Grade 12 Accounting Learner Revision Document 2020

CURRICULUM GRADE 10 -12 DIRECTORATE NCS (CAPS) SUPPORT DOCUMENT GRADE 12 ACCOUNTING LEARNER REVISION MATERIAL MARCH 2020

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT A. INCOME STATEMENTS ACTIVITY A1 (Limpopo Sept 2019 Q3) QUESTION 3 COMPANIES FINANCIAL STATEMENTS (45 marks; 30 minutes 1. FINANCIAL STATEMENTS AND NOTES The following information was taken from Khumalo Fashions Ltd. The financial years ended on 28 February 2019. REQUIRED: Complete the Income Statement for the year ended 28 February 2019. Certain figures have been added in the Answer book. (45) INFORMATION Balances on 28 February 2019 R Balance sheet accounts Ordinary shareholder’s capital 1 840 000 Retained income 213 260 Provision for Bad Debts (1 March 2018) 2 000 Loan from director 750 000 SARS: Income Tax (Dr) 74 195 Nominal accounts Cost of Sales ? Sundry expenses ? Additional information and Adjustments: A. Included in the Sales amount was R56 000 received for goods sold to a school at a mark-up of only 25%. All other goods were sold at a mark-up percentage of 40%. B. The following information from the February Bank Statement must still be taken into account:  Bank charges, R340  Interest on current account, R670  R/D cheque from a debtor for R3 650 as settlement of his account of R4 050.  A cheque for stationery was entered in the journals as R778 instead of R878. C. A debtor with an outstanding debt of R800 must be written off as irrecoverable. D. Dresses to the value of R4 800 were damaged in transit. The insurance will cover 35% of the loss and will make a payment during March 2019. The balance is the business’ loss. E. A physical stock-take on 28 February 2019 showed: Stationery on hand, R280  Trading stock of R3 200 could not be accounted for during the stock-take. F. An annual Insurance premium of R9 600 was paid and recorded on 1 June 2018. G. The Provision for Bad Debts must be adjusted to R3 800. H. Commission on certain old stock was calculated at R1 600 being 10% of the sale items. This must be adjusted to 6% due to the nature of the goods sold. I. Provide for any outstanding directors fees. The directors receive the following annual fees: G. Khumalo R50 000 and R. Khumalo R60 000.  Since 1 November 2018 R. Khumalo has been renting a house that belongs to the company. The rent of R6 000 per month is to be offset against her director’s fees. This transaction was not recorded. R. Khumalo has also not received any fee as yet. J. Operating profit on Sales for the year was calculated as 25%. K. Net profit after Tax on Sales for the year was calculated as 15%. L. Tax was calculated at R78 795 for the year. M. Loan from director:  The balance of the loan on 1 March 2018 was R844 205.  Interest on loan is capitalised.  Payments made during the year, including interest, were R150 000.  A loan repayment of R120 000 will be made on 1 July 2019. N. Dividends declared on 27 February 2019 amounted to R16 000. Page 2 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY A1 (Limpopo Sept 2019 Q3) COMPANIES FINANCIAL STATEMENTS 1. KHUMALO FASHIONS LTD. INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019 Sales 1 225 700 Cost of sales Gross profit Other operating income Commission income (89 200 Gross operating income Operating expenses Bank charges (3 260 Bad debts (5 600 Discount allowed (2 940 Stationery (3 860 Insurance (14 250 Director’s fees (50 000 Sundry expenses Operating profit Interest income (11 350 Profit before interest expense Profit before tax Profit after tax Page 3 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY A2 (Free State Sept 2019, Q3 ) COMPANY FINANCIAL STATEMENTS (67 marks; 40 minutes) You are provided with information from the records of Moonlight Ltd for the financial year ended 28 February 2019. REQUIRED: 2.1 Refer to Information D 2.1.1 Calculate the profit or loss on disposal of the computer on 1 August 2018. (6) 2.1.2 Calculate the total depreciation for the year. (9) 2.1.3 Suggest ONE internal control measure that the internal auditor can perform to verify the tangible (2) assets figure in the Balance Sheet. 2.2 Complete the Income Statement (Statement of Comprehensive Income) for the year ended 28 February 2019. (40) 2.3 Prepare the Retained income note on 28 February 2019. (10) INFORMATION: A. The following balances/totals, amongst others, appeared in the books on 28 February 2019: R Retained income 765 000 Loan: Derby Bank 2 110 000 Vehicles 1 520 000 Equipment 660 000 Accumulated depreciation on vehicles (1 March 2018) 484 500 Accumulated depreciation on equipment (1 March 2018) 178 000 Trading stock 1 287 000 Provision for bad debts (1 March 2018) 10 200 Sales ? Cost of sales 7 540 000 Rent income 158 200 Directors fees 932 400 Audit fees 64 000 Salaries and wages 320 000 Insurance 56 250 Commission income 31 580 Bad debts 2 779 Interest expenses ? Interest income ? Sundry expenses 187 640 Page 4 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT B. Adjustments and additional information (i) Goods are sold at a mark-up of 60% on cost price. (ii) A credit note for the return of merchandise sold for R12 480 was omitted from the Debtors Allowances Journal on the 15 February 2019. The goods were taken into stock, but no entries were made. (iii) Stock, costing R37 500 was stolen. The insurance company has agreed to pay out an