CURRICULUM GRADE 10 -12 DIRECTORATE
LEARNER SUPPORT DOCUMENT
ACCOUNTING
GRADE 12
SOLUTIONS
2020
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Gr12 Accounting Teacher Guide 2020 Support MIP
Grade 12 Accounting study guide from the 2020, 91 pages. Read online or get the free PDF download.
Publisher: KZN Support Documents
Accounting · Grade 12 · 2020. Study guide, 91 pages. Read online or download the PDF.
- Subject
- Accounting
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- Grade 12
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- Study guide
- Year
- 2020
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- KZN Support Documents
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- CAPS
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
A: INCOME STATEMENT
ACTIVITY A1
1. KHUMALO FASHIONS LTD.
INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019
Sales 1 225 700
Cost of sales
(1 169 700 x 100/140) + (56 000 x 100/125)
(880 300)
5
Gross profit (Sales ‒ Cos), operation 345 400
Other operating income operation, one part correct 112 560
Commission income (89 200 ‒ 640 operation 88 560
Rent income (4 x 6 000) 24 000
8
Gross operating income operation 457 960
Operating expenses Gross operating inc ‒ Operating (151
535)
profit
Bank charges (3 260 + 340 ) 3 600
Bad debts (5 600 + 800) 6 400
Discount allowed (2 940 ‒ 400 ) operation 2 540
Stationery (3 860 + 100
‒ 280 ) one part correct 3 680
Insurance (14 250 ‒ 2 400 ) operation 11 850
Director’s fees (50 000 + 60 000) 110 000
Sundry expenses (balancing figure, one part correct, 5 345
can be negative based on
candidate’s answers) 22
Loss of damaged stock (4 800
‒ 1 680
) operation 3 120
Trading stock deficit 3 200
Provision for bad debts adjustment (3 800 ‒ 2 000) 1 800
Operating profit (1 225 700 x 25%) 306 425
Interest income (11 350 + 670) 12 020
Profit before interest expense operation 318 445
Interest expense Profit before int exp ‒ NPBT, (55 795) 10
2
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
operation
Profit before tax NBPT + Tax, operation, must be greater than 262 650
NBAT
Income tax (78 795)
Profit after tax (1 225 700 x 15%) 183 855
ACTIVITY A2
2.1.1 Calculate the profit or loss on disposal of the computer on 31 August 2019.
30 000 – 13 680 x 20% x 6/12 – one method mark one part correct
30 000 – (13 680 + 1 632) – 8 000 = 6 688
one part correct
OR
Asset disposal
Equipment 30 000 Accumulated depreciation
on equipment (13 680 + 1 15 312
632)
Bank 8 000 6
Loss on sale of asset 6 688
30 000 30 000
2.1.2 Calculate the total depreciation for the year.
161 500 four marks
950 000 x 20% x 3/12 = 47 500 one part correct
1 520 000 – 950 000 x 20% = 114 000 one part correct
630 000 one mark 164 320 one mark 94 768 four marks
(660 000 – 30 000) – (178 000 – 13 680) x 20% = 93 136
Asset disposal (see 3.1.1) = 1 632
Total: 256 268
9
2.1.3 Suggest ONE internal control measure that the internal auditor can perform to verify the tangible
3
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
assets figure in the Balance Sheet.
Any one valid points
Check the fixed asset register agrees with an actual physical inspection of the tangible assets.
Check that all controls are adequate and are actually being implemented.
Check the documentation and financial records to ensure that all purchase and sale of fixed assets
have been recorded correctly.
2
2.2 Income Statement for the year ended 28 February 2019
Sales 7 540 000 x 160/100 – 12 480
12 051 520
12 064 000
Cost of sales 7 540 000 – 7 800 (7 532 200)
Gross profit 8 4 519 320
Other operating income 205 680
Commission income 31 580
Rent income 158 200 + 15 400 173 600
Provision for bad debts adjustment 500
Gross operating profit 7 4 725 000
Operating expenses (1 875 000)
Director's fees 932 400
Audit fees 64 000
Salaries and wages 320 000
Insurance 56 250
Bad debts 2 779 + 15 225 18 004
Sundry expenses 187 640
Loss on sale of asset see 3.1.1 (could be profit) 6 688
Loss on theft of stock 37 500 – 26 250 11 250
Trading stock deficit
1 287 000 + 7 800 – 37 500 – 1 234 800 22 500
Depreciation see 3.1.2 256 268
Operating profit 18 2 850 000
Interest Income balancing figure 158 200
Profit before interest expense 3 008 200
Interest expense 2 398 200 + 510 000 – 2 620 000 (288 200)
Net profit before tax NPAT + Inc tax 2 720 000
4
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Income tax 2 040 000 x 25/75 (680 000)
Net profit for the year 7 2 040 000
40
2.3 Retained income
Balance at beginning of year 765 000
Funds used for shares repurchased (125 000 x 0,50) (62 500)
Net profit after tax 2 040 000
Ordinary Share dividends operation one part correct
must (2 182 500)
be in brackets
Interim 982 500
Final (1 500 000 x 0,80) operation one part correct 1 200 000
560 000
Balance at the end of year operation one part 10
correct
ORDINARY SHARE CAPITAL
AUTHORISED
Number of authorised ordinary shares: 3 000 000 shares
ISSUED R
2 000 000 Ordinary shares beginning of the year 5 000 000
250 000 Ordinary shares issued during the financial 1 750 000
year at @R7 each operation
10 000 Ordinary shares repurchased at the average (30 000)
share price *R3 any one part correct
2 240 000 Ordinary shares in issue at the end of the year 6 720 000
operation
one part correct
9
ACTIVITY A 3
5
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
3.3 AUDIT REPORT
3.1 CONCEPTS
3.1.1 limited
3.1.2 receivables
3.1.3 liability
3.1.4 internal
4
3.2 PIXIE LTD
3.2.1 NOTES TO THE FINANCIAL STATEMENTS ON 28 FEBRUARY 2018
ORDINARY SHARE CAPITAL
AUTHORISED
400 000 ordinary shares
ISSUED
300 000 Ordinary shares in issue on 1 March 2017 1 275 000
(85 000)
Ignore brackets
shares repurchased during the year (x R4,25 one part correct
(20 000)
) do not accept
120 000 as final
answer
40 000 shares issued during the year 220 000
Ordinary shares in issue on operation
320 000
28 February 2018 1 410 000 8
RETAINED INCOME
Balance at the beginning of the year 28 900
See Inc St
Net profit after tax
288 000
Ignore brackets
Shares repurchased (120 000 - 85 000 see OSC)
(35 000)
Ignore brackets
Dividends on ordinary shares
(86 000)
one part correct
Interim dividends paid (300 000 x 0,1) 10
30 000
6
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
one part correct
Final dividends declared (280 000 x 0,2)
56 000
Balance at the end of the year Operation, one part correct 195 900
7
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
3.2.2 PIXIE LTD
INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2018
Sales 1 800 000
Cost of sales (1 000 000)
Operation
800 000
Gross profit 3
Other operating income Operation 21 710
1 750 x 10 1 925 x 2
21 350 *
Rent Income (17 500 + 3 850 )
Provision for bad debts adjustment 360
Gross operating income 6 821 710
Operating expenses GOI - OP (425 710)
Consumable stores 2 750
Advertising (62 545 – 28 800 ) 33 745 *
Audit fees (5 720 x 100/40) 14 300
Director’s fees (67 350 + 60 000 ) 127 350 *
Salaries and wages (128 450 + 2 700 ) 131 150 *
Sundry expenses missing figure 7 165
Bad debts (2 900 + 600) 3 500
Loss due to water damage 4 000 #
Trading stock deficit 23 400 #
Depreciation 78 350
Operating profit 24 396 000
Interest income 13 180
Net profit before interest expense Operation 409 180
Interest expense (76 500 – 12 500 – 73 180) (9 180)
Net profit before tax Operation 400 000
Income tax (19 500 + 64 650 + 27 850 ) (112 000) *
Operation
288 000
Net profit after tax 10
Foreign items -1 max -2 *one part correct
#can be combined
B: BALANCE SHEET
ACTIVITY B1
CALCULATION OF FINAL PROFIT, BALANCE SHEET AND NOTES
1.1 Correct net profit after tax for the year ended 30 June 2018
Incorrect Net Profit before Tax 1 234 335
8
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Insurance 10 800 ÷ 12 = 900 x 6 5 400
Loss due to fire 42 000 X 25% (10 500)
1.2 Provision for bad debts adjusted 2 475 – (4% x 54 000) =2 475 – 2 160 315
Rent income
1 050 X 6 = 6 300 / 136 950 – 6 300 = 130 650 ÷ 13 = 10 050 + 1 050 (11 100)
Interest on loan (5 250)
Profit on sale of asset 21 750 (correct entry) + 21 750 (make correct entry) 43 500
Correct Net Profit before tax 1 256 700
Income Tax (371 700)
Net Profit after Tax 885 000
(a) Ordinary Share Capital
Authorised:
(b)
500 000 ordinary shares
Issued:
300 000 shares on 30 June 2017 @ R12 each 3 600 000
(60% x 500 000) = 300 000 shares / 3 600 000 ÷ 300 000 = R12 each
100 000 shares issued @ R16 each 1 600 000
70 000 shares repurchased @ R13 each (910 000)
(3 600 000 + 1 600 000) ÷ (300 000 + 100 000) = R13
330 000 shares on 30 June 2018 R4 290 0000
Retained Income
Balance at end of the previous year 465 000
Net profit after tax for the year 885 000
Repurchase of 70 000 ordinary shares @R2 each (R15 – R13) (140 000)
Dividends on ordinary shares (696 000)
Paid 400 000 X 75 cents 300 000
(c) Recommended 330 000 X 120 cents 396 000
Balance at end of current year 514 000
Trade and other receivables
Trade debtors 54 000 54 000
Provision for bad debts 2 475 - 315 (4% x 54 000) (2 160)
Net Trade Debtors 51 840
SARS (Income Tax) 0
Expenses Prepaid 5 400 5 400
Income Accrued 31 660 31 660
88 900
1.3 BALANCE SHEET KAYZEE LIMITED AT 28 FEBRUARY 2018
ASSETS Note R
NON-CURRENT ASSETS 5 474 000
Fixed/Tangible Assets 4 684 000 + 525 000 – 215 000 3 4 994 000
Financial Assets 510 000 480 000
CURRENT ASSETS 282 000
Inventories 198 500 + 1 100 – 10 500 4 189 100
Trade and other receivables 5 88 900
9
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Cash and Cash equivalent 4 000 6 4 000
TOTAL ASSETS 5 756 000
EQUITY AND LIABILITIES
SHAREHOLDERS EQUITY 4 804 000
Ordinary Share Capital 7 4 290 000
Retained Income 8 514 000
360 000
NON-CURRENT LIABILITIES
Loan from JSE Bank 420 000 + 5 250 – 5 250 – 60 000 360 000
592 000
CURRENT LIABILITIES
Trade and other payables 9
87 150 + 11 100 + 5 250 + 7 500 + 15 000 + 396 000 522 000
Bank overdraft 1 050 000 - 15 000 – 1 025 000 10 000
Current loan portion 60 000
TOTAL EQUITY AND LIABILITIES 5 756 000
ACTIVITY B2
2.1 CONCEPTS
2.1.1 Directors
2.1.2 Liquidity
2.1.3 IFRS
3
2.2.1 FIXED ASSETS
(a) 285 000 – 91 200 193 800
one part
96 900 2 marks 14 535 2 marks
(b) correct
142 500 - 45 600 – (96 900 x 20% x 9/12 )
82 365
one part
(c) Remaining: correct
(285 000 – 142 500) – (91 200 – 45 600) 36 915 13
10
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
142 500 – 45 600 =
= 96 900 x 20% = 19 380 one part correct
New:
180 000 x 20% x 1/12 = 3 000 one part correct
Sold:
14 535 see (b)
2.2.2 BALANCE SHEET ON 30 JUNE 2019
ASSETS
NON-CURRENT ASSETS TA-CA 5 777 280
Fixed assets NCA - FA 5 127 280
Financial assets: Fixed deposit (Shallow Bank) 650 000
(3)
CURRENT ASSETS * 1 465 940
Inventories (450 000 – 5 000 + 15 300 ) * 460 300
Trade and other receivables
412 800 3 marks * 492 600
(430 000 - 17 200 + 79 800 )
Cash and cash equivalents (510 640 + 2 400 ) * 513 040
7 243 220
TOTAL ASSETS
= TE and L
(15)
EQUITY AND LIABILITIES
ORDINARY SHAREHOLDERS' EQUITY
5 088 000
(800 000 x 6,36)
Ordinary share capital 3 746 500
Retained income OSE - OSC 1 341 500
(3)
NON-CURRENT LIABILITIES 452 000
Loan: Gaga Bank (752 000 – 300 000 ) * 452 000
(3)
CURRENT LIABILITIES * 1 703 220
Trade and other payables *could include SFD/SARS:IT/STL
* 779 720
(661 600 + 103 600 + 14 520 )
Current portion of loan 300 000 36
11
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Shareholders for dividends (800 000 x 0,75) * 600 000
SARS: Income tax 23 500
7 243 220
TOTAL EQUITY AND LIABILITIES
= SE + NCL + CL
(12)
5.2.1 (a) ORDINARY SHARE CAPITAL
Authorised shares:
1 000 000 ordinary shares
Issued share capital:
700 000 Ordinary shares on 1 July 2018 2 100 000
(30 000) Shares re-purchased R3 (90 000) *
100 000 Shares issued at R7 each 700 000
770 000 Ordinary shares on 30 June 2019 2 710 000
10
*one part correct
(b) RETAINED INCOME
483 160 *
Balance on 1 July 2018 (Balancing figure)
Net profit after income tax 900 000 *
1 250 000 – 350 000
(1 250 000 one mark x 72/100 one mark)
(180 000) *
30 000 shares re-purchased at R6 each
(403 500) *
Ordinary share dividends
134 000
Interim dividends 670 000 x 0,20
269 500 *
Final dividends 770 000 * x 0,35
799 660 13
Balance on 30 June 2019
*one part correct
5.2.2 SAHARA LTD
BALANCE SHEET ON 30 JUNE 2019
ASSETS
NON-CURRENT ASSETS 3 168 660 *
Fixed Assets 2 580 000 *
1 275 000 + 300 000 + 720 000 + 600 000 - 315
000
12
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Financial assets: Fixed Deposit 588 660 * 11
CURRENT ASSETS (1 090 000 x 1,5) 1 635 000 *
Inventory 790 000 *
Trade and other receivables
(530 000 + 24 000 + 50 000 ) 604 000 *
Cash and cash equivalents
(66 000 + 175 000 ) 241 000 *
TOTAL ASSETS 4 803 660 **
**(Must be the same figure as Total Equity and
Liabilities) 13
EQUITY AND LIABILITIES
SHAREHOLDERS EQUITY 3 509 660 *
Ordinary share capital (see 4.2.1 (a)) 2 710 000 *
Retained income 799 660 5
NON-CURRENT LIABILITIES 204 000
Loan: Quality Bank
(300 000 + 8 000 - 56 000 – 48 000 ) 204 000 *
7
CURRENT LIABILITIES (***SEE ALTERNATIVE) 1 090 000 *
Trade and other payables
(720 000 + 35 500 +17 000 ) 772 500 *
Shareholders for dividends (see 4.2.1 (b)) 269 500 *
Current portion of loan 48 000 *
10
TOTAL EQUITY AND LIABILITIES 4 803 660 *
(SHE + NCL + CL) 46
*one part correct
***ALTERNATIVE FOR CURRENT LIABILITIES:
CURRENT LIABILITIES 1 090 000 *
Trade and other payables
(720 000 + 35 500 + 269 500 *(see 4.2.1 (b)) 772 500 *
+17 000 )
