Accounting Grade 12 IEB Paper 1 2017 Memo

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE EXAMINATION NOVEMBER 2017 ACCOUNTING: PAPER I MARKING GUIDELINES Time: 2 hours 200 marks These marking guidelines are prepared for use by examiners and sub-examiners, all of whom are required to attend a standardisation meeting to ensure that the guidelines are consistently interpreted and applied in the marking of candidates' scripts. The IEB will not enter into any discussions or correspondence about any marking guidelines. It is acknowledged that there may be different views about some matters of emphasis or detail in the guidelines. It is also recognised that, without the benefit of attendance at a standardisation meeting, there may be different interpretations of the application of the marking guidelines. IEB Copyright © 2017 PLEASE TURN OVER

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 2 of 12 QUESTION 1 MANUFACTURING Refer to the Information Booklet for information relating to File Fanatics. 1.1 Complete the raw materials note as it would have appeared on 31 December 2017: Opening stock 345 730 Purchases (2 100 000 – 19 359 mark given if figure seen) 2 080 641 only if subtracted will lose method if amount is unrelated Railage (191 900 – 9 595) 182 305 loose mark if incorrect use of brackets Closing stock loose mark if incorrect use of brackets (435 400) DO NOT TOTAL 1.2 Complete the direct labour note as it would have appeared on 31 December 2017: Wages (13 × (2 920 × 115) 335 800) 4 365 400 Bonus (4 365 400 × 7%) 305 578 UIF contribution 22 464 If deduction is added they lose contribution mark DO NOT TOTAL Bonus and wages may have been added together 4 670 978 or 4 955 366 or 4 431 518 = 4 103 476 = IEB Copyright © 2017 PLEASE TURN OVER

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 3 of 12 1.3 Complete the factory overheads note as it would have appeared on 31 December 2017: Depreciation on factory machinery 15 930 Indirect materials (15 400 + 187 200 – 12 600) 190 000 Factory foreman's salary 540 025 – 312 625) 227 400 Rent expense (409 500 × 3/6) 204 750 50 304 73 360 – 10 480 = 62 880 × 0.8 Give if related apportionment = 50 to Insurance (73 360/14 × 12 = 62 880 × 80%) apportionment Water and electricity 70 000 (22 500 × 100/20 = 112 500 – (112 500 × 25%) – 14 375 Must show both 112 500 – 28 125 = 84 375 subtractions DO NOT TOTAL 22 500 × 25% = 5 625 22 500 – 5 625 = 16 872 16 872 -14 375 = 2 500 4 marks if working is shown 1.4 The bookkeeper has incorrectly allocated the bad debts figure of R36 750. Into which note should bad debts have been recorded? Justify your answer by providing a reason. NOTE Selling and distribution note REASON Bad debts arise specifically from credit sales and therefore the cost of these needs to be borne by the sales department. If reason relates to their note will get 1 out of 2 If reason “Sales” no mark IEB Copyright © 2017 PLEASE TURN OVER

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 4 of 12 QUESTION 2 COMPANY FINANCIAL STATEMENTS Refer to the Information Booklet for information relating to ITSIE LIMITED. 2.1 Complete the Statement of Comprehensive Income (Income Statement) for the year ending 30 June 2017: Ignore brackets in Income Statement process ITSIE LIMITED Statement of Comprehensive Income for the year ending 30 June 2017 30 June 2017 30 June 2016 R R Net Sales (3 830 400 – 80 400) 3 750 000 Ignore brackets – Less: Cost of Sales (2 343 750) less Gross profit 1 406 250 DO NOT Other Operating Income CALCULATE 600 000 618 000 Rent income (R50 000 × 9 = 450 000) + 708 000 (R59 000 × 3 = R177 000) 627 000 924 000 Discount received 9 600 Fee income 223 000 DO NOT Gross income for the year CALCULATE (1 687 500) 1 723 680 Operating expenses (45% 3 830 400) Advertising (37 100 + [7 600/1,6 × 3 = 51 350 14 250]) OR [37 100 + (7 600 × 3) 59 900 ×100/160] (3 × SP) Audit fees 90 000 Bank charges 11 400 Debtors' allowances (80 400 – 80 400) 0 Delivery expenses 145 000 Discount allowed 29 350 Lease on vehicle 161 000 Salaries and wages 505 200 Directors' fees 682 900 9 500 Trading stock deficit (4 750 × 2) If 15 200 Check with advertising (2 × SP of 7 600) Provision for bad debts adjustment 1 800 DO NOT Operating profit for the year CALCULATE Interest income 12 625 DO NOT Profit before interest expense CALCULATE Interest expense (33 000 + 50 375) (83 375) Only as adjusting figure Method in adding Profit before taxation 507 600 Taxation for the year (170 250) IEB Copyright © 2017 PLEASE TURN OVER