amount of R26 250 which is still receivable. (iv) Stocktaking on 28 February 2019 reflected trading stock of R1 234 800 on hand. (v) A cheque for R10 150 was received from the trustee of a debtor who was declared insolvent. This represented a dividend of 40 cents in the Rand. The balance must be written off as bad debt. (vi) Provision for bad debts must be decreased to R9 700. (vii) The rent for February 2019 was still outstanding. The rent was increased by 10% on 1 November 2018. (viii) Income tax is calculated at 25% of the net profit. C. The loan statement received from Derby Bank on 28 February 2019 reflected the following: R Balance at the beginning of the financial year 2 620 000 Repayments during the year (including interest) 510 000 Interest capitalised ? Balance at the end of the financial year 2 398 200 D. Fixed Assets Included in the vehicle account is R950 000 for a delivery van which was purchased on the 1 December 2018. Vehicles are deprecated at 20% p.a. on cost. On 31 August 2018, a computer was taken over by Paul Cluver one of the directors, for personal use for R8 000 cash. The relevant page from the Fixed Asset Register is provided below. No entries have been made in respect of the disposal of this asset. Equipment is depreciated at 20% p.a. on the diminishing balance method. FIXED ASSET REGISTER Page 22 Item: Aider computer Date purchased: 1 June 2015 Cost price: R30 000 Depreciation policy: 20% on diminishing method CURRENT ACCUMULATED DATE DEPRECIATION DEPRECIATION 28 February 2016 R4 500 R4 500 28 February 2017 R5 100 R9 600 28 February 2018 R4 080 R13 680 31 August 2018 ? ? Page 5 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT E. SHARE CAPITAL On 28 February 2019 the company repurchased 125 000 shares at R0,50 above the average share price. Shareholders qualify for final dividends. The share capital after the share buy-back consisted of 1 375 000 ordinary shares. An interim dividend of R982 500 was paid on 1 September 2018. A final dividend of 80 cents per share was declared on 28 February 2019. ACTIVITY A2 (Free State Sept 2019, Q3 ) 2.1.1 Calculate the profit or loss on disposal of the computer on 31 August 2019. 6 2.1.2 Calculate the total depreciation for the year. 9 2.1.3 Suggest ONE internal control measure that the internal auditor can perform to verify the tangible assets figure in the Balance Sheet. 2 Page 6 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.2 Income Statement for the year ended 28 February 2019 Sale Cost of sales Gross profit Other operating income Commission income 31 580 Rent income 158 200 Gross operating profit Operating expenses Director's fees 932 400 Audit fees 64 000 Salaries and wages 320 000 Operating profit Profit before interest expense Net profit for the year 2 040 000 40 Page 7 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.3 Retained income Balance at beginning of year 765 000 Ordinary Share dividends Balance at the end of year 10 ACTIVITY A3 (Mpumalanga Sept 2018 Q3) CONCEPTS, INCOME STATEMENT AND NOTES TO FINANCIAL STATEMENTS (75 marks; 45 minutes) 3.1 CONCEPTS Choose the correct word from those given in brackets. Write only the word next to the question number (3.1.1–3.1.4) in the ANSWER BOOK. 3.1.1 In the event of bankruptcy, the shareholders are not responsible for the debts of the business. This (1) is because of (limited/unlimited) liability. 3.1.2 In the financial statements, debtors will be shown as trade and other (1) (equity/receivables/payables). 3.1.3 The portion of a loan that will have to be repaid within a year is a current (liability/asset). (1) 3.1.4 The (internal/external) auditor is employed by the company to set up and audit internal control (1) processes. 3.2 PIXIE LTD The information below was extracted from the accounting records of Pixie Ltd on 28 February 2018. REQUIRED: 3.2.1 Prepare the following notes to the Financial Statements for the year ended 28 February 2018:  Ordinary Share Capital (8)  Retained Income (10) 3.2.2 Complete the Income statement for the year ended 28 February 2018. (43) Page 8 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT INFORMATION: A. Balances The following balances for 2018 were extracted from the accounting records before the adjustments and additional information were taken into account: 28 February2018 28 February2017 Balance Sheet accounts section Ordinary share capital R? R1 275 000 Retained income ? 28 900 Mortgage loan: Oberon Bank ? 76 500 Debtors control 98 750 118 500 Provision for bad debts ? 3 555 SARS (Income tax) (Cr.) 27 850 (Dr.) 19 500 Shareholders for dividends ? 68 000 Nominal accounts section Sales 1 800 000 Cost of sales ? Rent Income ? Consumable stores 2 900 Advertising 62 545 Audit fees 5 720 Director’s fees 67 350 Interest on loan ? Salaries and wages 128 450 Sundry expenses ? Interest income 13 180 Bad debts 2 900 B. Information from the Cash Flow Statement for the year ended 28 February 2018: R Depreciation 78 350 Income tax paid 64 650 Proceeds from the issue of new shares 220 000 Payment for shares repurchased 120 000 Page 9 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT C. Share capital and dividends  Pixie Ltd has an authorised share capital of 400 000 shares.  300 000 shares were in issue on 1 March 2017.  20 000 shares were repurchased on 1 October 2017 from the estate of a deceased shareholder.  