Current portion of loan 48 000 * 10
TOTAL EQUITY AND LIABILITIES 4 803 660 *
ACTIVITY B3
3.1 CONCEPTS
13
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
3.1.1 B
3.1.2 D
3.1.3 A
3.1.4 E 4
3.2 PHAMBILI LIMITED
3.2.1 Prepare the following notes for the financial year ended 28 February 2019.
(a) Ordinary share capital
500 000 Ordinary shares at beginning of the year 1 220 000
900 000 Shares issued at R3,00 2 700 000
(150 000) Shares repurchased at R2,80 ASP (420 000)
(Do not accept R0,75 as ASP)
1 250 000 Ordinary shares in issue at the end 3 500 000 11
ASP – average share price
(b) Retained income
Balance at the beginning of the year 355 500
Net profit after tax 1 148 000 72/28 2 952 000
Funds used for repurchase of shares (112 500)
(150 000 R0,75)
Ordinary share dividends operation, one part correct
(975 000)
Interim 350 000
See above
Final (1 250 000 R0,50 ) operation, one part correct
625 000
Balance at the end of the year inspect operation
2 220 000
Must subtract ordinary share dividends and shares repurchased 11
3.2.2 Complete the Balance Sheet (Statement of Financial Position) on
28 February 2019. Where notes are not required, show ALL workings.
14
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
BALANCE SHEET ON 28 FEBRUARY 2019
ASSETS
NON-CURRENT ASSETS TA-CA 6 519 800
Fixed Assets 1 499 500
Financial Assets (Fixed Deposit) balancing figure 5 020 300
3
CURRENT ASSETS 1 400 200
Inventory (480 000 + 16 000) 496 000
Trade and receivables (400 000 – 5 400 + 32 000 ) 426 600
Cash and cash equivalents (1 010 100 – 532 500 ) 477 600
11
TOTAL ASSETS 7 920 000
EQUITY AND LIABILITIES
ORDINARY SHAREHOLDERS' EQUITY 5 720 000
Ordinary share capital See 3.2.1 3 500 000
3
Retained income See 3.2.1 2 220 000
NON-CURRENT LIABILITIES 992 000
Loan (1 376 000 – 384 000 ) 5
992 000
(32 000 12) Operation, one part correct
CURRENT LIABILITIES 1 208 000
824 000/
Trade and other payables * 199 000 /
(177 500 + 10 000+ 11 500 + 625 000 See 3.2.1) **1 208 000 /
***583 000
Current portion of loan See above 384 000
Shareholders for dividends See 3.2.1 625 000
NOTE: CURRENT PORTION OF LOAN + SHAREHOLDERS FOR DIVIDENDS
CAN BE ADDED TO TRADE AND OTHER PAYABLES OR SHOWN
SEPARATELY
* 177 500 + 10 000+ 11 500 = 199 000
** 177 500 + 10 000+ 11 500 + 625 000 + 384 000 = 1 208 000
***177 500 + 10 000 + 11 500 + 384 000 = 583 000
7
TOTAL EQUITY AND LIABILITIES 7 920 000
29
ACTIVITY B4
15
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
4.1
4.1.1 C
4.1.2 E
4.1.3 A
4.1.4 B
4.1.5 D 5
4.2.1 RETAINED INCOME
Balance at the beginning of the year 468 000
Net profit after tax (1 085 500 x 70% or – 325 680) 759 920
one
mark two marks
Re-purchase of shares (50 000 x 55c) or 237– 210
500 000
50 000 x
4,20 (27 500)*
Ordinary share dividends (460 000)
Interim dividend (800 000 x 30c) 240 000* 12
Final dividend (1 000 000* x 22c) 220 000*
Balance at the end of the year 740 420*
*one part correct
* If the question is silent on whether the shares bought back is entitled/not entitled to final
dividends, it is implied that shares bought back is entitled to final dividends as they were
there for the whole year.
4.2.2 STATEMENT OF FINANCIAL POSITION ON 28 FEBRUARY 2019
ASSETS
Non-current assets operation 4 767 240
Fixed assets (4 919 040 – 201 520) 4 717 520
Financial assets balancing figure 49 720
Current assets operation 634 180
Inventory (255 340 + 1 580 ) 256 920
Trade and other receivables (235 000
– 35 000 – 6
000 + 7
840 +
17 300 + 14 320 )
(– 4 000 – 2 000) one mark 233 460 *
Cash and cash equivalents (381 300 –
237 500 )
143 800 *
TOTAL ASSETS if same as TE+L 5 401 420
16
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
EQUITY AND LIABILITIES
Shareholder’s equity operation 4 730 420
Ordinary share capital (4 200 000
– 210 000 )
50
000 x 4,20 3 990 000*
Retained income see 4.2.1 740 420
Non-current liabilities 270 000
Loan: Central Bank (420 000 –
150 000 )
352 400 + 67 600 270 000 *
Current liabilities operation 401 000
Trade and other payables (22 000+ 9
000 )
31 000 *
Shareholders for dividends see 4.2.1 220 000
35
Current portion of loan 150 000
TOTAL EQUITY AND LIABILITIES operation 5 401 420
Trade and other payables can combine the elements under current liabilities.
*One part correct
ACTIVITY B5
5.1 Choose a GAAP principle in COLUMN B that matches the description in COLUMN A.
5.1.1 E historical cost
5.1.2 D materiality
5.1.3 B matching
5.1.4 F going concern
51.5 C business entity
5
17
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
C: CASH FLOW STATEMENTS AND D: ANALYSIS (COMBINED)
ACTIVITY C1
CASH FLOW STATEMENT, RATIO ANALYSIS
1.1 LEWIS LTD.
1.1.1 Calculate the total dividends paid that will be reflected on the Cash Flow
Statement on 30 June 2019.
143 000 + 333 000‒
108 000 = 368 000
one part correct
OR
Shareholders for dividends
**BANK** ** 368 000 Balance 143 000
Balance 108 000 Ord Sh Div 333 000 4
476 000 476 000
1.1.2 Calculate the balance on the SARS (Income Tax) account on 1 July 2018. I
532 000
‒ 376 000
‒ 23 900 = 132 100
one part correct
OR
SARS (Inc tax)
Bank 532 000 Balance* (payable) *132 100
Inc Tax 376 000
Ba ance 23 900
532 000 532 000
5
1.1.3 Movements in fixed assets:
(a) Calculate the amount of cash received for the equipment sold during
the year.
160 000 – 54 500 = 105 500
2
(b) Calculate the cost of the new assets purchased during the financial
year.
See (a)
6 480 000 + 136 000 + 105
500‒ 5 324 000
= 1 397 500
one part correct
18
5
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Or:
one mark if
1 580 000 is
800 000 (one mark) one mark one mark
also used
(4 900 000 ‒ 4 100 000) + (1 580 000 + 136 000 + 105 500 ‒ 1 224 000)
= 1 397 500 one method mark
1.1.4 Complete the “Cash flow from Financing Activities” section of the Cash Flow
Statement on 30 June 2019.
Cash flow from financing activities (211 000)
Shares issued balancing figure; one part correct * 147 000
Shares repurchased (50 000 x R5,40 ) (270 000)
Repayment of loan (1 038 000 – 950 000) (88 000)
Note: If brackets are incorrect on final figure, candidate loses one mark per line.
8
1.1.5 Calculate the closing balance of Retained Income as on 30 June
2019.
(1 144 000 ‒ 376 000) (50 000 x 0,60)
970 000 + 768 000 ‒ 30 000 ‒
333 000
= 1 375 000 one part correct
7
1.1.6 On the AGM of Lewis Ltd. there was interest shown in purchasing additional
machinery and equipment. The company will have to obtain a loan of R2
million at an interest rate of 14%.
19
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
(a) Calculate the Return on total capital employed (ROTCE).
1 284 000 (2 marks)
1 144 000 + 140 000 x 100
½ [ (5 470 000 +0381 000) +5 (782 000 + 950 000
) ]
6 508 000 (2 marks) 6 732 000 (2 marks)
= 1 284 000 x 100
6 620 000
9
= 19,39% (accept 19%, or 19,4%), must be x 100, must be %, one part
correct)
(b) Show how the proposed additional loan will impact on the debt/equity
ratio. Provide a calculation.
950 000 + 2 000 000 : 5 782 000
2 950 000 : 5 782 000
0,51 : 1 one part correct
4
1.2 TAYLOR LTD.
1.2.1 Calculate the following financial indicators on 28 February 2019:
(a) Net Asset Value per share
R1 690 000 x 100 =
221,78 one part correct, accept 222c, must be x 100
762 000
3
(b) % Return on average Shareholder’s Equity (ROSHE)
457 200 x 100
½ (1 510 000 + 1 690 000 )
= 457 200__ x 100
1 600 000
= 28,58 % must be a % sign, one part correct
5
1.2.2 Comment on the liquidity of the company. Quote THREE financial indicators
(with figures and trends) to support your answer.
20
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Financial indicator trend and figure
Comment one mark: must indicate liquidity is healthy/goo d
one mark: must indicate it is possibly too good, not
good to have so much current assets /
money locked up in stock, debtors or
cash
Current ratio, increased from 2,4:1 to 4,1:1 (or by 1,7:1)
Acid-test ratio, increased from 1,4:1 to 1,6:1 (or by 0,2:1)
Stock turnover rate, increased from 6 to 10 times (or by 4 times)
Debtor’s collection period, remained on 30 days (or no change)
Creditor’s payment period, decreased from 60 days to 30 days (decreased by 30
days)
Comment:
The liquidity of the company is healthy/acceptable/good, although some indicators
could possibly be too high
1.2.3 Tricia Harper is a shareholder and she is unsure if she should sell her shares
or not. She asks for your advice. Provide figures in your answer.
