Accounting Grade 12 EC June 2019 Question Paper (English)

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE GRADE 12 JUNE 2019 ACCOUNTING MARKS: 300 TIME: 3 hours *JACCNE* This question paper consists of 15 pages and a 14-page answer book.

Downloaded from hlayiso.com 2 ACCOUNTING (EC/JUNE 2019) INSTRUCTIONS AND INFORMATION Read the instructions carefully and follow them precisely. 1. Answer ALL the questions. 2. A special ANSWER BOOK is provided in which to answer ALL the 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 black/blue ink to answer the questions. 6. Where applicable, show all calculations to ONE decimal place. 7. Write neatly and legibly. Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/JUNE 2019) ACCOUNTING 3 8. Use the information in the table below as a guide when answering the question paper. Try NOT to deviate from it. QUESTION 1: 40 marks; 25 minutes Topic: This question integrates: Managing resources Inventory Valuation Inventory concepts and valuation Internal control QUESTION 2: 45 marks; 30 minutes Topic: This question integrates: Financial accounting Bank reconciliation Reconciliation Debtors' reconciliation Managing resources Internal control QUESTION 3: 50 marks; 30 minutes Topic: This question integrates: Financial accounting Company financial Adjustments statements Income statement QUESTION 4: 70 marks; 40 minutes Topic: This question integrates: Financial accounting Company financial Notes to the Balance Sheet statements, Analysis and Interpretation Balance sheet Analysis & interpretation of financial information QUESTION 5: 55 marks; 30 minutes Topic: This question integrates: Financial accounting Company financial Notes to the Cash Flow Statement statements, Audit report Cash Flow Statement Managing resources Audit report QUESTION 6: 40 marks; 25 minutes Topic: This question integrates: Financial accounting Fixed asset note calculations Fixed Assets Asset disposal account VAT VAT calculations Managing resources VAT ethics Copyright reserved Please turn over

Downloaded from hlayiso.com 4 ACCOUNTING (EC/JUNE 2019) QUESTION 1: INVENTORY VALUATION (40 marks; 25 minutes) 1.1 CONCEPTS REQUIRED: Indicate whether the following statements are TRUE or FALSE: 1.1.1 When goods are sold, the cost of sales is recorded at the same time under the perpetual stock system. (1) 1.1.2 The specific identification method of stock valuation is based on the assumption that certain stock is identified to be sold first. (1) 1.1.3 Goods bought are debited to the Purchases Account under the periodic stock system. (1) 1.1.4 The weighted-average method of stock valuation is based on the assumption that the value of opening and closing stock are added up, and divided by the number of units bought. (1) 1.2 INVENTORY VALUATION Zenko’s Shop sells one type of suitcase. You are provided with information for the financial year ended on 30 April 2019. The business uses the FIFO method for stock valuation and the periodic stock system. REQUIRED: 1.2.1 Calculate the value of the closing stock on 30 April 2019. (8) 1.2.2 Calculate the following for the year ended 30 April 2019:  Cost of sales (8)  Gross profit % (4)  Stock holding period for 2019 in days (5) 1.2.3 Comment on the stock holding period for 2019. Quote figures. (The stock holding period for 2018 was 182 days.) (4) 1.2.4 In order to improve on stock losses (20 suitcases) the previous year, the owner introduced stricter control measures over stock. Comment on whether it was successful. Show calculations. (7) Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/JUNE 2019) ACCOUNTING 5 INFORMATION: Stock records of suitcases: Price per unit Date Number of units (including carriage Total value on purchases) 1 May 2018 215 R122 550 30 April 2019 110 ? ? Purchases of suitcases: Total Cost Carriage on No. of Total carriage Date price per purchases units purchases on unit per unit purchases 10 July 2018 150 R580 R87 000 R30 R4 500 28 September 2018 200 R600 R120 000 R30 R6 000 2 December 2018 125 R630 R78 750 R30 R3 750 28 February 2019 75 R610 R45 750 R40 R3 000 TOTAL 550 R331 500 R17 250 Return of suitcases: Ten (10) suitcases purchased during February 2019 were damaged and therefore returned to the supplier. The supplier agreed and credited the business account with the cost price including the carriage on purchases. Sales 640 suitcases were sold during the year for R576 000. 40 Copyright reserved Please turn over