40 000 new shares were issued on 28 February 2018. These shareholders do not qualify for final dividends.  An interim dividend of 10 cents per share was paid on 28 August 2017.  A final dividend of 20 cents per share was declared on 28 February 2018. D. Adjustments and additional information that need to be taken into account: 1. The company aims to achieve a mark-up percentage on cost of 90%, but this year has only achieved an actual mark-up of 80%. 2. Pixie Ltd has rented out their unused storeroom since 1 March 2014. The rent at the beginning of the current financial year (1 March 2017) was R1 750 per month. The lease agreement stipulates an annual increase of 10% effective from 1 January each year. The rent for March 2018 has already been received. 3. Consumable stores used for the financial year amounted to R2 750. 4. Merchandise to the value of R38 000 was damaged because of a pipe burst during February 2018. After the claim, Elvis Insurance agreed to pay R34 000 in March 2018. 5. The inventory records reflect a trading stock deficit of R23 400 on 28 February 2018. 6. The loan statement received from West Bank reflects the following:  Balance on 1 March 2017 R76 500  Repayments during the year, including interest 12 500  Balance on 28 February 2018 73 180 Interest on loan is capitalised and has not been recorded yet. 7. The employer’s contribution of R2 700 to the Rosa Medical Aid was omitted from the Salary Journal. The amount will be paid in March 2018. Contributions are recorded in the Salaries and wages account. 8. If the annual sales exceed R1 500 000, the two directors are each rewarded a bonus of 10% of the amount exceeding R1 500 000. This must still be recorded. 9. Pixie Ltd paid a 40% deposit on their audit fees for the year. The outstanding balance will be settled on 7 June 2018. 10. Included in the advertising cost for the year is a 12 month campaign that was launched on 1 December 2017 on a local billboard at a cost of R43 200. Advertisements will appear every second month starting in December 2017. 11. A debtor, C Mawela, with an outstanding balance of R600, has left the country. His account must be written off as irrecoverable. 12. The provision for bad debts must be decreased by R360. 13. Operating profit on sales was 22% for the year. 14. Sundry expenses is the missing figure in the Income Statement. Page 10 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY A3 (Mpumalanga Sept 2018 Q3) 3.1 CONCEPTS 3.1.1 3.1.2 3.1.3 3.1.4 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 Ordinary shares in issue on 28 February 2018 8 RETAINED INCOME Balance on 1 March 2017 28 900 Dividends on ordinary shares Balance on 28 February 2018 10 Page 11 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 3.2.2 PIXIE LTD INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2018 Sales 1 800 000 Cost of sales Gross profit Other operating income Gross operating income Operating expenses Operating profit Net profit before interest expense Net profit before tax Net profit after tax B. BALANCE SHEET ACTIVITY B1 (DBE REVISION DOC. 2014 – Q2) 1. CALCULATION OF FINAL PROFIT, BALANCE SHEET AND NOTES The financial year of KAYZEE Limited ends on 30 June. The accountant of KAYZEE Limited calculated the net profit before tax as R1 234 335. However, it was discovered that not all the adjustments were made before calculating the net profit before tax. REQUIRED: 1.1 Calculate the correct net profit after tax for the year ended 30 June 2018. (19) 1.2 Prepare the following notes to the Balance Sheet (Statement of Financial Position): (a) Ordinary Share Capital (11) (b) Retained Income (13) (c) Trade and other receivables (8) 1.3 Complete the Balance Sheet (Statement of Financial Position) on 30 June 2018. Where notes are not required, (40) Page 12 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT calculations must be shown in brackets for part marks to be given. INFORMATION: 1. The following extract was taken from the list of balances which appeared in the ledger of KAYZEE Limited on 30 June 2018, before any additional adjustments and information were taken into account: Ordinary Share Capital ? Retained Income (1 July 2017) R465 000 Land and Building 4 684 000 Equipment 525 000 Accumulated depreciation on equipment: 215 000 Fixed Asset: ZAR Bank 480 000 Trading stock 198 500 Debtors’ control 54 000 Provision for bad debts 2 475 Bank (Dr) 1 025 000 Cash float 4 000 Consumable stores on hand 1 100 Income Accrued 31 660 SARS: Income Tax (Dr) 364 200 Creditors control 87 150 Loan: JSE Bank @ 15% p.a. (1 June 2018) 420 000 Profit and loss (net profit before tax) 1 234 335 2. The following adjustments and additional information were not taken into account: (a) According to the profit and loss account the insurance amounted to R40 500. This amount included an annual premium of R10 800 which was paid on 1 January 2018. (b) Trading stock, R42 000 was damaged in a fire which broke out in the storeroom. The insurance company accepted the claim and will cover 75% of the claim. The amount will be received during July 2018. This was recorded. Write off the balance. (c) The provision for bad debts must be adjusted to 4% of the outstanding debtors. (d) In the profit and loss account, the amount for Rent income amounted to R136 950. The accountant did not take into account that the tenant paid the rent for July 2018 in advance. The rent had increased by R1 050 per month on 1 February 2018. (e) Interest on the loan for the last month is still outstanding. Interest is capitalized. The business intends to reduce the loan by R60 000 in the next financial year. (f) Profit on sale of an asset sold during the year, R21 750, was recorded as a loss in the profit and loss account. (g) Income tax for the year amounted to R371 700. (h) The bank reconciliation statement on 30 June 2018, showed an outstanding cheque of R15 000, dated 31 August 2018. This cheque was issued to a creditor. (i) Share Capital:  On 1 July 2017 the ordinary share capital amounted to R3 600 000  60% of the authorised share capital of 500 000 shares were issued.  