Decision
Compare NAV (see 4.2.1 a) to market price
Figure(-s) (either NAV and Market price mentioned together, or
difference between the two)
Tricia should sell her shares/not sell her shares
NAV is less than Market price
NAV is 221,8c per share and Market price is 252c per share (or Market price
exceeds NAV by 30,2c, or Market price is 18,9% higher that NAV)
1.2.4 Refer to Information C. Calculate the total dividends Charlie Williams received
during the year. 3
10 400
shares x 20c = 208 000c = R2 080
16 600
(10 400 + 6 200)
shares x 25c = 415 000 c =R4 150
R6 230
6
one part correct
1.2.5 The dividend pay-out policy has changed from the previous year. Provide
calculations to show the change and provide ONE possible reason for the
change.
Comparing 2018 DPS vs EPS by %
Comparing 2019 DPS vs EPS by %
In 2018 they paid out 15/55, thus 27%.
21
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
In 2019 they paid out 45/60, thus 70%.
One mark:
In 2018 they paid out 15c of 55c.
In 2019 they paid out 45c of 60c.
Reason:
Part marks for an unclear or partial answer
There could have been a decision made at the AGM that the company has enough
reserves and does not have to retain any more funds / The company does not need
reserve funds for repurchasing of shares / The company has increased their
investments in the previous year and does not require additional funds for further
investments.
22
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
ACTIVITY C2
2.1
2.1.1 False
2.1.2 True
2.1.3 True
2.1.4 True
4
2.2.1 Calculate the following for the Cash Flow Statement:
Income tax paid
1 240 000 – 892 800 367 700
12 000 + 347 200 + 8 500 OR one part correct
– 12 000 – 347 200 – 8 500 mark the line
Accept brackets
Dividends paid
1 400 000 x 0.15 510 000
300 000 + 210 000 one part correct
Cost of new delivery vehicles purchased
801 800
10 152 700 + 425 000 + 389 500 – 7 915 400 – 2 250 000 one part correct
14
2.2.2 Cash effects of financing activities 1 732 000
one part correct
Proceeds from shares issued (400 000 x 8.60) 3 440 000
Funds used to repurchase shares
(1 008 000)
840 000 + 168 000
Repayment of loan (700 000) 9
(77 500)
Net change in Cash and Cash equivalents
operation
43 300
Cash and cash equivalents in the beginning
one part correct
45 300 – 2 000
Cash and cash equivalents at the end (34 200) 4
2.2.3 Calculate the debt/equity ratio
1 300 000 : 9 209 000 0,1:1
one part correct
3
23
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Calculate the net asset value per share
9 209 000 X 100 719 cents
1 280 000 one part correct 3
Calculate the return on average shareholders' equity
892 800 x 100
½ (6 458 200 + 9 209 000 11,4 %
7 833 600 one part correct one part correct
4
2.2.4 The management decided to change the mark-up % in the current financial year. Was this a good
decision? Explain. Quote figures.
Yes/No Explanation figure
A decrease in the mark-up% resulted in an increase in sales by 1 650 000
The gross profit has increased by R262 500
Gross profit on sales dropped from 43% to 38%
Operating profit on sales did not change, 16% 3
2.2.5 Comment on the management of expenses. Quote TWO relevant financial indicators to support
your comment.
Financial indicators and figures Comment
Operating expenses on sales has decreased from 23% in 2018 to 22% in 2019.
The operating profit on sales however, remained unchanged at 16%.
4
2.2.6 Comment on the issue price of the new shares issued on 30 June 2018. Was this fair? Quote
figures.
Any three relevant comments
They issued the new shares at 860 cents.
6
NAV per share is R7,19 at the end and R6,46 in the beginning.
Market price per share was R6,30 in the beginning and R7,28 at the end.
24
2.2.7 Comment on the pay-out policy of the company by comparing 2018 to 2019 and quote relevant
figures
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
2018 60/62 = 96,8%
2019 41/69 = 59,4%
Any relevant comment
96,8% of the earnings was paid out in 2018 but was
decreased to 59,4% in 2019 (by 38%).
The business decided to retain 40,6% of the earnings
in 2019 for further growth. 6
2.2.8 Comment on the degree of risk and gearing of the business. Quote TWO financial indicators
with figures.
Financial indicators – with figures Explanation/comment
Debt-equity ratio has improved from 0,3 to 0,1:1
ROTCE has increased from 13,0% to 15,3%
Comment: The risk has decreased/the company is low geared
It was not necessary to pay a large portion of loan as the company is positively geared – the return
is greater than interest on loan (13%).
6
2.2.9 How many shares will a shareholder, having 45% of the issued share capital, have to buy to
gain control of the company?
Shares owned = 45% x 1280 000 = 576 000
He needs to own at least
50% + 1 = 640 001 shares OR
50% + 100 = 640 100 shares OR
51% = 640 000 shares
Answer – 576 000 shares 4
ACTIVITY C3
3.1 TINAMERA LTD
3.1.1 FIXED ASSET NOTE TO THE BALANCE SHEET ON 30 JUNE 2018
25
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Buildings Vehicles Equipment
Carrying value –
3 452 000 413 400 83 200
1 July 2017
Cost 3 452 000 872 000 340 000
Accumulated depreciation 0 (458 600) (256 800)
Movements
Additions at cost 1 070 800 0 116 000
Disposal at carrying value 0 (102 800) 0
(99 399) (22 630)
One part correct One part correct
Depreciation 0 14 999 + 12 480 +
70 400 + 10 150
14 000
211 201 176 570
Carrying value –
4 522 800
30 June 2018
operation operation
Cost 4 522 800
Accumulated depreciation 15
3.1.2 TINAMERA LTD
CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2018
If a working is shown as a final answer, award working mark only if brackets correctly applied for
that item
If item is incorrectly placed, award no marks for details or figures
Signs may be reversed; apply consistently; mark one line only to benefit candidate
Workings may be done as T-accounts; inspect answer booklet for these workings
If workings not shown but figure is correct without brackets, award marks to cover workings and
penalise on answer
Correct use of brackets to
earn the mark on the final
answer for each item in this
column
*one part correct and
correct use of brackets
Operation
CASH FLOW FROM OPERATING ACTIVITIES
384 000
Cash generated from operations 1 295 760
Interest paid (86 760) 25
26
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Dividends paid
170 000 + 60 000 – 30 000 or
(200 000)*
- 170 000 – 60 000 + 30 000
140 000 two marks + 60 000 one mark
Income tax paid (625 000)
Operation
CASH FLOW FROM INVESTING ACTIVITIES
(1 084 000)
Purchase of fixed asset
(1 186 800)*
(1 070 800 see FA Note + 116 000 )
Proceeds from sale of fixed assets 102 800
Operation
CASH FLOW FROM FINANCING ACTIVITIES
(114 000)
Repurchase of shares (336 000)
Proceeds of new loans
920 000 + 86 760 – 164 760 – 1 142 000 300 000*
Or 1 142 000 + 164 760 – 86 760 – 920 000
Repayment of loan (164 760 – 86 760 ) (78 000)*
Operation
Net change in cash and cash equivalents
(814 000)
Cash and cash equivalents beginning of year (91 000)
Operation
Cash and cash equivalents at the end of year
(905 000)
27
3.1.3 Calculate the percentage operating profit on sales
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
1 410 550 x 100
5 611 000
= 25,1 % One part correct in %
3
Calculate the debt-equity ratio
= 1 142 000 : 4 607 300
= 0,3 / 0,25 : 1 One part correct in ratio
3
Calculate the net asset value per share
4 607 300 X 100
750 000
= 614,3 cents One part correct in cents
3
3.1.4 Provide a reason supported by information from the Cash Flow Statement as to why
the shareholders are concerned over the directors’ decision to repurchase 80 000
shares.
Any valid explanation Part marks can be awarded for partial answers
Possible answers:
The business has a very big overdraft because of the fixed assets purchased. They cannot
afford to buy back the shares.
The business had to take out another loan.
After an investigation, it has come to light that Jim Jeffs, the shareholder from whom
the company repurchased the shares, is a close friend of the financial director.
Explain briefly why you as a shareholder may find this to be a problem.
Any valid explanation Part marks can be awarded for partial answers
Possible answers:
This is a conflict of interest and unethical to repurchase only the shares of Jim Jeffs.
The shares were repurchased at a price higher than the average issue price although the
business has a very big overdraft.
4
28
3.2
KZN ACCOUNTINGINTERPRETATION OF FINANCIAL INDICATORS
GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
3.2.1 Which company uses more loans? Quote a financial indicator to support your answer.
Thabiso Ltd
Debt / equity ratio 1,8 : 1 for Thabiso and 0,3 : 1 for Lauren
Explain whether this is a good idea or not. Quote a financial indicator to support your
answer.
No, they did not benefit
Return on Capital Employed for Thabiso is 12,4 % which means that the return he is earning is
lower than the interest he is paying on the loan, 14% (negative gearing)
6
3.2.2 According to Phakamile the liquidity indicators of Thabiso Ltd are better than those of
Lauren Ltd. Explain, quoting THREE financial indicators to support his opinion.
Quoting of indicator Superfluous indicator (i.e. more than three indicators) -1
max
Comparison with figures
Explanation
Current ratio of Thabiso is 1,7 : 1 and of Lauren is 5,8 : 1. Thabiso has enough current assets
to cover his current liabilities whereas Lauren Ltd is holding too much of his funds in the form
of current assets which may not result in a return for the business.
Acid test ratio of Thabiso is 0,8 : 1 and of Lauren is 3,7 : 1. Even if Thabiso is not able to sell
all of his trading stock he should still be able to cover his short term debt. Lauren is holding
much of her current assets in the form of trading stock (stock piling).
Period for which enough stock is on hand for Thabiso is 80 days and for Lauren is 140 days
(almost 5 months). Thabiso has enough stock for almost 3 months which is appropriate.
Lauren is holding stock for too long, resulting in obsolete stock.
Debtors collection period of Thabiso Ltd is 26 days which is within the acceptable period of 30
days. Debtors’ collection period for Lauren is much longer, 55 days.
9
29
3.2.3
KZN ACCOUNTINGAlthough the market price of the shares of Lauren
GR 12 Ltd is higher than those 2020
of Thabiso
SOLUTIONSLtd,
TO SUPPORT DOCUMENT
Phakamile is of the opinion that Thabiso Ltd’s shareholders are more satisfied with the
market price of their shares. Explain, quoting financial indicators to support this opinion.
Comparing market price and NAV of Thabiso
Comparing market price and NAV of Lauren
Market price of Thabiso Ltd is 630 cents which is higher than the Net Asset Value of 520 cents.
Their shares are in demand and investors have confidence in the company.
Market price of Lauren Ltd is 680 cents which is lower than the Net Asset Value of 790 cents.
4
3.2.4 In which company is Phakamile a major shareholder?
Lauren Ltd
Support your answer with a calculation.
He owns 300/500, 60% of the shares.
3
ACTIVITY C4
4.1 Calculate the missing figures indicated by (a) – (e) in the Fixed Asset Note.
CALCULATIONS AMOUNT
17
30
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
(a) R6 800 000 – R5 800 000 R1 000 000
(b) R840 000 + R960 000 R1 800 000
(c) R850 000 – R180 000 R670 000
R150 000 – (R15 000 + R15 000) – R7 500
R30 000
(d) R112 500
See (d)
R7 500 + R70 000 + R20 000
Sold old / remaining new
(e) R97 500
R850 000 – R150 000 X 10% = R70 000
= R20 000
31
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
4.2
CASH FLOW STATEMENT FOR THE YEAR ENDED
28 FEBRUARY 2019
R
CASH EFFECTS OF OPERATING ACTIVITIES
operation (344 715)
Cash generated from operations
(2 854 800– 198 615 ) one part correct 2 656 185
Interest paid (208 800)
Dividends paid
(676 500 + 1 458 000) one part correct (2 134 500)
Income Tax paid 12
(23 700- 713 250+ 31 950 ) one part correct (657 600)
CASH EFFECTS FROM INVESTING ACTIVITIES
operation (187 500)
Fixed assets purchased see 4.1
(900 000 + 400 000) one part correct (1 300 000)
Proceeds on sale of fixed assets see 4.1 6
(112 500 + 1 000 000 ) 1 112 500
CASH EFFECTS FROM FINANCING ACTIVITIES
operation 1 944 000
Proceeds from the sale of shares
1 800 000
Repurchase of shares
36 000 (3 marks) (576 000)
(720 000 X 5% X R16 ) one part correct
40% X 300 000 = 120 000 + 600 000
Proceeds of loan 9
(2 100 000 – 1 380 000) 720 000
Net change in cash and cash equivalents
operation 1 411 785
Cash and cash equivalents at beginning of year 3
1 429 465
Cash and cash equivalents at end of year 30
2 841 250
BRACKETS ESSENTIAL BEFORE AWARDING THE MARK – SHOULD INDICATE OUTFLOW
4.3 Calculate the Debt-Equity ratio for 2019.
2 100 000 : 11 000 250 3
0,19 : 1
32
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
4.4 The directors decided to increase the loan during the current financial year. Explain
TWO financial indicators to indicate why this was a good decision. Quote figures.