Downloaded from hlayiso.com 6 ACCOUNTING (EC/JUNE 2019) QUESTION 2: RECONCILIATIONS (45 marks; 30 minutes) 2.1 BANK RECONCILIATION You are provided with information from the books of Qumbu Traders. REQUIRED: 2.1.1 Calculate the correct balance of the Bank Account on 31 January 2019. (15) 2.1.2 Prepare the Bank Reconciliation Statement on 31 January 2019. (11) 2.1.3 An internal investigation revealed that cash deposits are not made immediately. Quote and explain TWO examples which led to this finding. (4) 2.1.4 Provide TWO internal control measures that the business can use to prevent this from happening again. (4) INFORMATION: A. Extract from the Bank Reconciliation Statement on 31 December 2018: Outstanding deposits 15 November 2018 R 4 100 31 December 2018 R 3 600 Cheques not yet presented for payment: No. 673 R 1 080 No. 681 R 2 860 No. 707 R 3 900 No. 723 R 1 000  Cheque no. 673 was issued on 21 July 2018 as a donation.  Cheques no. 681 and no. 707 were reflected on the Bank Statement for January 2019. B. The Bank Account in the General Ledger on 31 December 2018 reflected a favourable balance of R24 740. C. Provisional totals for January 2019: CRJ: R68 720 CPJ: R74 960 Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/JUNE 2019) ACCOUNTING 7 D. Items reflected in the Journals for January 2019, but not on the Bank Statement:  The following cheques: o No. 782 for R5 400 o No. 805 for R1 560, dated 8 February 2019 o No. 808 for R5 400 NOTE: Cheque no. 782, dated 21 January 2019, issued for stationery was lost. Payment of this cheque was stopped. The cheque was replaced by cheque No. 808 on 30 January 2019.  Cheque no. 790 was issued for trading stock purchased. The amount was recorded as R1 850 in the Cash Journal, but the correct amount of R1 580 was recorded in the Bank Statement.  A deposit made by Qumbu Traders on 31 January 2019, R6 800. E Items on the January Bank statement, but not in the Cash journals:  A deposit of R3 600 on 12 January 2019  Bank charges, R1 560 NOTE: Bank charges were overcharged by R160. The bank will rectify the error in the next bank statement.  Interest on credit balance, R500.  A dishonoured cheque originally received from a debtor, R3 500.  A direct deposit by a debtor, in settlement of his account of R1 500 after 10% discount was allowed.  A debit order for instalment of the owner’s personal insurance, R2 100. 2.2 DEBTOR’S RECONCILIATION REQUIRED: Draw up a reconciled Debtor’s List on 31 March 2019: (11) INFORMATION: The following errors were found:  An allowance of R300 for damaged goods returned by H. James was posted to the account of H. Jameson.  An invoice issued to A. Dyantyi for R1 200 was entered correctly in the journal, but posted to her account as R2 100.  R20 interest charge on the overdue account of E. Rasmeni, was posted to the wrong side of his account. 45 Copyright reserved Please turn over

Downloaded from hlayiso.com 8 ACCOUNTING (EC/JUNE 2019) QUESTION 3: INCOME STATEMENT (50 marks; 30 minutes) You are provided with information extracted from the records of BigSave Ltd, on 30 April 2019. REQUIRED: Prepare the Income Statement for the year ending 30 April 2019. (50) INFORMATION: A. EXTRACT FROM THE PRE-ADJUSTMENT TRIAL BALANCE ON 30 APRIL 2019 Trading stock 1840 800 Debtors control 625 600 Provision for bad debts 26 400 Sales 7 164 000 Cost of sales 3 840 000 Bad debts 14 520 Debtors allowances 84 000 Consumable stores 47 400 Salaries and wages 985 200 Employers’ contributions 97 200 Rent income 278 000 Directors’ fees 1 248 800 Repairs and maintenance 150 720 Bank charges 33 600 Auditing fees 105 600 Sundry expenses 107 670 B. ADJUSTMENTS AND ADDITIONAL INFORMATION: 1 Goods are sold at a mark-up of 40% on cost price. 2 An allowance for stock totally damaged was granted by the business. The value of the stock according to the original invoice received, R12 000. 3 On 30 April 2019, R2 880 was received from A. Kwaza, whose account had previously been written off as irrecoverable. The amount was entered as Bad debts in the CRJ. 4 The provision for bad debts must be adjusted to 5% of outstanding debts. 5 The company has 3 directors, each earning R44 600 per month. The third director was only appointed on 1 November 2018. Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/JUNE 2019) ACCOUNTING 9 6 The following were reflected during a physical stock count on 30 April 2019:  Trading stock, R1 847 800  Consumable stores, R600 7 Depreciation for the year amounted to R243 840. 8 An amount of R5 600 was paid too much in auditing fees. 9 An employee was omitted from the salaries journal. He has not been paid. His details are as follows: Deductions Employer’s contribution Net salary R5 250 R4 410 15 750 10 The tenant is two months’ arrears with the rent. The monthly rent was decreased by R1 000 on 1 January 2019. 11 Net profit after tax amounts to 5% on sales. 12 Income tax is calculated at 28% of the net profit. 50 Copyright reserved Please turn over