On 31 July 2017 the directors issued an additional 100 000 shares at R16.  On 10 January 2018 the directors decided to buy back 70 000 shares from the estate of a deceased shareholder at R15 per share. This transaction was completed successfully, but no entry has been made as yet. (j) Dividends: On 1 December 2017 an interim dividend of 75 cents per share was declared and paid. A final dividend of 120 cents per share was declared on 30 June 2018. Page 13 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY B1 – CALCULATION OF FINAL PROFIT, BALANCE SHEET AND NOTES 1.1 Correct net profit after tax for the year ended 30 June 2014 Incorrect Net Profit before Tax 1 234 335 Correct Net Profit before tax Income Tax Net Profit after Tax 1.2 (a) Ordinary Share Capital 1.3 Authorised: 500 000 ordinary shares Issued: shares on 30 June 2017 @ shares issued @ shares repurchased @ shares on 30 June 2018 (b) Retained Income Balance at end of the previous year 465 000 Net profit after tax for the year 885 000 Repurchase of _____________ ordinary shares @ Dividends on ordinary shares Paid Recommended Balance at end of current year (c) Trade and other receivables Trade debtors Provision for bad debts Net Trade Debtors SARS (Income Tax) Expenses Prepaid Income Accrued Page 14 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 1.3 BALANCE SHEET OF KAYZEE LIMITED AT 30 JUNE 2018 ASSETS Note R NON-CURRENT ASSETS Fixed Assets 3 Financial Assets CURRENT ASSETS Inventories 4 Trade and other Receivables 5 Cash and Cash Equivalent 6 TOTAL ASSETS EQUITY AND LIABILITIES SHAREHOLDERS EQUITY Ordinary Share Capital 7 Retained Income 8 NON-CURRENT LIABILITIES Loan CURRENT LIABILITIES Trade and other Payable 9 Bank Overdraft Current Portion of Loan TOTAL EQUITY AND LIABILITIES Activity B2 (Mpumalanga Sept 2019 Q3) FIXED ASSETS AND BALANCE SHEET (60 marks; 35 minutes) 2.1 CONCEPTS Choose the correct word(s) from those given in brackets. Write only the word(s) next to the question number (2.1.1–2.1.3) in the ANSWER BOOK. 2.1.1 (Directors/internal auditors) are appointed by the shareholders to manage the company. 2.1.2 (Liquidity/Solvency) is the ability of the business to pay off their immediate debts. 2.1.3(GAAP/IFRS) makes that financial statements across the world is comparable and consistent. (3) (3 x 1 ) 2.2 COOPER LTD You are provided with information for the financial year ended 30 June 2019. REQUIRED: 2.2.1 Refer to Information B. Calculate the missing amounts denoted by (a) to (c) in The Fixed Asset Note for vehicles. (13) 2.2.2 Complete the Balance Sheet (Statement of Financial Position) on 30 June 2019. Show ALL workings. (36) Page 15 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT INFORMATION: A. Extract from the books on 30 June 2019: Balance sheet accounts section R Ordinary share capital 3 746 500 Retained income ? Mortgage loan: Gaga Bank 752 000 Fixed assets at carrying value (balancing figure) ? Trading stock 450 000 Debtors control ? Provision for bad debts 17 200 Bank (favourable) 510 640 Petty cash 2 400 Fixed deposit: Shallow Bank (5,5% p.a.) 650 000 SARS (Income tax) 446 500 Creditors control 661 600 Nominal accounts section Rent income 176 880 Directors’ fees 518 000 Dividends on ordinary shares (interim) 404 800 B. Extract from the Note for Fixed assets VEHICLES Carrying value - Beginning (a) Cost 285 000 Accumulated depreciation (91 200) Movements Additions at cost 180 000 Disposals at carrying value (b) Depreciation (c) Carrying value - End Cost Accumulated depreciation Page 16 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT Additional information in respect of fixed assets:  Fixed assets consist of Land and buildings, Vehicles and Equipment.  On 1 July 2018 Cooper Ltd had the following vehicles: Two delivery vehicles purchased on 1 October 2016 at R142 500 each.  Depreciation on vehicles is calculated at 20% per annum on the diminishing balance method.  One of the vehicles was written off in an accident on 31 March 2019. The insurance company, BST Insure, agreed to pay out R79 800 on 31 July 2019.  Cooper Ltd replaced the delivery vehicle written off with a new vehicle purchased on 1 June 2019 for R180 000. This was correctly recorded. C. Share capital and dividends  80% of the 1 000 000 authorised shares were in issue on 30 June 2019.  The directors declared a final dividend of 75 cents per share on 30 June 2019. D. Trading stock and consumable stores on hand  An invoice issued to a debtor has not been recorded in full. Obsolete goods were sold for R4 000 which is 20% below cost. The selling price was recorded correctly but not the cost price.  