Financial indicator Trend and figures Comment
ROTCE
This has decreased from 21,3% to 20.9%.
Positively geared as ROTCE is higher than the interest rate of 12%
Debt-Equity
This has increased from 0,13 : 1 to 0,19 : 1.
Low financial risk / lowly geared / not making use of loans / relies more on own capital 8
4.5 The board of directors is of the opinion that the shareholders should be happy with
their percentage return and the market price of their shares. Quote and explain TWO
financial indicators with figures to support their opinion.
Financial indicator Trends and figures Comments
ROSHE
Improved from 12,3% to 15,7% and it is 8,2% more than the interest (7,5%) in alternative
investments.
NAV
NAV per share of 1 608 cents is less than the market price of 1 680 cents. 6
4.6 The Cash Flow Statement reflects some important decisions taken by the Directors.
Apart from the loans, identify TWO good decisions. Explain the effect of this decision
on the company. Quote figures.
33
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
DECISION EFFECT ON COMPANY
Decision Figures
Sale of land and building, Increased the cash flow. / Used funds to buy
R1 000 000 / Selling of fixed assets other fixed assets.
R1 112 500
Issue of shares R1 800 000 / Increased the cash flow. / Used funds to buy
120 000 shares assets.
Purchase of fixed assets Leads to capital growth (future productivity).
900 000 + 400 000 = 1 300 000 / More assets in the company. / Generates
more income. 6
ACTIVITY C5
QUESTION 5
5.1.1 CASH GENERATED FROM OPERATIONS
Net profit before tax 1 230 000
Adjustments in respect of:
Depreciation 950 000
Interest expense 144 150
Operating profit before changes in working capital
operation 2 324 150
Changes in working capital operation 59 400
Decrease in inventory (1 044 700 – 903 900) 140 800
Increase in debtors
70 950 two marks
208 150 – (70 000 + 950 ) (137 200)*
889 000 two
marks
Increase in creditors (944 800 – (860 700 +28 300
) (55 800)*
Cash generated from operations operation 2 383 550 15
The figure and the brackets (or no brackets) must be correct to
earn the mark in the money column. *one part correct
5.1.2
CASH FLOWS FROM INVESTING ACTIVITIES operation (1 853 900)
Purchase of fixed assets
(3 616 400 + 225 000 + 950
000
– 2 300 000 (2 491 400)
Proceeds of sale on non-current assets 225 000
Decrease in investments (712 500 – 300 00) 412 500 10
34
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
5.1.3
CASH FLOWS FROM FINANCING ACTIVITIES operation 988 000
Proceeds from the issue of share capital 520 000
Repurchase of shares
(588 000 + 266 000 ) (854 000) *
Proceeds from long-term borrowings
(1 622 000 – 300 000 ) 1 322 000 7
35
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
5.1.4
5.3 It was a good decision for the directors to increase the loan. Explain and quote
TWO financial indicators with figures to support the director’s decision.
NET CHANGE IN CASH AND CASH EQUIVALENTS operation 131 000
Cash and cash equivalents – beginning of year
(– 62 000 + 1
000) (61 000)
Cash and cash equivalents – end of year 70 000
5
5.2 Calculate the following financial indicators for 2019:
Acid test ratio
327 150 two marks (944 800 + 193 200)
1 231 050– 903 900 : 1 138 000 any one part correct
0,3 : 1 one part correct, accept 0,28 : 1 4
Debt-equity ratio
3 345 800 two marks
1 622 000: 1 932 000 + 1 413 800
0;48 :1
one part correct accept 0,5:1 4
Net asset value per share
3 345 800 two marks
1 932 000 + 1413 800 x 100 = 363,67 or 364 cent
one part correct
920 000 4
Percentage return on total capital employed:
1 230 000 + 144 150_ x 100 = 32,6
one part correct
½ (4
967 800 + 3 456 000 )
4 211 900 five marks
8
36
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Financial indicator and Figure Explanation
The debt-equity ratio increases from 0,1:1 to 0,5: 1.
The return on total capital employed increase from 21,2% to 32,6% (see 5.2)
Explanation
Although the business is making greater use of loans than last year as reflected by the
increase in the debt/equity ratio, ROTCE is much higher than the interest rate (cost of the
loan).
Debt- equity ratio is lowly geared and the return on capital employed is 32,6% and is
much higher than the 15% interest on loan. Positively geared. 6
5.5 Identify TWO major decisions taken by the directors, as evident from the Cash Flow
Statement. Quote figures. Explain how these decisions would benefit the business
in future.
Decision 1 Decision 2 Benefit 1 Benefit 2
Figures 1
Figure 2 Part marks for incomplete answer
Fixed assets were bought for R2 491 400. These could generate profits in future if
see 5.1.2 they are well used and maintained.
Loan was increased by R1 322 000. see The still low risk can attract potential
5.1.3 investors.
This could be used to finance fixed
assets.
New shares were issued. This increased the capital, there-fore no
37
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Cash increase by R520 000. need to go back into overdraft.
Shares were re-purchased, R854 000 was This would raise the NAV, EPS + DPS
spent. see 5.1.3 because the numbers of shares are lower.
Fixed assets were sold for Got rid of unused or high maintenance
R225 000. assets. The money could be used better
5.6 elsewhere.
Calculate the amount of money she received this year in the form of dividends.
20 000 x 0,33 = R6 600
2
8
Explain to her why you think the directors changed the dividend pay-out policy this
year. Quote figures.
Explanation
5.4
One of thefigures
shareholders want to sell his shares at 550 cents per share. Explain why
the business should not repurchase these shares. Quote TWO financial indicators
The company
(withpaid out to
figures) 89,3% (50/56)your
support of EPS last year as they had no/little plans for
opinion.
improvement in the business. (Retained 10,7%)
They decided to retain
Quoting 58,8%figure)
NAV (with (distributed
and41%; 33/80)
Market Priceof the
(withEPS this
figure) year as they have
plans to expand the business
Explanation whichwith
(comparison will in
550turn result
cents) in greater profits in the long run.
They want to use funds from operations to improve the business rather than increase the
loan or issue
new shares.
The NAV of 363,7 or 364 (see 5.2) is less than the 550 cents
Their plans would
Market value ofexplained
have been 380 centsinisthe directors’
lower than thereport so that shareholders would
550 cents
buy into the proposals.
Explanation: 3
This shareholder would not even be able to sell these shares on the JSE at 550 4
cents per share.
Although there is an upward trend in the MP and the NAV, it is still not good practice
to pay an amount that is way above the share price.
38
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
ACTIVITY C6
6.1
6.1.1 Directors
6.1.2 Internal auditor
6.1.3 Shareholder
6.1.4 External auditors
4
6.2 SO-FINE LTD
6.2.1 ORDINARY SHARE CAPITAL
AUTHORISED SHARE CAPITAL
1 200 000 ordinary shares
ISSUED SHARE CAPITAL
900 000 Ordinary shares on 1 September 2016 Balancing figure 4 725 000
150 000 Issued on 1 May 2016 at R6,30 each 945 000
Re-purchased 30 August 2017 (378 000)
(70 000)
(ASP: R5,40) 5 292 000/980 000
980 000 Ordinary shares on 31 August 2017 5 292 000 7
RETAINED INCOME
Balance on 1 September 2016 147 370
Net profit after income tax 438 130
Shares repurchased (437 500 – 378 000 )
(59 500 *
70 000 x 0,85 Or 70 000 x (6,25 – ASP) 437 500/70 000
(276 000)
Ordinary share dividends *
Interim dividends (900 000 x 0,12) 108 000
Final dividends 168 000
`
Balance on 31 August 2017 250 000 * 9
6.2.2 SO-FINE LTD: CASH FLOW STATEMENT FOR YEAR ENDED 31 AUGUST 2017
39
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations
Interest paid
Dividends paid
Income tax paid # –2 400 + 187 770 – 11 800 ? ##
*
4 OR 2 400 – 187 770 + 11 800 (173 570)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets
# 6 177 000 + 320 000 + 324 000 – 4 975 000 ? (1 846 000) *
–6 177 000 – 320 000 – 324 000 + 4 975 000
? Proceeds from sale of fixed assets ? 324 000
7 Change in investments
CASH FLOWS FROM FINANCING ACTIVITIES
? Proceeds from issue of share capital ? 945 000
? Repurchase of shares ? (437 500)
4 Change in non-current liabilities
Net change in cash and cash equivalents ? 86 000 *
Cash and cash equivalents – opening balance (2 500 – 65 100) ? (62 600)
4 Cash and cash equivalents – closing balance ? 23 400 19
6.2.3 Calculate the percentage operating profit on sales.
697 000 x 100 = 8,1%
8 652 000 3
Calculate the debt-equity ratio.
5 542 000 two marks
985 000 : (5 292 000 + 250 000 ) = 0,2 : 1 4
6.2.4 Calculate the dividends per share (DPS) of a shareholder who owned the same number
of shares for the entire financial period.
900 000 + 150 000
(168 000 /1 050 000 x 100) + 12 cents = 28 cents 16 cents two marks
4
6.3 CASTRO LTD
6.3.1 Comment on the price of R9,10 charged by Castro Ltd for the new shares issued.
40
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Compare issue price to market price or NAV 3
Figures R12,00 or R10,73
Expected responses:
The shares were issued at the average share issue price.
The existing shareholders are being rewarded as the price is lower than the R12,00
charged on the JSE and the NAV of R10,73.
The shares could have been issued at the market price of R12,00 or the NAV of R10,73
(they have diluted the value of the shares).
6.3.2 Explain how the issue of new shares has affected the financial gearing and risk of
Castro Ltd. Quote TWO financial indicators.
Explanation Financial indicators Figures
Gearing has improved – less risk (as there was an issue of new shares)
debt-equity ratio decreased from 0,8 : 1 to 0,5 : 1 (by 0,3 : 1)
ROTCE improved (due to increased efficiency / profits on new branch)
from 15 % to 20 % (by 5% or 33,3%) 6
6.3.3 If Henry wanted to retain his 60% shareholding in the company, how many shares
would he have had to buy?
(700 000 x 60%) – (500 000 x 60%) = 120 000
420 000 300 000
OR two marks one method mark (if x 60%)
200 000 x 60% = 120 000 3
How much would he have had to pay?
120 000 shares at R9,10 each = R1 092 000 2
Henry decided NOT to buy these shares. Apart from the
% shareholding, explain TWO reasons why he has made a mistake by not taking up
this option.
Explanation Figures
Expected responses: Any two
His dividends would have increased by R61 200 (51c x 120 000 shares). This is more
than the interest he earned on the savings account R54 600
(1 092 000 see above x 5%)
He could buy the shares for capital growth - bought the shares for R9,10 and then could
sell them on the JSE for R12,00 / total profit could have been R348 000 / would be a
good buy as R12,00 exceeds NAV R10,73
He would have earned more dividends on bigger investment (51c/910c = 5,6%)
ROSHE would be 23% on a bigger investment.
He would lose 120 000 votes at the AGM. 6
RONKI LTD
6.3.4 Comment on the liquidity of Ronki Ltd. Quote TWO financial indicators.
Explanation:
The liquidity situation has improved / is able to meet current debts / liquidity ratios have 6
41
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
decreased / liquidity ratios are more efficient
Financial indicators any two Figures
Current ratio has improved/decreased (from 3,5 : 1) to 1,9 : 1
Acid-test ratio has improved/decreased (from 1,7 : 1) to 1,1 : 1
Stock-holding period appears to be efficient at 54 days (less than 2 months)
6.3.5 Comment on the price paid by Ronki Ltd for the repurchase (buy-back) of shares.
Expected response: Part-marks for partial or incomplete explanation
The company is paying a premium above the average share price in order to entice
shareholders to give up their shares / they wanted to increase returns by decreasing equity /
this is a fair value same as the price on the JSE.
Compare price paid (R15,00) to Any one figure
market value R15,00
net asset value R13,30
average issue price of shares R10,20 3
6.3.6 Explain THREE ways in which Henry has benefited from the repurchase of the shares
by Ronki Ltd.
Explanation Figures
Expected responses: Three different responses
He has now become a majority shareholder. His 300 000 shares are 51,7% of the total
shares (33,3% before the share buy-back)
Due to the reduced number of shares, his return has improved i.e. EPS
has increased by 95c / from 171c to 266c / ROSHE increased from 13% to 16%.
(NOTE: EPS and ROSHE reinforce the same point).
The reduced number of shares could have contributed to an increase in the DPS by 57c
/ by 55,3% / from 103c to 160c (Directors may have maintained the dividend pay-out
policy). 6
E: AUDITING
ACTIVITY E1
1. AUDITING
42
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
1..1 Explain why the shareholders would be satisfied with this audit report.