Downloaded from hlayiso.com 10 ACCOUNTING (EC/JUNE 2019) QUESTION 4: COMPANY FINANCIAL STATEMENTS (70 marks; 40 minutes) 4.1 BALANCE SHEET AND NOTES Refer to the information from the records of RADABA LTD for the financial year ended 28 February 2019. REQUIRED: 4.1.1 Prepare the following notes to the Balance Sheet:  Ordinary share capital (9)  Retained income (11)  Trade and other receivables (7) 4.1.2 Complete the Statement of Financial Position (Balance Sheet) on 28 February 2019. Where notes are not required, show ALL workings in brackets. (26) INFORMATION: A. Amounts extracted from the financial records of RADABA LTD: 28 Feb. 2019 Fixed assets (cost) 6 791 400 Accumulated depreciation 1 940 400 Ordinary share capital ? Retained income 531 050 Fixed deposit: Trust Bank (8%) 975 000 Loan: Easy Bank 723 900 Inventories ? Debtors’ Control 365 250 Creditors’ Control 93 690 Provision for bad debts 14 610 Accrued expenses 18 180 Accrued income 5 910 Prepaid expenses 11 400 Cash (Bank and cash float) 504 900 SARS Income tax (provisional payments) 555 000 Dividends on shares (interim dividends) 405 000 B. Share capital  The business has an authorised share capital of 800 000 shares.  On 1 April 2018, the directors decided to repurchase shares at a total cost of R1 170 000. The shares were bought at R1,70 above the average price of R10 per share.  A further 120 000 shares were issued on 31 October 2018 at R13 per share. Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/JUNE 2019) ACCOUNTING 11 C. On 27 February 2019, a final dividend of 30 cents per share was declared. Shares repurchased do not qualify for final dividends. D. A certain portion of the fixed deposit matures in the next 3 months, after which the remaining balance will be R800 000. E. Interest capitalised, R122 100, is reflected on the loan statement received. This was not recorded in the books. The business expects to decrease the loan by R169 200 in the next financial year. F. After all the above adjustments were taken into account the net profit before tax was calculated to be R1 741 500 and the income tax payable for the year R522 450. 4.2 ANALYSIS AND INTERPRETATION OF FINANCIAL INDICATORS REQUIRED: Use the financial indicators of QUICKFIX LTD given below, to answer the following questions. 4.2.1 The company issued additional shares at R9. In your opinion, do you think the existing shareholders would be happy with the issue price? Quote ONE financial indicator with actual figure/percentage/ratio to support your statement. (3) 4.2.2 The directors feel that the shareholders should be satisfied with the performance of the company. Explain and quote TWO financial indicators with actual figures/ratios/percentages to support their opinion. (6) 4.2.3 The directors decided to increase the loan during the current financial year. Quote TWO financial indicators (actual figures/ratios/percentages) that are relevant to their decision. Explain why this was a good decision, or not. (8) The following financial indicators were calculated for the past two years: 2018 2017 Current ratio 1,7 :1 1 :1 Stock turnover rate 8 times 6 times Debt-equity ratio 0,3 : 1 0,2 :1 % return on average shareholders’ equity 16% 13% % return on total capital employed 22% 18% Dividends per share 34 cents 20 cents Earnings per share 133 cents 120 cents Net asset value per share 1 121 cents 992 cents Market price on JSE 1 050 cents 980 cents Interest rate on loans 15% 15% Interest rate on fixed deposit 8% 8% 70 Copyright reserved Please turn over