Consumable stores on hand amounts to 15 300 on 30 June 2019. E. Provision for bad debts has already been adjusted to 4% of the debtors of 2019. F. Loan from Gaga Bank R300 000 of the loan will be repaid during the next financial year. G. The following adjustments have not been taken into account:  The tenant has paid rent until 31 July 2019. The rent was increased by R1 320 from 1 April 2019.  The two directors earn the same monthly fees. Two month’s fees are still outstanding to both the directors. H. After the actual tax was calculated on the corrected net profit for the year, it was found that the provisional tax paid was R23 500 less than the actual tax. I. The NAV per share on 30 June 2019 amounts to 636 cents per share after all adjustments and information were taken into account. Activity B2 (Mpumalanga Sept 2019 Q3) 2.1 CONCEPTS 2.1.1 2.1.2 2.1.3 3 2.2.1 FIXED ASSETS (a) (b) (c) 13 Page 17 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.2.2 BALANCE SHEET ON 30 JUNE 2019 ASSETS NON-CURRENT ASSETS 5 777 280 Fixed assets 5 127 280 Financial assets: Fixed deposit 650 000 CURRENT ASSETS TOTAL ASSETS EQUITY AND LIABILITIES ORDINARY SHAREHOLDERS' EQUITY Ordinary share capital 3 746 500 NON-CURRENT LIABILITIES CURRENT LIABILITIES Trade and other payables TOTAL EQUITY AND LIABILITIES 36 Page 18 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT B3 (Gauteng Sept 2019 Q3) CONCEPTS AND BALANCE SHEET (55 marks; 35 minutes) 3.1 CONCEPTS Choose an explanation from COLUMN B that matches a concept in COLUMN A. Write only the letter (A – D) next to the question number (3.1.1 – 3.1.4) in the ANSWER BOOK. COLUMN A COLUMN B 3.1.1 Finance cost A Consumable stores not used at the end of the financial year 3.1.2 Dividends B Interest on bank overdraft on the Income Statement 3.1.3 Inventory C A financial indicator which reflects liquidity 3.1.4 Current liability D Profits distributed to shareholders in proportion to the number of shares held E Debts payable over a short period of time 3.2 PHAMBILI LIMITED The information below relates to Phambili Ltd. The financial year ended on 28 February 2019. REQUIRED: 3.2.1 Prepare the following notes for the financial year ended 28 February 2019. (a) Ordinary share capital (11) (b) Retained income (11) 3.2.2 Complete the Balance Sheet (Statement of Financial Position) on 28 February 2019. Where notes are not required, show ALL workings. (29) INFORMATION: A Balances extracted from the accounting records on 28 February 2019 (unless otherwise stated). R Ordinary share capital (1 March 2018) 1 220 000 Retained income (1 March 2018) 355 500 Loan from VDS Bank 1 376 000 Fixed assets at carrying value 1 499 500 Fixed deposit: Sandton Bank ? Trading stock 480 000 Creditors' control 177 500 Debtors' control 400 000 Packing material on hand 16 000 Accrued expenses (expenses payable) 10 000 Income received in advance (deferred income) 11 500 Bank (favourable) 1 010 100 Provision for bad debts (1 March 2018) 6 200 SARS: Income tax (provisional tax payments) 1 180 000 Ordinary share dividends 350 000 Page 19 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT B Share capital:  Phambili Ltd. is authorised to sell 6 000 000 ordinary shares.  500 000 shares were in issue on 1 March 2018.  900 000 new shares were issued on 1 August 2018 at R3,00 per share. This has been properly recorded.  150 000 shares were repurchased on 10 January 2019 from a disgruntled shareholder for 75 cents above the average share price. This transaction was not recorded. This shareholder does not qualify for final dividends. C Dividends: The Directors declared a final dividend of 50 cents per share on 28 February 2019. D Provision for bad debts: The provision for bad debts must be decreased to R5 400. E Loan:  The loan was received on 1 September 2016.  This loan is to be repaid over 6 years in equal monthly instalments with effect from 1 October 2016. All payments have been made.  Interest is not capitalised and has been paid in full. F Taxation: After taking into account all relevant information, taxation for the year was accurately calculated to be R1 148 000 at 28%. B3 (Gauteng Sept 2019 Q3) 3.1 CONCEPTS 3.1.1 3.1.2 3.1.3 3.1.4 4 3.2 PHAMBILI LIMITED 3.2.1 Prepare the following notes for the financial year ended 28 February 2019. (a) Ordinary share capital 11 Page 20 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT (b) Retained income Balance at the beginning of the year 355 500 Ordinary share dividends Balance at the end of the year 11 Page 21 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 3.2.2 Complete the Balance Sheet (Statement of Financial Position) on 28 February 2019. Where notes are not required, show ALL workings. BALANCE SHEET ON 28 FEBRUARY 2019 ASSETS NON-CURRENT ASSETS CURRENT ASSETS 1 400 200 Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES ORDINARY SHAREHOLDERS' EQUITY Ordinary share capital NON-CURRENT LIABILITIES Loan CURRENT LIABILITIES 1 208 000 Trade and other payables TOTAL EQUITY AND LIABILITIES 29 Page 22 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT Activity B4 (Eastern Cape Sept 2019 Q 4) QUESTION 4: FINANCIAL STATEMENTS (60 marks; 35 minutes) 4.1 Choose the correct description in COLUMN B to match the concept in COLUMN A. Write only the letters (A–E) next to the question numbers (4.1.1 to 4.1.5) in the ANSWER BOOK. COLUMN A COLUMN B 4.1.1 SAICA A Guidelines for preparation of financial statements to ensure consistency. 