Any ONE relevant answer
This is a positive report / clean report /
in accordance with IFRS or Companies Act.
This is an unqualified report / the
report was fairly presented as per the auditor’s opinion.
The auditors did not mention any
irregularities / shortcomings in the financial statements. 2
1.2 Tello Motloung, the managing director, has informed the auditors that he intends
to buy the unissued shares for himself without informing the other shareholders.
What advice should the auditors give to Tello? Explain.
Valid explanation
Advice – This is unethical and the
issue of new shares should be advertised to all according to the Memorandum of
Incorporation / Companies Act.
It is unethical as it constitutes insider 2
trading.
1.3 Explain why the auditors found it necessary to stipulate the page numbers in
the report.
Any ONE valid explanation
They are only responsible for the
pages that they have stipulated in the report / only financial statements on
Pages 23 – 89 were subjected to audit / examination.
They are not accountable for the
other information in the annual report. 2
1.4 Explain TWO major consequences for Mxo and Frank should they be negligent
in performing their duties.
Any TWO explanations
Not to be re-appointed as auditors
Face disciplinary procedures by the
professional body
Lose clients / fired by shareholders
(because their integrity would be questioned) 4
Can be sued
ACTIVITY E2
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
2.1 Provide ONE reason why public companies must be externally audited.
Any valid answer
Because they work with public funds.
To be accountable to stake holders e.g. shareholders.
To discourage fraud.
Requirement of the Act/IFRS (compliance).
2
2.2 What type of report did Giovanni Ltd receive from the independent auditors?
Explain your answer.
Type:
Unqualified report
Explain your answer:
The auditors found that the financial statements were accurate.
The financial statements fairly present the financial performance and financial
position of the company.
The financial statements are in accordance with International Financial Reporting
Standards and the Companies Act of South Africa.
3
2.3 Refer to information B.
One of the directors says that “the company must not waste money on things like
this.” Provide THREE reasons against his opinion.
Any TWO valid answers
This forms part of their corporate social investment/responsibility which is
necessary as the company relies on the goodwill (support/positive image/good
publicity) of the community in which they operate.
Creates a safer environment which encourages customers to visit the
business/creates better working environment.
In accordance with the King Code.
6
ACTIVITY E3
3 AUDIT REPORT
44
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
3.1 What is the purpose of an independent auditor report and to whom is it
addressed?
Purpose:
To report on the company’s financial records and determine whether there is a fair
presentation of facts, and whether the policies are consistent with the previous year
Addressed to:
Shareholders
3
3.2 Explain the difference between a qualified and an unqualified audit report.
Qualified:
A qualified report reveals problems in certain areas of the company – all is not well.
Unqualified:
An unqualified report is a report without any problems – good report
3.3 Predict THREE implications for the company or directors after PWC release
their report.
4
One mark per point
Existing shareholders would lose faith in the company and possible sell their
shares
Potential shareholders would not invest in the company
Could result in a drop in the market price of the shares
The financial statements would not be fairly presented
Suppliers will lose faith in the company
Internal control measures should be improved in order to prevent unethical
transactions.
Directors could lose their jobs
3
ACTIVITY E4
4 AUDIT REPORT
4.1 Explain why the auditors did specifically address the report to shareholders?
They are the owners of the business.
2
4.2 Explain why the independent auditors referred to pages 25-51 in the report.
45
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
2
Any valid explanation
Part-marks for unclear / incomplete answers
Auditors are responsible for only parts / certain pages of the annual report.
They are not accountable for the other information in the annual reports.
Financial statements on pages 25–51 were subjected to audit / examination.
Additional information, such as corporate social investment matters, is not audited.
Do not accept statistical sampling as a reason.
4.3 The directors claimed that the value of the buildings increased over the years and that the
value must be increased and shown as additions in the fixed asset note.
As the independent auditor, what advice would you give? Provide ONE point.
ONE valid point Part-marks for unclear / incomplete answers
It is fraudulent to indicate revaluation as an addition
No audit evidence exists, so there is no proof of the actual value of the buildings
GAAP prescribes the historical (original) cost principle when recording assets
Only physical acquisitions/expansions can be shown as additions
2
4.4 The company received a/an (unqualified/qualified/disclaimer) audit report.
Qualified
Give a reason for your answer.
The auditors queried the increase of the assets in the Balance sheet. 2
F] INVENTORY SYSTEMS
ACTIVITY F1
F1.1 Calculate the following on 28 February 2019:
46
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
F1.1.1 Value of closing stock.
Workings Answer
4 191 500 four marks (5 512 x 7) two marks
195 424 + 4 034 660 – 38 584
49 + 788 – 7
830 three marks
eight marks
1 111 000
5 050 x 220 one part correct
10
F1.1.2 Gross profit for the year ended.
Workings Answer
see 2.1.1 see 2.1.1
COS: 4 191 500 – 1 111 000 = 3 080 500
(195 424 + 4 034 660 – 38 584) one mark
369 800
Gross profit: 3 450 300 – 3 080 500 one part correct
5
F1.2.1 Calculate the stock value on 28 February 2019 using the FIFO
method.
Workings Answer
200 – 7
193 x 5 512 = 1 063 816
220 – 193 1 202 731
27 x 5 145 = 138 915 one part correct
Be aware of alternative arrangements 7
F1.2.2 Explain the effect on gross profit if the FIFO method is used.
Any valid point
A larger closing stock will result in a smaller cost of sales and hence a
greater (an increased) gross profit.
The gross profit will be more compared to when weighted average
method is used.
2
F1.2.3 As an internal auditor, explain the benefits of using the FIFO
method to the owner and the accountant. State TWO points.
Stock shown at recent prices, realistic.
Reflect a higher gross profit
Easy to apply
No manipulation of profits.
4
F1.3 Ching Lee feels that she was not able to achieve her targeted mark-up % for 2019.
Do (or perform) a calculation to confirm whether she is correct.
47
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Workings Answer
12%
see 2.1.2
one part correct
369 800 x 100 3
3 080 500
see 2.1.2
OR: 3 080 500 x 25% = 770 125 (targeted); Actual was 369 800 (2.1.2)
Did not achieve target by 400 325
Provide TWO suggestions that can be implemented in order to
improve profitability.
Any TWO valid suggestions
Give less trade discounts 4
Support local suppliers
Supervise sales to ensure correct prices are applied.
Consider after-sales services such as maintenance, repairs,
installations.
ACTIVITY F2
F2.1 Explain the difference between the specific identification method and
weighted average method of valuing stock.
Specific identification method
– Each item is assigned a specific cost
– the original purchase price recorded in a register
– this data base is retrieved when item is sold.
Weighted average method
– The average price is calculated taking into account opening stock,
purchases, returns and carriage on purchase, divided by the total number of
units in relation to the above. 2
- Therefore, final closing stock will be calculated on the average cost of the
goods.
F2.2 Provide a calculation to show the number of cooler boxes missing.
3 900– (520 + 4 300 – 850 - 20)
= 50
50 cooler boxes were missing. 4
F2.3 Calculate the following in respect of cooler boxes:
The value of the closing stock of cooler boxes.
48
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
850x R67= R56 950 3
Cost of sales of cooler boxes.
290 400
(31 200+ 291 400– 1 000) – 56 950see closing stock above
= R264 650
5
Gross profit on cooler boxes.
387 000– 264 650 =R122 350
3
F2.4.1 Calculate the Stock Holding Period in days. Use Closing Stock in your
calculation.
56 950 see closing stock in 2.3 X 365
264 650 see COS in 2.3 1
= 78,5 days
4
49
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
F2.4.2 Comment on your findings in response to the manager’s feelings.
Stock holding period decreased / improved from 125 days to 78,5 days or
Stock Turnover rate increased / improved from 2.9 to 5.7 times
One mark for incomplete answer
Stock is selling faster
Any other suitable answer can be accepted 3
F2.5 Calculate the value of the closing stock of tents.
14 x R1 400 = R 19 600
7 x R1 680 = R 11 760
7 x R1 540 = R 10 780
R 42 140
4
F2.6 If the mark-up percentage is 25% on cost price, calculate the total sales
of tents for the period.
14 x 1 260 x 1,25 = R22 050
28 x 1 400 x 1,25 = R49 000
28 x 1 680 x 1,25 = R58 800
35 x 1 540 x 1,25 = R67 375
R197 225 (operation, one part correct)
OR: (17 640 + 39 200 + 47 040 + 53 900) x 1,25
= R197 225 (One part correct)
6
ACTIVITY F3
F3.1 Choose the correct word(s) from those given in brackets. Write only
the word(s) next to the question number (5.1.1–5.1.4) in the ANSWER
BOOK
F3.1.1 periodic
F3.1.2 specific identification
F3.1.3 asset
F3.1.4 weighted-average
4
F3.2 KROOKED SKATEBOARD TRADERS
F3.2.1 Calculate the following on 28 February 2019:
50
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
(a) The value of closing stock using the weighted-average method.
1 618 200 (3 marks)
1 392 400 (1 mark) (40 x 320) (2 marks)
238 600 + (1 298 000 + 94 400) - 12 800
860 + 4 400 - 40
5 220 (3 marks)
= R310 check operation
(8 marks)
420 x R310 = R130 200 one part correct 9
(b) Cost of sales:
R1 618 200 (2 marks)
(R238 600 + R1 392 400 – R12 800) – R130 200
= R1 488 000
Accept ledger account / table. 4
(c) Gross Profit:
R1 680 000 – R1 488 000
= R192 000 one part correct
Accept ledger account / table. 3
51
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
F3.2.2 G Gonzales the owner of Krooked Skateboard Traders wants to
alternate between using the weighted-average method and a FIFO
method, depending on which will result in the higher cost of sales.
(a) In your opinion, why do you think G Gonzales wants to increase
the value of cost of sales in the financial statements?
It decreases gross / net profit and therefore decreases tax liability.
2
(b) Provide ONE reason why the bookkeeper says that alternating
between two methods of valuing stock does not comply with the
requirements of GAAP.
Any acceptable answer
The business must stay consistent from one year to the next in order to
compare results.
It is not ethically correct to manipulate profit by changing policies.
Needs permission from SARS to change from one inventory valuation
method to another
2
F3.3 PROTEC TRADERS
Identify a different problem in each store. Quote figures to support the
problem identified in each case and give Patrick Ace advice on how to
solve each problem.
52
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Problem (Quote figures.) Solution / Advice
Problem Figure
Lucas spent R30 000 on Lucas should review his
advertising and his turnover advertising and promotional
amounted to R280 000 strategies in order to increase
sales volume.
Store 1: Advertising is 10.7% of sales.
Lucas
The returns of R28 000 is too Change supplier for better
high / 8,24% of sales is quality if the product is
returned. inferior / Train the workers to
provide a better sales service.
Store 2:
The returns policy of 21 days Change the returns policy to
is too long. 7 days.
Pitso
Control of stock is a problem – Improve control over stock to
50 units of stock stolen in a minimize theft.
month.
Store 3:
Pepe
9
G TANGIBLE ASSETS
G1 (32 Marks, 19 Minutes)
53
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
G1.1 Provide TWO advantages of purchasing a caravan for the staff, rather than booking them alternative (4)
accommodation.
Cheaper to buy a caravan than accommodate four staff members.
No daily transportation is needed to take the staff members to the work site
The workers are on hand to protect the site from damaged / theft 24 hours a day.
A caravan will have storage space for their belongings, a fridge a bathroom, and a stove built in.
ANY LOGICAL ANSWER
G1.2 Is it ethical for Harry Bhengu, the owner of HB Contractors, to use business funds to pay for his personal (3)
accommodation in a hotel during the duration of the contract?
Yes – he is the owner of the business so can choose to spend business money on his business related
accommodation.
OR
No – He should stay on site in a caravan like he expects his workers to do.
Any logical answer.
G1.3 Complete the Fixed Asset Register for this caravan. (9)
Accumulated Carrying
Depreciation
Depreciation Value
31 July 2018 16 000 16 000 64 000
31 July 2019 12 800 28 800 51 200
30 January 2020 5 120 33 920 46 080
G1.4 Draft the Asset Disposal account in the General Ledger to calculate whether a profit or a loss was made on the (10)
disposal of this caravan.
Asset Disposal
2020 80 000 2020 Acc Dep on 33 920
30 Equipment 30
Jan Jan Equipment
Profit on Sale of 3 920 50 000
Bank
Asset
83 920 83 920
G1.5 Apart from the above caravan, HB Contractors has various specialised tools that are needed for their various (6)
construction projects. Discuss THREE control measures that can be implemented to ensure the safety of these
tools, as well as the safely of the workers.
Ensure all tools are serviced / checked regularly for problems
Only people who have been trained to use certain tools may use them
All tools should be kept in a safe place when not in use
Workers should be provided with the correct safety gear.