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 5 of 12 Net profit after taxation (154 000/0,22 = 700 000 + 165 000) × 39 c 337 350 315 900 165 000 × .39c = 64 350 700 000 × .39c = 273 000 Interest [600 000 × 14% × 7/12 = 49 000] + [550 000 × 15% × 5/12 = 34 375] = 84 000 = 82 500 IEB Copyright © 2017 PLEASE TURN OVER

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 6 of 12 2.2 Complete the Retained income note as it would have appeared in the notes to the Financial Statements as at 30 June 2017: ITSIE LIMITED Notes to the Financial Statements as at 30 June 2017 30 June 2017 R RETAINED INCOME Balance as at 1 July 2016 302 500 Net income after tax not before tax 337 350 Repurchase of shares (55 000 × 1, 90) (104 500) 95 000 Dividends for the year (393 050) Interim paid (400 000 – 154 000) 246 000 147 050 If 14 705 000 Final declared (700 000 + 165 000) × 17c (865 000 × R17) Balance as at 30 June 2017 142 300 Must show brackets 2.3 Complete the Current Assets section in the Statement of Financial Position (Balance Sheet) as at 30 June 2017: ITSIE LIMITED Statement of Financial Position as at 30 June 2017 30 June 2017 30 June 2016 R R DO NOT CURRENT ASSETS CALCULATE Inventories 407 000 437 000 Trade and other receivables (337 500 × 1,25 – 152 000) 269 875 Cash and cash equivalents 152 000 If 421 875 (337 500 × 1,25) 185 000 (337 500 – 153 000) IEB Copyright © 2017 PLEASE TURN OVER

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 7 of 12 QUESTION 3 CASH FLOW STATEMENTS Refer to the Information Booklet for information relating to INGIVELA LIMITED. 3.1 Complete the Tangible Asset note as it would have appeared in the Statement of Financial Position as at 31 December 2017: NOTE 3: TANGIBLE ASSETS Plant and Property Vehicles Machinery Carrying value on 1 January 2017 3 000 000 700 000 645 000 ? Cost 3 000 000 1 750 000 1 350 000 Accumulated depreciation – (1 050 000) (705 000) Ignore MOVEMENTS brackets 2 850 000 Additions ? 450 000 225 000 Disposals (110 160) 180 000 – 57 600 – 12 240 – 0 ? Depreciation (104 520 + 12 240 + (131 760) 15 000) – (220 000) ? Carrying value on 31 December DO NOT 2017 5 850 000 930 000 CALCULATE Cost 5 850 000 2 200 000 1 395 000 – (766 920) Accumulated depreciation (1 270 000) ? Accuracy Method mark = brackets If no information in note then award marks in calculation block due to ? being in the way Calculation for depreciation (Alternate mark allocation for workings only.) 1350 + 225 – × =1 395 (180 000 – 57 600) = 122 400 × 20% × 6/12 = 12 240 sold new old 24 480 / 36 000 / 18 000 225 000 × 20% × 4/12 = 15 000 1 350 000 – 180 000 = 1 170 000 705 000 – 57 600 = 647 400 106 968 1 170 000 – 647 400 = 522 600 × 20% = 104 520 depr cal – disposal depreciation Calculation for asset disposal 180 000 – (57 600 + 12 240 = 69 840) = 110 160 122 400 167 760 IEB Copyright © 2017 PLEASE TURN OVER

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 8 of 12 3.2 Calculate the Cash generated from operations as it would appear in the reconciliation of profit before taxation and cash generated from operations on 31 December 2017. = 1 962 010 – 946 050 (1 463 550 – 517 500) + 315 900 (944 400 – 628 500) + 414 750 ( 656 700 + 13 050 OR = 669 750 – 247 500 – 7 500 OR (255 000) 656 700 – 247 500 = 409 200 = 1 746 610 Payables +/ 3.3 Complete the Cash Flow Statement of INGIVELA LIMITED for the year ended 31 December 2017. Show all working detail in brackets. INGIVELA LIMITED Cash Flow Statement for the year ended 31 December 2017 No brackets no marks DO NOT Cash flows from operating activities CALCULATE Cash generated from operations 1 746 610 Interest paid (63 000) Dividends paid (412 500 + (173 250 + 157 500)) – 157 500 -412 500 – 173 250 – 157 500 + 157 500 (585 750) Taxation paid (494 830 – 53 550 – 26 100) -494 830 + 53 550 + 26 100 494 830 – 53 550 = 441 280 494 830 – 26 100 = 468 730 53 550 +26 100 = 79 650 53 550 – 26 100 = 27 450 (415 180) DO NOT Cash flows from investing activities CALCULATE (3 900 000) Purchase of non-current assets (3 525 000 + 375 000) (3 525 000) Proceeds from the sale of non-current assets refer back 110 160 DO NOT Cash flows from financing activities CALCULATE Proceeds of share capital (475 000 × 4, 50) 2 137 500 Repurchase of shares (134 500) Proceeds of new loans (600 000 + 63 000 = 663 000 – 123 000 – 2 692 500) 663 000 – 123 000 = 540 000 600 000 – 123 000 = 477 000 123 000 – 63 000 = 60 000 600 000 – 2 692 500 = 2 095 500 663 000 – 123 100 – 2 692 500 = 1 906 500 2 152 500 IEB Copyright © 2017 PLEASE TURN OVER