4.1.2 CIPC B Appointed by the board of directors 4.1.3 IFRS C Maintaining the integrity of the profession and institute disciplinary action against those who breach standards. 4.1.4 Internal auditor D Expresses an unbiased opinion on the financial statements of the company. 4.1.5 External auditor E Maintaining records and control of new/existing companies. (5) 4.2 CDJ LTD. The information relates to a public company with an authorised share capital of 1 500 000 ordinary shares, the financial year-end 28 February 2019. REQUIRED: 4.2.1 Complete the Retained Income Note to the Statement of Financial Position (Balance Sheet). (12) 4.2.2 Complete the Statement of Financial Position (Balance Sheet) on 28 February 2019. (35) 4.2.3 At the annual general meeting, the board of directors proposed the following TWO programmes: Program 1 R1 500 000 be allocated for staff training and development initiatives during the next two financial years. Program 2 R1 000 000 to be spent on the upliftment of the computer facilities at three local schools. Vic Pienaar, a young shareholder, was not pleased about this proposal. He feels that greater dividends should be given to shareholders.  Explain why the directors included these proposals in their director’s report. Provide TWO (4) points.  Provide a different benefit of each of the programmes proposed, to the company. (4)  Page 23 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT INFORMATION: A. Balances/Totals on 28 February 2019. Debit Credit Ordinary share capital (1 000 000 shares) R4 200 000 Retained income (1 March 2018) 468 000 Loan: Central Bank 352 400 Fixed assets at cost R4 919 040 Accumulated depreciation 201 520 Trading stock 255 340 Debtors Control 235 000 Provision for bad debts 4 000 Fixed deposit: King Bank ? Bank 381 300 Creditors’ Control 22 000 SARS (income tax) 340 000 Insurance 23 520 Rent Income 34 600 B. Additional information: (i) Share Capital: 200 000 Shares were in use at the beginning of the current financial year. 600 000 Additional shares were issued on 1 April 2018 at R3,90 per share. 200 000 Additional shares were issued on 31 October 2018 at R5 per share. 50 000 On 28 February 2019, shares were bought back from the estate of a diseased shareholder for R237 500. This transaction was not yet recorded. They qualify for final dividends. (ii) Loan agreement with Central Bank: Opening balance of loan on 1 March 2018. R550 000 Repayment during the year, including interest 197 600 Closing balance 420 000  The interest on loan is capitalised.  R150 000 of the loan will be paid in the next financial year. (iii) Dividends:  An interim dividend of 30 cents per share was paid on 31 August 2018.  A final dividend of 22 cents per share was declared on 28 February 2019 and must still be brought into account. (iv) The following adjustments must be taken into consideration for the drafting of the Balance Sheet only:  The rent for February 2019 was not received yet. The space was rented out since 1 December 2018.  An additional insurance policy on granite saws was taken out on 1 October 2018. The annual premium of R13 440 was paid.  Consumable stores on hand R1 580.  A debtor owing R35 000 was declared insolvent. No entry was made.  The provision for bad debt must be adjusted to R6 000.  Audit fees of R9 000 are still outstanding on 28 February 2019. Page 24 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT (v) Net profit and income tax: Income tax for the year was calculated at 30% Net profit before tax is R1 085 600 after all adjustments above were taken into account. Activity B4 (Eastern Cape Sept 2019 Q 4) 4.1 4.1.1 4.1.2 4.1.3 5 4.1.4 4.1.5 4.2.1 RETAINED INCOME Balance at the beginning of the year 12 Balance at the end of the year Page 25 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 4.2.2 STATEMENT OF FINANCIAL POSITION ON 28 FEBRUARY 2019 ASSETS Non-current assets Current assets TOTAL ASSETS EQUITY AND LIABILITIES Shareholder’s equity Ordinary share capital Non-current liabilities Current liabilities 35 TOTAL EQUITY AND LIABILITIES Page 26 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 4.2.3 At the annual general meeting, the board of directors proposed the following TWO programmes: Explain why the directors included these proposals in their directors’ report. Provide TWO points. Provide a different benefit of each of the programmes proposed, to the company. 4 Programme 1 Programme 2 4 Page 27 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY B5 (North West Sept 2019 Q 4) BALANCE SHEET AND GAAP PRINCIPLES (85 marks; 55 minutes) 5.1 GAAP PRINCIPLES Choose a GAAP principle in COLUMN B that matches the description in COLUMN A. Write only the letters (A– F) next to the question numbers (4.1.1 to 4.1.5) in the ANSWER BOOK. COLUMN A COLUMN B 5.1.1 The original cost of the assets of a business need to be A prudence recorded. 5.1.2 All significant information needs to be clearly shown in B matching the financial statements of a business. 5.1.3 Income and expenses must be recorded in the correct C business entity financial period. 5.1.4 Financial Statements are prepared with the assumption D materiality that the business does not expect to close down in the near future. E historical cost 5.1.5 The owner and business are seen as two separate F going concern entities for accounting purposes. 