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
ANY LOGICAL ANSWER
G2 (30 Marks, 18 Minutes)
Notes to the financial statements for the year ended 28 February 2020
G2.1. Tangible Assets
Land & Buildings Vehicles
Cost price (1/03/ 19) 1 260 000 360 000
Accumulated Depreciation (1/03/19) 0 (125 000)
Carrying Value (1/03/20) 1 260 000 235 000
Movements 190 000 107 800
Additions at cost 190 000 204 000
Disposals at carrying value 0 (31 200)
Depreciation for the year 0 (65 000)
Cost price (28/02/20) 1 450 000 484 000
Accumulated Depreciation (28/02/20) 0 (141 200)
Carrying Value (28/02/20) 1 450 000 342 800
(11 Marks)
Calculation Of Depreciation:
Old / Remaining (360 000 – 80 000) – (125 000 + 4 800 – 48 800) X20% 39 800
Vehicles = (280 000 – 81000) X 20%
Sold Vehicle 48 800 – 44 000 = 4 800 4 800
New Vehicle 204 000 X 20% X 6/12 = 20 400 20 400
Total Depreciation 65 000
(3 Marks)
G2.2. G2.2.1Which GAAP principle is used when assets are depreciated? Explain the purpose of the principle. (3)
Prudence concept
Be realistic as assets loose value over time.
Better to write off an asset over time than to have a large loss in the year that the asset is disposed of.
G2.2.2 Elain has suggested to the bookkeeper that in future vehicles must be depreciated by 50% on cost, in order
to get the greatest tax benefit. Explain to her whether this is feasible or not as well as the consequences of (5)
this decision.
Not feasible
SARS stipulates the maximum depreciation to be written off.
Writing off higher amounts would be fraud as this would result in lower profits and therefore less tax.
Vehicles last a lot longer than 2 years.
This can result in penalties, fines, and jail sentences.
55
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
G2.2.3 Elain budgeted R50 000 for motor expenses in the year ended 28 February 2020 that included
maintenance and licenses. She was very concerned when the Income Statement was produced to notice
that the actual costs were R95 000. Discuss 2 possible reasons for this difference and suggest to her 2 (8)
measures that she could use in future to prevent these great differences.
Possible reasons: (4 marks)
Higher fuel costs
Vehicle did more mileage than budgeted. Suggestions must
Fraud – private use. link to reasons
Any other feasible answer
Suggestions: (4 marks)
Re-look at budget in view of latest price increases in fuel.
Set up internal controls to monitor private use.
Any other feasible answer.
G3 (68 Marks, 41 Minutes)
G3.1 Identify the GAAP concept that is applied in the following cases:
G3.1.1 Penny’s vehicles need to be recorded at their original cost price (1)
Historical Cost Concept
G3.1.2 Each vehicle’s value depreciates annually due to wear and tear (1)
Prudence Concept
G3.2 Complete the Fixed Asset Register to calculate the Accumulated Depreciation on ONE Toyota Corolla on (16)
1 December 2019 by completing the table in your answer sheet.
Corrola Number 1
Make Toyota Cost price 120 000
Model Corolla Depreciation Method 20%
Registration number ND 638 - 376 Depreciation Rate Diminishing Balance
Date Bought 1 August 2016
Depreciation Accumulated Depreciation Carrying Value
31 January 2017 12 000 12 000 108 000
31 January 2018 21 600 33 600 86 400
31 January 2019 17 280 50 880 69 120
1 December 2019 11 520 62 400 57 600
G3.3.1 Accumulated Depreciation: Vehicles (21)
50 880 X 3
56
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
2019 Asset 62 400 2019 152 640
Dec 1 Disposal GJ Feb 1 Balance b/d
2020 31 2019 11 520
Jan Balance c/d 135 408 Dec 1 Depreciation GJ
2020 31 Depreciation
Jan (27 648 + 6 000) GJ 33 648
197 808 197 808
2020 135 408
Feb 1 Balance b/d
G3.3.2 Asset Disposal (12)
Accumulated
2019 1 2019 Depreciation: 62 400
Dec Vehicles GJ 120 000 Dec 1 Vehicles GJ
Creditors’ Control CJ 50 000
Loss on Sale of
Asset GJ 7 600
120 000 120 000
G3.4 Notes to the Financial Statements for the year ended 31 January 2020 (10)
Vehicles
Carrying value at the beginning of the year 207 360
Cost 360 000
Accumulated Depreciation (152 640)
Movements 77 232 From
Additions at cost 180 000 Ledger
Disposals at carrying value (57 600)
Depreciation (27 648 + 11 520 + 6000) (45 168)
Carrying value at the end of the year 284 592
Cost 420 000
Accumulated Depreciation (135 408)
G3.5 Did this Jenny make a good decision regarding the sale of one Corolla and replacing it with a Kombi? Give a (3)
reason for your answer.
Yes – She can transport more passengers at one time and therefore make a bigger profit.
OR
No – she made a loss on the sale of the Figo.
ANY LOGICAL ANSWER
G3.6 Identify TWO things that Jenny can do to ensure that her employees drive her vehicles in a responsible manner. (4)
57
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Ask customers to rate their driving
Hold employees accountable for damage to the vehicles due to their error
Install tracker to monitor the use of her vehicles
ANY LOGICAL ANSWER
H] COST ACCOUNTING
CHUNKY CHAIRS
H1.1. Calculate the total purchases of raw material for the financial year ended 21
May 2019.
1 450 000 – 27 000 – 325 000 = 1 098 000 one part correct
H1.1.2 Production cost statement for the year ended 31 May 2019
4
Direct material 1 140 000
Direct labour (650 000 x 40%) 260 000
Prime cost DM + DL 1 400 000
Factory overhead cost balancing 312 000
Total cost of production 1 712 000
Work in process (1 June 2018) balancing 82 000
TCP + WIP begin 1 794 000
Work in process (31 May 2019) (94 000)
Total cost of production of complete products 1 700 000
80 000 x 21,25 9
H1.1.3 Calculate the following for the financial year ended 31 May 2019:
Number of units sold during the year.
15 000 + 80 000‒
9 500 = 85 500
one part correct
Cost of Sales
5
201 875
285 000 + 1 700 000
‒ (9 500 x 21,25 ) = 1 783
125
one
part correct 5
Or: The Finished Goods Stock account
Calculate the Net Profit for the year ended 31 May 2019.
58
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Sales (85 500 see 2.1.3 x 42,50 ) 3 633 750
Cost of Sales see 2.1.3 (1 783 125)
Gross profit operation 1 850 625
Less: Distribution cost (625 600)
Less: Administrative cost (787 400)
8
Net profit 437 625
* one part correct
H1.2 GLITTERATI BAGS AND PROBLEM SOLVING
H1.2.1 Calculate the following:
(a) the variable cost per unit.
85 + 108 + 34 = 227 one part correct
OR:
5 436 000 (3 marks)
1 989 000 + 2 527 200 + 795 =600
227 per unit one part correct,
23 400 must be divided by 23 4
400
(b) the breakeven point.
1 380 600 (2 marks)
842 400 + 538 200
299 ‒ 227 see (a) above
72 (2 marks)
= 19 175 units one part correct, do not accept fractions of a unit, must be
rounded 5
“up” to the next full unit
H1.2.2 After an analysis of cost and efficiency, the internal auditor is concerned
about a few points. Refer to Information C and answer the following
questions:
59
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
(a) Direct material:
Problem Solution
Material is wasted Use templates when cutting / train
workers to work efficiently / any
acceptable or correct answer
2
Direct labour:
Problem Solution
(b)
Tarren is not producing enough (2 Give her daily targets / bring in
100 from 2 925) commission if they reach a certain
goal / any acceptable or correct
answer
Tarren works the most overtime Only approve overtime if daily
and still does not reach the average target has just been missed / count
production number / slow worker / and compare the number of bags
exploits overtime she produces every hour / any
acceptable or correct answer
Sewing machine maintenance: 4
Problem Solution
Machines are old / needs to be Replace the machines / buy newer
replaced and more productive machines /
any acceptable or correct answer
Roger and Gary cannot work the Train them again / move them to
machines properly / lack of training another part of the production line /
any acceptable or correct answer
4
H2
H2.1 Calculate the following on 28 February 2019:
60
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
H2.1.1 Value of closing stock.
Workings Answer
4 191 500 four marks (5 512 x 7) two marks
195 424 + 4 034 660 – 38 584
49 + 788 – 7
830 three marks
1 111 000
eight marks one part
correct
5 050 x 220 10
H2.1.2 Gross profit for the year ended.
Workings Answer
see 2.1.1 see 2.1.1
COS: 4 191 500 – 1 111 000 = 3 080 500
(195 424 + 4 034 660 – 38 584) one mark 369 800
one part 5
correct
Gross profit: 3 450 300 – 3 080 500
H2.2.1 Calculate the stock value on 28 February 2019 using the FIFO method.
Workings Answer
200 – 7
193 x 5 512 = 1 063 816
1 202 731
220 – 193
one part
27 x 5 145 = 138 915 7
correct
Be aware of alternative arrangements
H2.2.2 Explain the effect on gross profit if the FIFO method is used.
61
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Any valid point
A larger closing stock will result in a smaller cost of sales and hence a greater (an
increased) gross profit.
The gross profit will be more compared to when weighted average method is used.
2
H2.2.3 As an internal auditor, explain the benefits of using the FIFO method to the owner
and the accountant. State TWO points.
Any TWO valid points part marks for short/incomplet
e statements
Stock shown at recent prices, realistic.
Reflect a higher gross profit
4
Easy to apply
No manipulation of profits.
62
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
ACTIVITY H3
H3.1 KLEMISH MANUFACTURERS
H3.1.1 PRODUCTION COST STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019
Direct material cost (3100 000 + 204 000 ) 3 304 000
Direct labour cost Prime cost – DMC 1 296 000
Prime cost 4 600 000
Factory overhead cost (974 400 + 46 200 )
(84 000– 1 020 600
37 800)
Operation;
one part correct
operation Prime + 5 620 600
FOHC
Work-in process (beginning) 500 800
6 121 400
Work-in process (end) operation TCP – subtotal above
Check that is deducted / ignore brackets / do not (775 400)
accept 500 800 or 0
Total cost of production 10 800 X 495 5 346 000 13
H3.1.2 ABRIDGED INCOME STATEMENT FOR THE YEAR ENDED
28 FEBRUARY 2019
63
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Sales 8 160 000
See TCP 2.1.1 Could do FGS
account
Cost of sales (672 000+ 5 346 000 – 18 000) (6 000 000)
ignore brackets
Gross profit Sales – COS 2 160 000
Administration cost (296 800 + 1 000 )
(297 800)
one part correct / ignore
brackets
Selling and distribution cost
(844 000 – 1000 - 46 200 )
(84 000–37 800) One part correct / ignore (796 800)
brackets
Net profit operation (subtract AC & SDC) one part
1 065 400
correct 11
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
H3.2 DAMARA’S JEWELLERY
H3.2.1 Break-even point:
(a) Calculate the break-even point for February 2019.
R1 296 000 = R1 296 000 = 8 000 units one part correct
R407 – R245 R162
4
OR
R1 296 000 x 18 000 = R1 296 000 x 18 000 = 8 000 units
R7 7326 000 – R4 410 000 R2 916 000
(b) Damara is satisfied with the results. Explain ONE reason with figures to support
Damara’s satisfaction.
Reason
Quote Figures
The break-even point dropped from 13 500 units to 8 000 units.
The business is producing 18 000 units, which exceeds the break-even point of 8 000
units.
This indicates that the business will be making a profit of R4 070 000 3
(10 000 X R407).
H3.2.2 Refer to the unit costs.
(a) Explain why the fixed costs per unit decreased.
Total fixed costs remained the same at R1 296 000 but the number of units produced
increased to 18 000 units
2
(b) Provide ONE possible reason for the change in Direct Material Costs.
Any one valid reason e.g.
Reduction in price / exchange rate (if imported) 2
Greater efficiency in using raw materials / less wastage
65
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Better quality of raw materials leading to less wastage
Found a supplier closer to the factory to reduce carriage
H4
H4.1 CONCEPTS
4.1.1 False
4.1.2 False
4.1.3 True 3
H4.2 STAR WHEELS MANUFACTURERS
H4.2.1 DIRECT LABOUR COST
Basic salary (14 x 7 000) x 12 1 176 000
98 000 one part
correct
Overtime (14 x 144) x 65 131 040
UIF contributions (1 176 000 x 1%) (1% of basic) 11 760
one part correct 1 318 800 9
FACTORY OVERHEAD COST
Indirect materials one part correct
36 500
(13 200 + 38 400 – 15 100 )
Salaries: foreman 156 000
Electricity and water (104 000 x 90%) 93 600
Rent expense (115 200 x 600/1 500) 46 080
Insurance (74 200 x 3/7) 31 800
Depreciation: factory plant and machinery 277 220
operation 641 200 13
H4.2.2
Direct (raw) materials cost 2 100 000
Direct labour cost see 2.2.1 1 318 800
Prime cost operation 3 418 800
Factory overhead costs see 2.2.1 641 200
Total manufacturing cost operation 4 060 000
Work-in-process (beginning of year) 160 000
operation 4 220 000
Work-in-process at end operation (220 000)
Cost of production of finished goods 4 000 000
(4 015 000 + 95 000 – 110 000 ) one part correct 10
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
H4.3 NUTRITIOUS EATS
H4.3.1 Calculate the break-even point for the year ended 31 October 2015.
