ? 1 300 300 Non-current liabilities 1 294 000 1 560 000 Current liabilities 900 000 1 156 600 Trade and other payables 432 000 814 600 Bank overdraft 319 000 0 Shareholders for dividends 188 000 201 000 Note 1: Trade and other receivables. 30 April 2024 30 April 2023 R R Net trade debtors 528 000 426 800 Accrued income 30 800 SARS (Income tax) 9 900 32 600 568 700 459 400 D. Fixed assets: • The total cost for acquisition of a new vehicle and extensions to the buildings during the year amounted to R1 702 000. • During the year equipment was sold at carrying value. E. Share capital and shares: • There were 1 340 000 shares in issue on 30 April 2023. • Additional shares were issued on 1 November 2023. • An interim dividend was paid on 31 August 2023. • On 30 April 2024 shares were repurchased. The value of the shares as per the average issue price amounted to R28 000. The asking price was 15% more than the average issue price. F. Dividends and earnings per share: 30 April 2024 30 April 2023 Interim dividends (per share) 20 cents 45 cents Final dividends (per share) 25 cents 15 cents Earnings per share ? 109 cents 40 Copyright reserved Please turn over Hosted by www.ecexams.co.za.

Downloaded from hlayiso.com (EC/SEPTEMBER 2024) ACCOUNTING P1 7 QUESTION 3: INTERPRETATION OF FINANCIAL INFORMATION (40 marks; 30 minutes) LUKER LTD The financial year ends on the last day of February each year. REQUIRED: NOTE: Where comments or explanations are required, you should: • Quote financial indicators and trends with figures. • Give a reason or an explanation for the financial indicators quoted. 3.1 Concepts relating to companies are given in COLUMN A and descriptions in COLUMN B. Choose the description in COLUMN B that matches a concept in COLUMN A. Write only the letter (A‒D) next to the question numbers (3.1.1 to 3.1.4) in the ANSWER BOOK. COLUMN A COLUMN B (CONCEPT) (EXPLANATION) 3.1.1 Gearing A indicates the benefit that the owners receive from their investment in the business 3.1.2 Solvency B indicates the extent to which the business is financed by borrowed capital 3.1.3 Liquidity C indicates whether the business will be able to pay off all its debts 3.1.4 Return on equity D indicates whether the business can pay off short-term debt (4 x 1) (4) 3.2 Profitability Quote and explain TWO financial indicators which indicate that the company manages its expenses more efficiently. (4) 3.3 Liquidity Suggest strategies that the company can employ to improve its net working capital. Quote TWO financial indicators. (6) 3.4 Financing strategies and gearing • Comment on whether the company is making good use of loans. Quote ONE financial indicator with figures and trends. (4) • The debt-equity ratio of the company decreased from 0,8 : 1 to 0,6 : 1. Mention TWO possible reasons that could have led to this change. (4) Copyright reserved Please turn over Hosted by www.ecexams.co.za.

Downloaded from hlayiso.com 8 ACCOUNTING P1 (EC/SEPTEMBER 2024) 3.5 Dividends, earnings and returns: • Comment on the dividend pay-out policy of the company. Provide TWO reasons why the directors decided to change the policy in 2024. (4) • Explain whether the shareholders should be satisfied with their return on investment in the company. Quote ONE financial indicator, with figures, in your explanation. (4) • Calculate the dividends that were earned by your friend who owns 40 000 shares in the company on 29 February 2024. (2) 3.6 Value of shares: The CEO wants to sell his 60 000 shares back to the company at 1 250 cents per share on 29 February 2024. As a shareholder in the company, how would you react to this decision? Explain and quote ONE financial indicator. (4) 3.7 Shareholding: Refer to information B: • Calculate the number of shares that John Khan purchased from the 250 000 new shares issued on 1 February 2024 to retain his majority status. (4) INFORMATION: A. Financial indicators calculated on the last day of financial year: 29 Feb. 2024 28 Feb. 2023 % operating expenses on sales 21,6% 23,2% % mark-up achieved 60% 50% % operating profit on sales 21% 19% Current ratio 2:1 1,9 : 1 Acid-test ratio 0,6 : 1 1,3 : 1 Average debtors’ collection period 42 days 29 days Average creditors’ payment period 60 days 56 days Debt-equity ratio 0,6 : 1 0,8 : 1 Earnings per share 70 cents 78 cents Dividends per share 72 cents 40 cents Dividend pay-out rate 103% 51% % return on shareholders’ equity 12,8% 11% % return on capital employed 19,8% 20,3% Interest on fixed deposit 8% 8% Interest on loan 13% 13% Net asset value per share 950 cents 955 cents Market price per share at JSE 934 cents 968 cents B. Share capital and shareholding of John Khan: 29 Feb. 2024 28 Feb. 2023 Number of shares in issue: ? 650 000 Shares owned by John Khan (50,1%) (51%) 40 Copyright reserved Please turn over Hosted by www.ecexams.co.za.

Downloaded from hlayiso.com (EC/SEPTEMBER 2024) ACCOUNTING P1 9 QUESTION 4: CORPORATE GOVERNANCE AND AUDITING (15 marks; 15 minutes) You are provided with an article relating to Nicole Ltd. Use the information presented and your knowledge of companies to answer the questions. REQUIRED: 4.1 Explain why Nicole Ltd needs the services of both the internal and external auditors. (4) 4.2 Identify and explain the accounting principle that the directors of Nicole Ltd violated when they recognised revenue in earlier accounting periods. (2) 4.3 Explain what corporate governance is and how the former CEO, Peter Moore did not conduct himself according to the King Code. (4) 4.4 What type of audit report did Nicole Ltd receive in 2023? Provide a reason for your answer. (3) 4.5 As a shareholder in the company, what concerns would you have regarding what happened? Mention TWO points. (2) NICOLE LTD: THE COMPANY LOST MILLIONS OF RANDS BECAUSE OF LACK OF GOOD CORPORATE GORVENANCE In April 2023 Nicole Ltd announced that its 2022 financial results could not be relied on. This was after the external auditors from Dion stated that they were unable to express an opinion on the reliability of the company’s financial statements. They found that 10 executives, including former CEO, Peter Moore, inflated profits to boost their own financial incentives resulting in the company’s equity being overstated by R4,5 billion. Among other things, they recognised revenue (income) in earlier accounting periods than it should have been, and they inappropriately capitalised expenses to assets. The Kuga Investigation identified problems including governance practices, record keeping, system usage and financial reporting. Nicole Ltd asked that its listing be suspended to protect its investors against speculative trading. The JSE then suspended their listing (no one could buy or sell shares) from 10 June 2023 onwards. The JSE started trading Nicole shares again in February 2024, and they fined them R7,5 million. Since then, Nicole Ltd hired ZENTEC to be their internal auditor. Dion was Nicole’s external auditors for more than 15 years. [Adapted from www.sharedata.co.za.] 15 TOTAL: 150 Copyright reserved Please turn over Hosted by www.ecexams.co.za.

Downloaded from hlayiso.com 10 ACCOUNTING P1 (EC/SEPTEMBER 2024) 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 (See Note 1 below) Average debtors x 365 Average creditors x 365 Credit sales 1 Cost of Sales 1 (See Note 2 below) Net income after tax x 100 Net income after tax x 100 Number of issued shares 1 Average shareholders' equity 1 (See Note 3 below) Net income before tax + Interest on loans x 100 Average shareholder’s 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: 1. Trading stock at the end of a financial year may be used if required in a question. 2. Credit purchases may be used instead of cost of sales (figures will be the same if stock is constant). 3. 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 Hosted by www.ecexams.co.za.