5.2 SAHARA LIMITED The information provided relates to Sahara Ltd for the year ended 30 June 2019. Sahara Ltd has an authorised share capital of 1 000 000 ordinary shares. REQUIRED: 5.2.1 Prepare the following notes to the Balance Sheet: (a) Ordinary share capital (10) (b) Retained income (13) 5.2.2 Complete the Balance Sheet (Statement of financial position) on 30 June 2019. Show calculations. (46) INFORMATION: A. Ordinary share capital:  700 000 ordinary shares were issued on 1 July 2018 to the total value of R2 100 000.  The company decided to buy back 30 000 shares from an unsatisfied shareholder on 1 October 2018 at R9 per share. An electronic transfer to the shareholder was done on the same day. These shares do not qualify for any dividends thereafter.  A further 100 000 new ordinary shares were issued on 1 March 2019 at R7 per share. B. Dividends:  An interim dividend of 20 cent per share was paid on 31 December 2018.  A final dividend of 35 cent per share was declared on 30 June 2019 and will be paid in August 2019. C. Net profit and income tax:  The correct net profit before income tax for the year ended on 30 June 2019 was calculated at R1 250 000. This is after all the adjustments reflected below were brought into account.  Income tax is calculated at 28% of net profit. Page 28 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT D. Balances in the books on 30 June 2019: R Retained income 799 660 Creditors’ Control 720 000 Debtors’ Control 530 000 Creditors for salaries 35 500 Accrued income 24 000 Cash in the bank 66 000 Fixed deposit ? SARS: Income tax (provisional) 400 000 E. Fixed deposit:  A fixed deposit of R175 000 matures on 31 January 2020. F. Loan: Quality Bank: R Balance at beginning of financial year 300 000 Interest capitalised during the year 8 000 Repayments, including interest, during the year 56 000  Capital portion of loan to be paid in the following financial year remains the same as the current year. G. Fixed assets:  Land and buildings cost price on 1 July 2018 is R1 275 000. The following invoice was not recorded: Improvement to land and buildings: R300 000 Repairs to land and buildings: R120 000  The carrying value of vehicles on 30 June 2019 was R720 000.  All equipment were purchased on 1 January 2016 at R600 000. Depreciation is calculated at 15% per annum on the cost-price method. H. Rent income:  Rent income received in advance for July and August 2019 amounted to R17 000. I. Financial indicators on 30 June 2019:  The current ratio is 1,5 : 1 ACTIVITY B5 (North West Sept 2019 Q 4) 5.1 Choose a GAAP principle in COLUMN B that matches the description in COLUMN A. 5.1.1 5.1.2 5.1.3 5.1.4 5.1.5 5.2.1 (a) ORDINARY SHARE CAPITAL Authorised shares: 1 000 000 ordinary shares Issued share capital: Ordinary shares on 1 July 2018 Ordinary shares on 30 June 2019 (b) RETAINED INCOME Page 29 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT Balance on 1 July 2018 Net profit after income tax Ordinary share dividends Balance on 30 June 2019 13 5.2.2 SAHARA LTD BALANCE STATEMENT ON 30 JUNE 2019 ASSETS NON-CURRENT ASSETS Fixed Assets CURRENT ASSETS Inventory Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES SHAREHOLDERS EQUITY NON-CURRENT LIABILITIES Loan: Quality Bank CURRENT LIABILITIES Trade and other payables Shareholders for dividends TOTAL EQUITY AND LIABILITIES 46 C. CASH FLOW STATEMENT & D. RATIO ANALYSIS AND INTERPRETATION ACTIVITY C1 ( Limpopo Sept 2019 Q4) (75 marks, 45 minutes) Page 30 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 1.1 LEWIS LTD. You are provided with extracts from the financial records of Lewis Ltd. REQUIRED 1.1.1 Calculate the total dividends paid that will be reflected on the Cash Flow Statement on 30 (4) June 2019. 1.1.2 Calculate the balance on the SARS (Income Tax) account on 1 July 2018. (5) 1.1.3 Movements in fixed assets: (a) Calculate the amount of cash received for the equipment sold during the year. (2) (b) Calculate the cost of the new assets purchased during the financial year. (5) 1.1.4 Complete the “Cash flow from Financing Activities” section of the Cash Flow Statement (8) on 30 June 2019. 1.1.5 Calculate the closing balance of Retained Income on 30 June 2019. (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%. (a) Calculate the Return on total capital employed (ROTCE). (9) (b) Show how the proposed additional loan will impact on the debt/equity ratio. (4) Provide a calculation. INFORMATION A. Extract from the Income Statement for the year ended 30 June 2019: Interest on loan R140 000 Depreciation R136 000 Net profit before tax R1 144 000 Income tax R376 000 B. Extract from the Balance Sheet on: 30 June 2019 30 June 2018 Fixed assets 6 480 000 5 324 000 Land and Buildings 4 900 000 4 100 000 Equipment (carrying value) 1 580 000 1 224 000 Shareholder’s equity 5 782 000 5 470 000 Share capital ? 4 500 000 Retained income ? 970 000 Long term loan 950 000 1 038 000 C. Extract from the notes to the financial statements on 30 June 2019: Trade and other receivables 30 June 2019 30 June 2018 SARS (Income tax) 23 900 0 Trade and other payables 30 June 2019 30 June 2018 SARS (Income tax) 0 ? Shareholders for dividends R108 000 R143 000 D. Fixed assets:  New equipment was bought during the year and an additional warehouse was built.  Old equipment was sold at carrying value on 1 February 2019: o Cost price R160 000 o Accumulated depreciation on date of sale R54 500 o Asset sold for cash R ?  