736 000
= 61 333 or 61 334 units one part correct
(28 – 16)
12 4
H4.3.2 Should the business be satisfied with the number of units that they have
produced and sold during the current financial year? Explain. Quote figures.
Yes/No
Reason with figures
Reasons for Yes
The business sold (64 000 – 61 334) 2 666 units more than the break-even point.
Reasons for No
The business sold (78 000 – 60 000) 18 000 more than the break-even point in
the previous financial year.
Production decreased from 78 000 – 64 000 3
H4.3.3 Give TWO possible reasons for the increase in the direct material cost per
unit in the current financial year.
Any two suitable reasons
Due to the effects of inflation, price of raw materials increased.
Storage costs.
Raw material obtained from new suppliers.
Increase in wastage
Increase in carriage 4
H4.3.4 Craig suggests that, in order to improve financial results in the new financial
year, the quantity of cereal per box must be reduced by 10% and the selling
price must remain the same. Give TWO valid reasons why he should not do
this.
Any TWO valid reasons
It is not ethical and would lead to a decrease in the customers once this
information becomes public knowledge.
This is deliberate product shrinkage to gain higher profits. Could lead to legal
action against the business.
Product may be removed from the shelves if the contents of the product do
not correspond with the information on the package. 4
A. BANK RECONCILIATIONS
ACTIVITY 1
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
1.1
(a) True
(b) False
(c) True
(d) True
4
1.2 Calculate the correct totals for the Cash Receipts Journal and the
Cash Payments Journal for July 2019. Use the tables provided.
Cash receipts Cash payments
journal journal
127 670 68 900
1 800 1 300
12 340 920
600
8 700 F 50 000
one part correct
141 810 both figures 121 720
*Note: Do not award method mark if R15 000 appears in any column.
14
1.3 Bank reconciliation statement on 31 July 2019.
Debit Credit
Balance as per bank statement 44 040
Outstanding deposit 18 000
Outstanding cheques: 897 8 700
#balancing figure 905 20 500
908 3 100
Balance as per bank account 29 740
(9 650 + 141 810 - 121 720) Inspect
see 1.2.2 (if no workings)
10
Both totals must be the same 62 040 62 040
# Note: Do not award method mark for balancing figure if R15 000 appears in any column.
-1 Presentation (if no details / or incorrect details)
1.4 Explain how cheque No. 908 should be treated when preparing the
financial statements on 31 July 2019 the end of the financial year.
Increase bank and increase creditors
Do not accept: Dr bank and Cr Creditors control is for ledger account not financial statement 2
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
1.5 Identify the GAAP principle applied by the bookkeeper.
Principle of prudence
Provide TWO suggestions on how a similar problem can be
prevented in the future.
Any TWO valid suggestions Part marks for partial/incomplete answers
Division of duties (partial answer)
Encourage EFT payments by customers/debtors
All cash received must be deposited daily (deposit slips must tally with
receipts issued)
Daily checks to see that deposits are made. 5
Request notification (sms) from bank for all transactions.
ACTIVITY 2
2.1 Indicate whether the following statements are TRUE or FASLE. Write only ‘true’ or
‘false’ next to the question number (i) – (iv) in the answer book.
2.1.1 False
2.1.2 True 4
2.1.3 False 4
2.1.4 True
2.2
2.2.1 Calculate the correct totals for the Cash Receipts Journal and Cash
Payment Journal for May 2019.
Cash Receipts Journal Cash Payment Journal
146 970 68 900
1 800 2 100
12 340 920
600
50 000 9
Operation if one part correct Operation if one part correct
9
161 110 122 520
2.2.2 Prepare the Bank Reconciliation Statement on 31 May 2019.
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Debit Credit
Credit balance as per bank statement 42 440
Credit outstanding deposit 18 000
Debit outstanding cheques
No. 897 8 700
No. 905 1 200
No. 908 3 100
Credit amount wrongly debited 800
Debit balance as per bank account 48 240
Operation
Operation one part correct 61 240 61 240 10
10
2.2.3 Explain how cheque No. 908 should be treated when preparing the financial
statements as at 31 July 2015 the end of the financial year.
Explanation:
Accept short explanation; may be phrased differently
Part-marks for unclear/incomplete explanation
Increase bank and increase creditors in the Balance Sheet notes.
Increase cash and cash equivalents as well as trade and other payables in the 2
notes.
The amount is not recognised as paid and the debt is not reduced. 2
Accept : debit Bank and credit Creditors control
2.2.4 Refer to information G. The bookkeeper has decided to write off the amount of
R50 000.
Which GAAP principle will the bookkeeper be applying?
The bookkeeper wants to prevent a similar problem in future. Give TWO
suggestions to improve internal control in this regard.
Principle of prudence
Solutions: Any two
Accept short solutions; may be phrased differently
Part-marks for unclear/incomplete solution
Division of duties/separation of duties
Encourage EFT payments by customers / debtors
All cash received must be deposited daily/deposit slip must agree to receipts/ bank
notifications by SMS or email
Regular and timely check / monitor all large transaction
B CREDITORS RECONCILIATION
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
ACTIVITY 1
Creditors' Reconciliation
Creditors' Ledger
Statement
Balance 28 370 25 300
+ 13 320
A
(14 800 – 1 480)
+ 2 700
B
1 350 + 1 350
C + 350
D – 7 200
E -2 700 -2 700
Operation – both 28 720 28 720
totals
9
71
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
ACTIVITY 1
CREDITOR’S LEDGER
NO. STATEMENT BALANCE
ACCOUNT BALANCE
Balance 35 000 38 420
2 970
i)
7 740 – 4 770
ii) (750)
iii) 1 000
(1 960)
iv) 980 + 980
(1 mark each)
v) (3 860)
13
vi) 7 120
13
C. DEBTORS RECONCI;IATION AND DEBTORS AGE ANALYSIS
ACTIVITY 1
1.1 Explain how a debtors’ age analysis can assist with internal control over debtors.
Any ONE valid point.
Gives an indication of debtors whose accounts are overdue.
The analysis will give a clear idea of reliable debtor.
Assist the business to review credit limits allowed to debtors.
Assist the business when to refuse additional credit sales until accounts are
paid.
1.2 Calculate the percentage of total debts exceeding the credit terms.
14 560 x 100 + 2 080 x 100
41 600 1 41 600 1
35% 5%
OR
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
16 640 x 100 award 2 marks for 16 640
41 600 1 award 1 mark for 41 600 4
40% award method mark if one part is correct 4
1.3 Explain ONE problem (with figures) relating to each of the following debtors:
PROBLEM FIGURES
Mswane P
Mswane P exceeded the credit limit of R10 000 to R11 000 by R1000
Hambrok V
Hambrok V exceeded the credit term of 30 days to 60 days (9 112) and 90 days (2 080)
ACTIVITY 2
2.1 DEBTORS' AGE ANALYSIS
2.1.1 Explain why the debtors' age analysis is considered to be an effective internal
control measure. State ONE point.
Valid explanation part-mark for unclear / incomplete answer
Helps identify slow or defaulting debtors (not abiding to the credit terms) so that action
can be taken.
Highlights debtors in good standing so their credit ratings can be reviewed.
It can expose the problem of allowing debtors to exceed their credit limits.
It can assist with planning/corrective measures such as sending reminders, writing off
debtors etc.
2
2.1.2 Explain TWO different problems highlighted by the debtors' age analysis. In EACH
case, provide the name of a debtor and figure(s).
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Give marks for debtor & figures even if problem incorrectly identified
PROBLEM DEBTOR AND FIGURE(S)
Debtor Figure
Debtors exceeding credit limits P. Botha (by R700)
Or: balance of 4 200 is above his limit of 3
500
Overdue accounts/not complying with credit S. Walker (R8 500 overdue)
terms/slow payers
O. Klein (R1 100 overdue);
M. Valley (R950 overdue)
Poor control of granting credit / Continue M. Valley (R950)
selling to debtors whose accounts are
S. Walker (R8 500)
overdue
O. Klein (R1 100) 6
2.2 DEBTORS' RECONCILIATION
2.2.1 CORRECTIONS TO THE DEBTORS' CONTROL ACCOUNT ON 30 NOVEMBER 2017
Balance before errors and omissions 25 700
(i) +2 700
(ii) +350
(iii) no part-marks – 1 800
(iv) No change
(v) +1 500
Correct Debtors' Control balance
28 450
one part correct 7
accept brackets for -ve amounts; no sign indicates +ve
accept “0 or –“ for “no change”
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
2.2.2 DEBTORS' LIST ON 30 NOVEMBER 2017
L Nkosi (5 700 – 1 800 ) 3 900
S Muller (11 100 + 350 ) 11 450
M Welthagen (– 1 900 + 1 500) (400)
B Sandleni (15 900 – 1 200 – 1 200 )
2 400 two marks must be 13 500
< 15 900
Correct total of Debtors' List operation one part correct 28 450 10
J] VAT AND K] BUDGETING
ACTIVITY J1:
1.1.1 Calculate the amount of VAT receivable or payable to SARS. Indicate
whether it is receivable or payable.
Input : 26 184 + 2 500 + 2 000 + 1 059
Output : 48 000 + 1 461+ 750
50 211 - 31 743 = 18 468 operation
Receivable/Payable:
Payable to SARS 13
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
1.1.2 Des suggests that the business should charge VAT but stop submitting
returns to SARS in future.
Give your opinion regarding this matter. State ONE relevant points.
Any ONE
According to VAT regulations he is obliged to register as a VAT vendor.
If he does not, he can be charged for no compliance.
He might lose his license.
Even if he does not register, he still has to meet his VAT requirements.
Failure to submit correct VAT returns or late submissions attracts penalties,
fines and interest.
2
ACTIVITY J2 VAT
2.1. VAT CONCEPTS
2.1.1 Exempt
2.1.2 Zero
2.1.3 Exempt 3
2.2 WINSTON TRADERS
2.2.1 Calculate the amount that would be entered next to Debtors Control on the
credit side of the VAT Output account.
Total sales = 120 000 x 25/75 = 40 000 x 15% = 6 000
3
2.2.2 Calculate the VAT amount owed to SARS on 28 February 2018.
(18 000 + 6 000 see 5.2.1)
24 000 ‒ (276 + 350) + 150 ‒ (8 600 + 6 000)
= 8 924
2.2.3 In which section of the Balance Sheet will you record the amount calculated 5
in 5.2.2?
Trade and other payables
1
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
ACTIVITY J3 CASH BUDGET
3.1.1 DEBTORS’ COLLECTION SCHEDULE
3.1.4 The directors are concerned
Creditabout
Salesthe cash balances
June shown in the Cash Budget. Mention
TWO strategies used to improve the cash balances.
May 72 000 48 960
Explain why you agree or disagree with these strategies.
June 84 000 19 950
Any TWO
68 910
3.1.2 Calculate the Wages and Salaries for May
6 000 + 1 800 = 7 800
42 000 + 3 000 = 45 000
52 800
OR 48 000 + 1 800 + 3 000
OR 7 800 + 45 000
5
3.1.3 The purchases payment policy needs to be changed.
Explain the need to change the policy.
Debtors are expected to pay within 30 days and creditors are also being paid within 30 days. This
could lead to cash flow problems if debtors do not pay on time.
Provide TWO points of change that would benefit the company
All purchases to be made on credit
and negotiate extended
terms with creditors.
77
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
ACTIVITY J4
4.1
4.1.1 B
4.1.2 D
4.1.3 A
4.1.4 C
4
4.2 SHELDON TRADERS
4.2.1 Incorrect entry:
Depreciation
Reason:
It is a non-cash item.
2
4.2.2 State THREE ways in which the purchasing of Land and Building will be
financed.
Additional loan R800 000
Fixed deposit matured. R500 000
September closing bank balance R1 100 000 3
4.2.3 Debtors' Collection schedule:
MONTH CREDIT SALES SEPTEMBER OCTOBER
July R270 000 R129 600
August R300 000 90 000 144 000
September 330 000 62 700 99 000
October 360 000 R68 400
282 300 311 400
Both totals
9
78
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
4.2.4 Item Calculations Answer
A
1 100 000
B 71 406 – 1 100 000
(1 171 406)
C
118 800 x 100/108 110 000
D
70 000
one part correct
E
120 000
one part correct
12
4.2.5 Comment on the cash and credit sales. Explain how these amounts are
affecting the cash flow of the business? Quote figures.
