Accounting Grade 12 P1 NSC November 2020 QP (Eng)

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE GRADE 12 ACCOUNTING P1 NOVEMBER 2020(2) MARKS: 150 TIME: 2 hours This question paper consists of 10 pages, a formula sheet and an 9-page answer book. Copyright reserved Please turn over

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Downloaded from hlayiso.com Accounting/P1 3 DBE/November 2020(2) NSC 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 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. QUESTION TOPIC MARKS MINUTES Fixed Assets and Statement of 1 60 45 Comprehensive Income Financial Indicators and Cash Flow 2 40 35 Statement 3 Interpretation of Financial Statements 35 30 4 Corporate Governance 15 10 TOTAL 150 120 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 4 DBE/November 2020(2) NSC QUESTION 1: FIXED ASSETS AND STATEMENT OF COMPREHENSIVE INCOME (60 marks; 45 minutes) The information relates to Robbie Ltd for the financial year ended 28 February 2021. REQUIRED: 1.1 Refer to INFORMATION B(a) for fixed assets. Calculate the following: 1.1.1 The missing amounts denoted by (i) to (iii) on the Fixed Asset Note (11) 1.1.2 Profit/Loss on the sale of equipment on 1 October 2020 (2) 1.2 Refer to INFORMATION B(e) for trading stock. Calculate the trading stock deficit. (4) 1.3 Prepare the Statement of Comprehensive Income for the financial year ended 28 February 2021. (43) INFORMATION: A. Extract from the Pre-adjustment Trial Balance on 28 February 2021: R Mortgage loan: Sufi Bank 1 005 500 Debtors' control 123 000 Trading stock ? Provision for bad debts (1 March 2020) 7 030 Sales ? Cost of sales 6 966 000 Salaries and wages 1 468 120 Directors' fees 3 330 000 Audit fees 91 000 Repairs 476 000 Rent income 173 000 Interest income 25 000 Interest on loan ? Bad debts 19 200 Advertising 25 680 Sundry expenses 452 310 Ordinary share dividends 86 400 B. Adjustments and additional information: (a) Fixed assets: Vehicles:  The business owns two vehicles on 28 February 2021. The second vehicle was purchased on 1 November 2020.  Vehicles are depreciated at 15% p.a. on cost. Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 5 DBE/November 2020(2) NSC Equipment:  Depreciation is 20% p.a. on the diminishing-balance method.  Unused equipment was sold for R40 000 on 1 October 2020. Accumulated depreciation on the equipment sold was R36 600 on 1 March 2020. Extract of the Fixed Asset Note: VEHICLES EQUIPMENT Cost (1 Mar. 2020) 460 000 360 000 Accumulated depreciation (1 Mar. 2020) (396 750) (187 595) CARRYING VALUE (1 March 2020) (i) 172 405 Additions (at cost) 510 000 0 Disposals (at carrying value) 0 (iii) Depreciation (ii) (31 281) CARRYING VALUE (28 February 2021) Cost (28 Feb. 2021) 970 000 285 000 Accumulated depreciation (28 Feb. 2021) (b) The business maintains a mark-up of 120% on cost. Note that trade discounts of R648 000 were granted to special customers. (c) The account of debtor B Melta, R800, must be written off. (d) Provision for bad debts must be adjusted to 5% of outstanding debtors. (e) Trading stock is valued on the weighted-average method. The Ledger Account and records reflect that 280 units should be on hand. However, the physical stock count reflects only 262 units on hand. The stock records are as follows: UNITS UNIT PRICE TOTAL Stock at beginning of year 200 R3 600 R720 000 Purchased during the year 1 840 R4 100 R7 544 000 Returns: damaged units 40 R4 100 R164 000 Available for sale 2 000 R8 100 000 Stock units per records 280 ? ? (f) 30% of the audit fees is still outstanding. (g) The monthly rent income did not change during the year. During February 2021 the tenant paid R9 000 for repairs to the premises, and deducted this from his rent for February 2021. Repairs are the responsibility of the company, and this was not recorded. The rent for March 2021 was received in advance. (h) The company has four directors earning the same fee. One director resigned on 31 May 2020 and received his fees up to this date. Another director is still owed fees for January and February 2021. (i) Advertising consists of a contract with a newspaper for the entire financial year. Payments are monthly, however instalments were paid for 11 months only. NOTE: The monthly rate decreased by R240 from 1 November 2020. (j) The net profit after tax was accurately calculated at R1 054 000. The income tax rate is 32%. 