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 9 of 12 Repayment of capital portion of loan (10 250 × 12 = 123 000) – 63 000 (60 000) Net change in cash and cash equivalents 988 340 (138 000) 165 000 – Cash and cash equivalents at the beginning of the year 27 000 Cash and cash equivalents at the end of the year 850 340 IEB Copyright © 2017 PLEASE TURN OVER

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 10 of 12 QUESTION 4 INVENTORY Refer to the Information Booklet for information relating to Rhodes Cricket Supplies. 4.1 Provide one advantage of both the Periodic and Perpetual Inventory systems. Advantage of the Periodic system: Simple, cheap It is a cost effective system as there is very little outlay for expensive equipment. Feasible for businesses where it is difficult to determine the cost price of a single item. Advantage of the Perpetual system: GP can be determined Cost of sales is known Stock thefts are easily and quickly identified. Better control over stock Alternative advantages will be marked. 4.2 A number of cricket bats were stolen during the November robbery. No entry has been made to account for this theft. Calculate the number of cricket bats stolen. (1 100 + 15 000 )= 16 100 – 2 650 = 13 450 – 13 430 = 20 bats stolen 4.3 Calculate the value of the closing stock of cricket bats. 2 650 × [14 409 500 (13 470 000 + 939 500)/ 16 100 (15 000 + 1 100) = 895] = 2 371 750 898 = 2 379 700 IEB Copyright © 2017 PLEASE TURN OVER

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 11 of 12 4.4 By calculating how long the closing stock will last (stock holding period) determine on what date the owner has to place his next order for cricket bats so as not to run out. The supplier takes 14 days to deliver after the order has been placed. Calculation of stock holding period: Cost of sales [939 500 + 13 470 000 – 2 371 750] = 12 037 750 COS: ignore use of formula. Implied total if calculation in formula From 4.3 2 371 750 × 365 12 037 750 1 14 409 500 14 391 600 Or (895 × 13 430)= 12 019 850 + (20 × 895) = 17 900 =12 037 750 = 71, 9 days or 72 days The order needs to be placed: From above 71, 9 days – 14 days = 57, 9 days January 31 days therefore the order needs to be placed on about the 27 February date correct to answer IEB Copyright © 2017 PLEASE TURN OVER

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 12 of 12 4.5 Calculate the cost of sales for the cricket bags sold. 60 000 + 1 260 000 (1 000 × 1 260) + 1 417 500 (1 050 × 1 350) + 27 600 (20 × 1 380) = 2 765 100 OR 60 000 + [4 051 500 – 270 000 (200 × 1 350)] – 1 076 400 (780 × 1 380) = 2 765 100 4.6 Clive Rhodes, the owner, is concerned that the business is not achieving their intended mark-up on the sale of cricket bags. The business aims to achieve a mark-up of 60% at all times. Calculate the mark-up % achieved on the sale of cricket bags. From 4.5 from 4.5 4 112 800 – 2 765 100 = 1 347 700/ 2 765 100 × 100/1 = 48, 74% If used mark-up formulae (GP/COS × 100 or Sales /COS × 100 – 100) 4.7 Provide (does not need to be explained) two reasons why the business has not achieved their intended mark-up on the sale of cricket bags. Linked to 4.6. if actual is higher accept relevant answer Do not accept: donations, drawings, deficits Accept: damages, debtors allowances, different valuation method, loyalty programmes, error in processing selling price, cost price increasing but selling price stays the same Reason 1: Too many cash discounts on the selling price granted to customers. May have been holding too much stock and need cash so sold below the intended mark-up% Reason 2: Seasonal sales may have seen stock being sold at a lower price. They may be moving old stock to make room for new brands etc. Total: 200 marks IEB Copyright © 2017