Comment Quote figures
Cash sales had a negative variance of R26 000.
The actual amount of R84 000 is less than the budgeted amount of R110 000
The credit sales had a positive variance of R90 000. The actual amount
R360 000 was more than the budgeted amount of R270 000.
There were more customers buying on credit R360 000 as compared to cash
sales of R84 000.
Explanation
This will have resulted in a surplus of cash for August. The bank balance will
increase by R64 000 (R90 000 – R26 000) positively.
6
4.2.6
Has the Advertising campaign been beneficial to the business?
Explain. Quote figures.
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
5
YES/NO
Yes
Explanation
Explanation Quote figures
The actual advertising amount R44 000 doubled from 5% to 10% on
sales.
The sales increased by R64 000 (R444 000 – R380 000) which is an
increase of 14%.
Therefore, the increased advertising did not increase sales.
4.2.7 Do you think the collection from debtors is well controlled? Explain.
Quote figures.
YES/NO
No
Explain
Explain Quote figures
Collections of R173 000 are much lower than expected,
R282 300.
This will cause a cash flow problem as the variance is R109 300.
Give TWO points of advice
Ensure debtors adhere to policy by notifying them of outstanding
balances/SMS.
Charged interest on overdue amounts.
Do not allow further credit to debtors who do not adhere to the
required credit policy. 9
ACTIVITY J4
4.1 List TWO items on the Projected Income Statement provided, that would not
appear on a cash budget.
80
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Any two valid points
Cost of sales
Discount received
Depreciation
Trading stock deficit
2
4.2 A. Advertising
132 000 X 2%
= R 2 640 Operation one part correct
2
B. Net profit after tax
17 625 – 585 – 5 112 = R11 928 Operation one part correct
4
4.3 Calculate the cost of sales for May 2019. Refer to information C and H.
51 000 X 100
80
= 63 750 Operation one part correct
2
4.4 Creditor’s payment schedules.
Month Credit purchases July August Septemb
er
May 51 000 48 960 - -
June 55 000 52 800 -
July 49 200 If 96% of 47 4
July 232
81
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
4.5.1 The percentage increase in wage that the cleaners will receive in September 2019.
176 one mark
(3 376 – 3 200) x 100
3 200
= 5.5% Operation one part correct
3
4.5.2 The monthly salary due to the sales manager in September 2019.
(17 100 – 300) / 2 = (8 400 + 300 ) X 108
100
= 9 396 Operation one part correct
OR 8 700 x 1.08 = 9 396
Two marks One mark One method mark 4
4.5.3 The total credit sales expected in September 2019.
(99 000 x 160%) x 75% = 118 800 Operation one part correct
OR
132 000 x 120% = 158 400 x 75% = 118 800
One mark One mark One method mark
OR
3 168/2% = 158 400 x 75% = 118 800
One mark One mark One method mark 3
4.5.4 The loan balance on 1 August 2019.
(585 x 1 200 ) = 78 000 Operation one part correct
9
OR
585 x 12 = 7020 X 100/ 9 = 78 000
One mark One mark One method mark 3
4.6 Refer to the actual figures for Depreciation and Trading stock deficit for July 2019. In
each case, provide a reason for the difference with the budgeted figures.
Any valid point
Depreciation:
Purchases of a new asset.
Calculation error.
Trading stock deficit
Unanticipated stock loss.
Random stock take revealed stock shortage.
Damaged goods noted and taken into account. 2
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
4.7 Refer to the actual figures for July 2019. Comment on any TWO expenses (excluding
items mentioned in QUESTION 6.6) that were not well controlled by the business. In
each case, quote the relevant figures and give ONE suggestion on how this expense
can be more effectively managed.
EXPENSE COMMENT( WITH FIGURE) SUGGESTION
Any two: Comment and figure each Suggestion each
No mark for
expenses
Maintenance Over budget / underspent. Adjust budget or use the money wisely
(4 000 – 1 650) to maintain the assets. This could
extend the lifespan and productivity of
the assets.
Telephone Overspent / under budgeted (2 Control / usage or check for misuse.
000 – 4 280) over 50% Budget correctly if found to be
necessary.
Advertising Underspent / over budgeted (2 Spend money allocated. Look at
400 – 1 968) different forms of advertising may
result in better sales / profit
6
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
ACTIVITY J5
5.1.1 The main purpose of a Projected Income Statement is …
To project/plan/estimate the expected net profit for the budgeted period.
To plan/project/estimate/monitor/control/expected income and expenses for budget period. 2
5.1.2 The main purpose of a Cash budget is …
To project/plan/estimate the expected bank balance at the end of budget period.
To plan/project/estimate/monitor/control/expected cash received and paid over the budget
period. 2
5.2 DEBTORS' COLLECTION SCHEDULE
Month Credit Sales November December
September 150 000 19 500
October 152 000 68 400 19 760
November 160 000 60 800 72 000
December 165 000 62 700
6
5.3 Calculate:
5.3.1 % increase in Rent Income.
1 440 two marks
(19 440 – 18 000) x 100 = 8% one part correct
18 000
4
5.3.2 Payments to creditors in December.
320 000 x 100/160 x 80% = 160 000 one part correct
OR
40 000 x 80/20= 160 000
4
5.3.3 The amount of the loan on 1 December.
3 375/1 x 12/1 x 100/9 = 450 000 one part correct
4
5.3.4 Salaries and wages for December.
48 000/4 = 12 000 x 175% = 21 000 x 3 = 63 000 one part correct
12 000 x 150% 18 000 one part correct
Total: 81 000 one part correct
5
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
5.4 An amount of R123 000 for staff training. Provide ONE reason
why this is considered to be a necessary expense.
Better training to provide a better service.
Giving back to the society.
Commitment to the growth and development of the society. 2
Any ONE valid reason.
5.5 Provide a possible reason for the variance. In each case, give one point of advice to address
this problem.
ITEMS REASON ADVICE
Cash sales Too many discounts given to Encourage more cash sales as
clients. this improve the cash flow of
the business.
Delivery Possible abuse of delivery Better control/supervisor on
expenses vehicle by employees. vehicles.
Due to old condition of the
vehicle more maintenance Buy a new vehicle.
and repair cost have been
incurred.
Rent Poor collection strategy used Use debit order/EFT for the
income by the business. tenants.
Over budgeted.
Possible that the tenant has Ensure that tenants have to
left and the premises have place certain number of
been left unoccupied. months' notice before leaving.
6
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
ACTIVITYJ6
6.1.1 The main purpose of a Cash Budget is to …
Part-marks for incomplete / unclear response
Project / estimate the expected bank balance at end of budget period.
Project / estimate / monitor / control expected cash received and paid over budget period.
6.1.2 The main purpose of a Projected Income Statement is …
Part-marks for incomplete / unclear response
Project / estimate the expected net profit for the budgeted period.
Project / estimate / monitor / control expected income and expenses for budget period.
4
6.2.1 Debtors' Collection Schedule:
CREDIT SALES MAY 2018 JUNE 2018
March 2018 252 000 22 680
April 2018 288 000 172 800 25 920
108 000
May 2018 180 000 51 300
60% of credit sales
June 2018 216 000 61 560
195 480
Cash from debtors 246 780 Operation, one part
correct 7
6.2.2 Determine the discount allowed for May 2018.
See 6.2.1 ( ) Operation, one part correct
180 000 x (30% x 5%) = 2 700
OR
51 300 one mark x 5/95 one mark = 2 700 one method mark
180 000 x 30% = 54 000 one method mark – 51 300 one mark = 2 700 one method mark 3
Determine the bad debts written off in June 2018.
Operation one part correct
1% x 252 000 = 2 520 3
6.3 Calculate the cash sales for May 2018.
Workings Answer
300 000 x 40%
OR No part marks
300 000 – 180 000 120 000
2
Calculate the payment to creditors in June 2018.
Workings Answer
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
300 000 x 100/150 x 80/100 160 000
200 000 two marks Operation, one part
correct 4
87
KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Calculate the salaries for May 2018.
Workings Answer
14 500 + 11 600
(2 x 14 500) + (4 x 26 100)
133 400
29 000 104 400
Operation, one part
OR
correct
(6 x 14 500) + (4 x 11 600)
87 000 two marks 46 400 two marks
5
6.4.1 Tony is not concerned about the overspending in advertising. Explain why this is so.
Quote figures to support your answer.
Candidates must indicate the positive effect of advertising on sales
Provide appropriate figures one mark each
Expected response for 4 marks:
Advertising increased by R3 000 but Sales increased by R96 000.
OR
Advertising increased by 37,5% while Sales increased by 20% on bigger base. 4
6.4.2 State ONE consequence of not paying the amount due to creditors in
April 2018.
Any ONE valid consequence Part-marks for incomplete / unclear response
Credit to the business will be stopped by the creditors.
The credit ratings of business will decrease / could be blacklisted / report to credit bureau
Business will be charged interest for slow payment.
Legal action can be taken by the creditors 2
6.4.3 State TWO points in favour of appointing Gentex Cleaning Services.
Any two valid responses Figures not required but may be provided as part
of an explanation
Part-marks for incomplete / unclear response
Outsourced cleaning could cost less than budgeted/actual for wages and cleaning materials
Easier to budget (fixed contract amount)
Expertise / professionalism / specialisation of the cleaning company
No interruption or extra costs due to workers on sick leave etc.
No storage space needed for cleaning materials
Leads to reduction in administration costs
VAT input can be claimed from SARS
The cleaners can be rotated between different clients if necessary
Explain ONE point that Tony should consider before making this decision.
Any valid response Part-marks for incomplete / unclear response
Whether it will make the current employees redundant / retrench or reassign the existing
cleaners (consider the ethics of this)
Reliability of the new cleaning company 6
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Honesty of the workers of the outsourced business
Negative image of outsourcing to the company
Whether outsourcing conflicts with their social responsibility programmes
Instructions to cleaners have to be given through the cleaning firm’s managers
Terms of the contract regarding fee increases
Response for one mark:
VAT charged on outsourced cleaning services
ACTIVITY J7
7.1.1 Explain the importance of comparing the actual figures to the budgeted figures in
the cash budget.
To determine of the items/costs were managed well and within the set limits
(Any acceptable answer)
7.1.2 Calculate the values marked (A) ‒ (F).
Calculations 1
A 1 080 000 x 95% = 1 026 000
B 1 800 000 x 100/160 = 1 125 000
C 360 000 / 2 = 180 000
D 288 200
E (675 400) + 288 200 (see D) = (387 200)
F 49 680 x 100/115 = 43 200
7.1.3 Refer to the figures for “Cash received from debtors”. Are the debtors adhering to
the credit terms of the business? Provide figures to support your answer.
Explanation: Comparison of budgeted e and actual Figures
They should have paid R864 000 and only paid R624 000
7.1.4 No new workers were employed during July and August 2018. What could possibly
be a reason for the change in each of the actual figures for those two months?
3
Reason
July Workers worked overtime
August Less workers came to work / Workers were on a strike
(Any acceptable answers for both scenarios)
7.1.5 The owner feels that the business pays less money by renting equipment than
purchasing the equipment. Do you agree with her opinion? Provide TWO points to
support your answer.
Yes/No Explanation
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
Yes
Only hires equipment when necessary
Does not have to pay maintenance on equipment
Any other reasonable answer
No
By purchasing their own equipment they will save money as the equipment will
last longer than what the repayment period
The equipment can be rented out to earn an additional income (if it is not in use in
the business at that time)
Any other reasonable answer
7.1.6 The business still faces a cash flow problem in August, even though a loan was
obtained in July and the receipts from debtors improved.
Excluding these two items and the renting of equipment (as in 6.2.5), identify TWO
other items, with figures, that needs attention. Also provide advice how these items
can be managed.
Item Figure Advice
Item Figure Advice
Creditors 960 000 or (b) Buy less on credit, attempt more cash sales
1 125 000 in order to qualify for a cash discount.
or 1 200 000
Drawings 150 000 or Urge owner to decrease drawings so that
210 000 or the business can recover the cash flow
168 000
Salaries and 144 000 to 180 Pay workers a fixed salary; employ workers
wages 000 or for a fixed term.
144 000 to 108
000
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KZN ACCOUNTING GR 12 2020 SOLUTIONS TO SUPPORT DOCUMENT
7.1.7 The owner bought the vehicle from the business for her son. The usual driver and
the finance officer were unhappy with this. Prove each person’s point by explaining
ONE reason for each.
Concern
He was supposed to have first option to buy the vehicle and
Driver now he can’t go against the owner of the business.
The business received R60 000 less (R180 000 ‒
Finance officer R120 000) than what they would have received if the
vehicle was sold to the driver.
.
91
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