60 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 6 DBE/November 2020(2) NSC QUESTION 2: FINANCIAL INDICATORS AND CASH FLOW STATEMENT (40 marks; 35 minutes) 2.1 Choose the correct word(s) from those given in brackets. Write only the word(s) next to the question numbers (2.1.1 to 2.1.3) in the ANSWER BOOK. 2.1.1 The (directors' report/audit report) gives an explanation of the operations of the company during a financial year. 2.1.2 The (independent/internal) auditors are responsible for monitoring the financial control measures of a company on a regular basis. 2.1.3 In the event of bankruptcy, the shareholders are normally not responsible for the debts of the business. This is because of (limited/unlimited) liability. (3 x 1) (3) 2.2 USANDA LIMITED The financial year ended on 28 February 2021. REQUIRED: 2.2.1 Calculate the following figures for the 2021 Cash Flow Statement:  Income tax paid (4)  Dividends paid (4) 2.2.2 Prepare the following sections of the Cash Flow Statement:  Cash effects for financing activities (11)  Net change in cash and cash equivalents (4) 2.2.3 Calculate the following financial indicators for the year ended 28 February 2021:  % operating profit on sales (2)  Acid-test ratio (4)  % return on average shareholders' equity (ROSHE) (4)  Dividend payout rate (%) (4) Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 7 DBE/November 2020(2) NSC INFORMATION: A. Extract: Statement of Comprehensive Income for the year ended 28 February 2021: Sales R17 800 000 Operating profit 2 262 100 Interest on loan (capitalised) 270 000 Net profit before tax 1 777 000 Net profit after tax 1 243 900 B. Extract: Statement of Financial Position: 28 February 2021 29 February 2020 Fixed assets (carrying value) R13 650 600 R13 590 000 Current assets 659 500 1 067 500 Inventories 276 500 373 200 Trade and other receivables 262 300 539 600 Cash and cash equivalents 120 700 154 700 Shareholders' equity 9 891 400 11 985 000 Ordinary share capital 9 555 000 11 220 000 Retained income 336 400 765 000 Loan: VBC Bank (see E) ? 2 080 000 Current liabilities 611 900 592 500 Trade and other payables 252 100 185 700 Bank overdraft 0 90 000 SARS: Income tax 19 800 69 300 Shareholders for dividends 340 000 247 500 C. Share capital: NUMBER OF DETAILS OF DATES SHARES SHARES 1 March 2020 1 650 000 In issue 30 October 2020 50 000 Additional shares issued 27 February 2021 335 000 Shares repurchased at R9,50 each 28 February 2021 1 365 000 In issue D. Dividends and earnings:  An interim dividend was paid on 31 August 2020.  A final dividend of 20 cents per share was declared on 28 February 2021.  Total dividends for the year amounted to R835 000.  Earnings per share (EPS) on 28 February 2021 was 74 cents. E. Loan: VBC Bank  The balance on 1 March 2020 was R2 080 000.  Monthly instalments of R35 000, including interest, were paid.  Interest capitalised amounted to R270 000. 40 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 8 DBE/November 2020(2) NSC QUESTION 3: INTERPRETATION OF FINANCIAL STATEMENTS (35 marks; 30 minutes) 3.1 Choose the question from COLUMN B that matches a category of financial indicators in COLUMN A. Write only the letter (A–E) next to the question numbers (3.1.1 to 3.1.4) in the ANSWER BOOK. COLUMN A COLUMN B 3.1.1 Liquidity A Is the business managing expenses effectively to increase profitability? 3.1.2 Risk and gearing B Is the investment in the company 3.1.3 Return to shareholders better than investing in a fixed deposit? 3.1.4 Operating efficiency C Will the company be able to pay off its current debts? D Will the company be able to pay off all its debts using existing assets? E How is the company managing loans or borrowed capital? (4 x 1) (4) 3.2 SCI-FI GEEKS LTD The business trades in electronic equipment purchased from China. The information relates to the past two financial years, ended 31 March. The COVID-19 lockdown has negatively affected sales over the current financial year. REQUIRED: 3.2.1 Liquidity: The directors are satisfied with the improvement in the current ratio and the acid-test ratio. Explain why you would disagree with them. Quote TWO financial indicators in your response. (6) 3.2.2 Dividends: The directors changed the dividend policy for the current financial year.  