Downloaded from hlayiso.com 12 ACCOUNTING (EC/JUNE 2019) QUESTION 5: AUDIT REPORT (55 marks; 30 minutes) 5.1 The information relates to Liam Ltd for the financial year ended 30 June 2018. REQUIRED: 5.1.1 Prepare the note for CASH GENERATED FROM OPERATIONS. (19) 5.1.2 Complete the cash flow statement. (23) INFORMATION: A. Information from the Statement of comprehensive income (Income statement) for the year ended 30 June 2018. Depreciation 96 000 Interest expense 108 000 Income tax 113 400 Net profit after income tax 272 700 B. Information from the Statement of financial position (Balance sheet) 30 June 2018 30 June 2017 Ordinary share capital 1 425 000 1 200 000 Retained income 85 200 64 500 Fixed assets 2 258 100 1 802 250 Financial assets 100 000 240 000 Non-current liabilities 880 000 970 000 Inventories 180 300 264 000 Trade and Other Receivables (see 1 below) 98 250 105 300 Trade and Other Payables (see 2 below) 143 250 165 300 1. Trade and other receivables Nett trade debtors 90 500 89 900 SARS (Income tax) 7 750 15 400 98 250 105 300 2. Trade and other payables Trade creditors 44 250 102 000 Income received in advance 2 300 Shareholders for dividends 99 000 63 000 143 250 165 300 Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/JUNE 2019) ACCOUNTING 13 C. Share capital.  Received R440 000 for 40 000 additional shares issued on 31 October 2017.  On 30 May 2018 R250 000 was paid for the re-purchase of shares. D. Dividends  An interim dividend of R77 000 was paid on 5 January 2018.  A final dividend was declared on 29 June 2018. E. Fixed Assets  The following changes to buildings were made during the year: Extensions of R566 600 Repairs to the old building, R150 000  Old equipment, carrying value R35 250, was sold at a loss of R5 250. 5.2 AUDIT REPORT The following is an extract from the audit report issued by the external auditors of VOVO Ltd. REQUIRED: 5.2.1 What type of report did VOVO Ltd receive? Explain. (3) 5.2.2 The Companies Act requires public companies to be audited. Provide a reason for this. (2) 5.2.3 Explain ONE major consequence for Makaya&Ntini should they be negligent in performing their duties. (2) 5.2.4 Name ONE other party, other than the shareholders, that would be interested in this audit opinion and give a reason for their interest. (2) 5.2.5 Briefly indicate how this audit report would possibly affect the shares of VOVO Ltd on the Johannesburg Securities Exchange (JSE). Mention TWO points. (4) INFORMATION: Audit opinion – to the shareholders We have not been able to obtain sufficient audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements of VOVO Ltd for the year ended 28 February 2019. Makaya&Ntini Charted Accountants (SA) Registered Accountants and Auditors EAST LONDON 30 April 2019 55 Copyright reserved Please turn over

Downloaded from hlayiso.com 14 ACCOUNTING (EC/JUNE 2019) QUESTION 6: RECONCILIATION AND VAT (40 marks; 25 minutes) 6.1 FIXED ASSETS You are provided with the incomplete fixed asset note of Komani Ltd. The financial year ended 31 December 2018. REQUIRED: 6.1.1 Calculate the missing figures indicated by A to E in the incomplete Fixed Asset Note. (7) 6.1.2 Prepare the Asset Disposal Account for the office furniture sold. (10) 6.1.3 Comment on the sale of land to the husband of the CEO. See information B. (2) INFORMATION: A. INCOMPLETE FIXED ASSET NOTE Land and Equipment Vehicles buildings Carrying value (1 January 2018) A 180 000 Cost 350 000 650 000 Accumulated depreciation B (250 000) Movements Additions C Disposals 200 000 Depreciation D Carrying value (31 December 2018) 2 100 000 Cost 2 100 000 E 950 000 Accumulated depreciation B. Land not used was sold for cash to a local business man for R200 000. The business belongs to the husband of the company’s CEO. C. Old office furniture was offered for sale (see fixed asset register below). The local recreational club offered to pay R10 000 in cash. The offer was accepted on 30 September 2018 and the rest was regarded as a donation by the business. FIXED ASSET REGISTER OE 201 Item Office furniture Cost R32 000 Purchased 1 October 2016 Depreciation rate 20% p.a. on cost Depreciation Accumulated Carrying value depreciation 31 December 2016 1 600 1 600 30 400 31 December 2017 6 400 8 000 24 000 30 September 2018 ? ? ? Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/JUNE 2019) ACCOUNTING 15 D. A new vehicle was purchased on 31 December 2018 for R300 000 less 10% trading discount. Depreciation on vehicles is written off at 15% p.a. on the diminishing balance method. 6.2 VAT CALCULATIONS The information below relates to Nobs Traders for the VAT period ended 28 February 2019. REQUIRED: Calculate the amount of VAT payable to/receivable from SARS on 28 February 2019. Indicate whether the amount is payable or receivable. (13) INFORMATION: A. Amount owed to SARS on 1 February 2019, R49 800. B. Transactions for the period ended 28 February 2019: 4  Total sales (VAT exclusive) R412 800  Total purchases (VAT inclusive) 552 000  VAT on discount allowed to debtors 3 000  VAT on returns to creditors 8 700 NOTE: VAT on returns to creditors should be adjusted as the creditor agreed to an allowance of R23 000 less than the original claim  VAT on goods for personal use by owner 1 500  Total amount of bad debts written off 5 750 6.3 VAT AND ETHICS REQUIRED: Read the given information and answer the questions that follow. 6.3.1 Why should Rantsi Traders produce a proof of sales? (2) 6.3.2 How would this affect the VAT returns of Rantsi Traders? (2) 6.3.3 Advise Rantsi traders of the implications, should he agree to this request. Mention TWO points. (4) INFORMATION: A customer requested Rantsi Traders to sell goods to him exclusive of VAT. In exchange the customer will pay cash for all his purchases. Rantsi Traders stated that he would then not be able to produce the source document for these sales. 40 TOTAL: 300 Copyright reserved Please turn over

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