Comment on the dividend per share over the two years. Quote figures. (2)  Explain the change in the dividend payout rate and give a reason for this change. Quote figures. (4)  A shareholder felt that they should be satisfied with the dividends they received, as it is better than last year. Explain why you agree with him. Quote figures. (3) 3.2.3 Comment on the risk and gearing for both years. Quote TWO financial indicators (with figures). (6) Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 9 DBE/November 2020(2) NSC 3.2.4 Existing shareholders are dissatisfied that the new shares issued on 1 April 2020 were sold to the CEO, Ida Shark. Give TWO reasons why you consider their feelings to be justified. Quote figures. (6) 3.2.5 The Cash Flow Statement reflected a positive change of R980 000. Provide TWO points why this should still be a concern to directors. Quote figures. (4) INFORMATION: A. Financial indicators and additional information: 2021 2020 Mark-up % achieved 60% 60% % net profit before tax on sales 13,9% 20,3% Current ratio 2,4 : 1 1,1 : 1 Acid-test ratio 1,0 : 1 0,4 : 1 Stockholding period 102 days 32 days Average debtors' collection period 46 days 31 days Average creditors' payment period 60 days 60 days Earnings per share 58 cents 130 cents Dividends per share 72 cents 90 cents Dividend payout rate 136,5% 69% Debt-equity ratio 0,4 : 1 0,3 : 1 Return on average shareholders' equity 17,7% 31,6% Return on total capital employed 23,2% 39% Net asset value per share 332 cents 409 cents Market price of shares on stock exchange 410 cents 540 cents Interest rate on loans 13,5% 13,5% Interest rate on fixed deposits 6,8% 7,8% B. Share capital:  On 1 April 2020 the company issued an additional 250 000 shares.  On 31 March 2021 there were 1 250 000 shares in issue. C. Extract from the Cash Flow Statement on 31 March: 2021 2020 Cash flows from operating activities (148 080) 910 000 Cash generated from operations 1 281 620 Interest paid (232 000) Taxation paid (272 700) Dividends paid (925 000) Cash flows from investing activities 101 580 (300 000) Cash flows from financing activities 1 026 500 (100 000) Sale of shares 375 000 0 Change in loan 651 500 (100 000) Cash and cash equivalents: Net change 980 000 510 000 Opening (330 000) (840 000) Closing 650 000 (330 000) 35 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/P1 10 DBE/November 2020(2) NSC QUESTION 4: CORPORATE GOVERNANCE (15 marks; 10 minutes) Shareholders and employees associated with a company will be particularly interested in whether the company is well governed and managed by the directors. At the AGM, the shareholders will elect two types of directors:  Executive directors: They attend board meetings and work at the company on a full-time basis.  Non-executive directors: They attend board meetings and do NOT work at the company. You are provided with four aspects of corporate governance that will be of concern to the stakeholders. REQUIRED: 4.1 Audit Report: Explain why a qualified audit report is not a good reflection of a company. Provide TWO points. (4) 4.2 The Board of Directors: Explain why it is important for a company to include non-executive as well as executive directors on the Board of Directors. (4) 4.3 The Remunerations Committee: According to the Companies Act, 2008 (Act 11 of 2008), a company must have a Remunerations Committee. Explain the role/responsibility of this committee and give a reason why this committee is necessary. (3) 4.4 Directors engage with clients on a regular basis in an effort to negotiate contracts and to increase sales and services. Explain why there should be a company policy that directors must declare to the Board all gifts, donations or favours received by them from clients. Provide TWO points. (4) 15 c TOTAL: 150 Copyright reserved

Downloaded from hlayiso.com Accounting/P1 DBE/November 2020(2) NSC 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 & other receivables + Cash & 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