No Land and Buildings were sold during the year. E. Shares:  On 1 July 2018 the company had an issued share capital of 937 500 shares.  On 1 July 2018 the company repurchased 50 000 shares at 60c above the average Page 31 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT share price. The average price per share at that stage was R4,80.  During the financial year new shares were issued. F. Dividends and Tax:  Dividends paid and declared during the year, R333 000.  Tax paid during the year, R532 000. 1.2 TAYLOR LTD. The following information pertains to the financial records of Taylor Ltd. for the year ended 28 February 2019. REQUIRED1 1.2.1 Calculate the following financial indicators on 28 February 2019: (a) Net Asset Value per share (NAV). (3) (b) % Return on average Shareholder’s Equity (ROSHE). (5) 1.2.2 Comment on the liquidity of the company. Quote THREE financial indicators (with figures and (8) trends) to support your answer. 1.2.3 Tricia Harper is a shareholder and she is unsure if she should sell her shares or not. She asks (3) for your advice. Provide figures in your answer. 1.2.4 Refer to Information C. Calculate the total dividends Charlie Williams received during the (6) year. 1.2.5 The dividend pay-out policy has changed from the previous year. Provide calculations to show (6) the change and provide ONE possible reason for the change. INFORMATION A. Extract from the Income Statement for the year ended 28 February 2019: Interest on loan (14%) 87 000 Net profit before tax 635 000 Net profit after tax 457 200 B. Other financial information and indicators for the past two years: 2019 2018 Number of issued shares on 28 Feb 2018 700 000 Number of issued shares on 28 Feb 2019 762 000 Shareholder’s equity R1 690 000 R1 510 000 Current ratio 4,1 : 1 2,1 : 1 Acid test ratio 1,6 : 1 1,4 : 1 Stock turnover rate 10 times 6 times Debtors’ collection period 30 days 30 days Creditor’s payment period 30 days 60 days Debt/Equity ratio 0,4 : 1 0,3 : 1 % return on shareholder’s equity ? 22,3% Net asset value per share (NAV) ? 216c Dividends per share (DPS) 45c 15c Earnings per share (EPS) 60c 55c Market price per share 252c 236c C. Details on Charlie Williams’ dividends:  On 1 March 2018 Charlie Williams owned 10 400 shares in Taylor Ltd.  He bought 10% of the new shares issued during the year.  The interim dividend paid during the year was 20c per share (the new shares did not qualify for the interim dividend). C1 Limpopo Sept 2019 Q4) CASH FLOW STATEMENT, RATIO ANALYSIS 75 1.1 LEWIS LTD. Page 32 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 1.1.1 Calculate the total dividends paid that will be reflected on the Cash Flow Statement on 30 June 2019. 1.1.2 Calculate the balance on the SARS (Income Tax) account on 1 July 2018. I 1.1.3 Movements in fixed assets: (a) Calculate the amount of cash received for the equipment sold during the year. (b) Calculate the cost of the new assets purchased during the financial year. 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) 1.1.5 Calculate the closing balance of Retained Income as on 30 June 2019. 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%. Page 33 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT (a) Calculate the Return on total capital employed (ROTCE). (b) Show how the proposed additional loan will impact on the debt/equity ratio. Provide a calculation. 1.2 TAYLOR LTD. 1.2.1 Calculate the following financial indicators on 28 February 2019: (a) Net Asset Value per share (b) % Return on average Shareholder’s Equity (ROSHE) 1.2.2 Comment on the liquidity of the company. Quote THREE financial indicators (with figures and trends) to support your answer. 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. 1.2.4 Refer to Information C. Calculate the total dividends Charlie Williams received during the year. Page 34 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 1 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. ACTIVITY C2 (Free State Sept 2019, Q4 ) CASH FLOW STATEMENT AND INTERPRETATION (70 marks; 50 minutes) 2.1 Indicate whether the following statements are TRUE or FALSE. Write only 'true' or 'false' next to the question number (2.1.1–2.1.4) in the ANSWER BOOK. 2.1.1 Cash flow statement reflects the profit/loss of the company. 2.1.2 Net current assets are also referred to as net working capital. 2.1.3 Accumulated depreciation is regarded as a negative asset. 2.1.4 Liquidity refers to the ability of the company to settle its immediate debts. 2.2 PHILA LTD You are provided with information relating to Phila Ltd for the financial year ended 31 March 2019. The company is registered with an authorised share capital of 2 000 000 ordinary shares. REQUIRED: 2.2.1 Calculate the following amounts for the Cash Flow Statement:  Income tax paid (14)  Dividends paid  Cost of new delivery vehicles purchased 2.2.2 Prepare the sections for the Cash Flow Statement on 31 March 2019.  Cash Effects of Financing Activities (9)  Net change in Cash and Cash equivalents (4) 2.2.3 Calculate the following financial indicators on 31 March 2019.  Debt-equity ratio (3)  Net asset value per share (3)  % Return on average shareholders' equity (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. (3) 2.2.5 Comment on the management of expenses. Quote TWO relevant financial indicators to support your comment. (4) 2.2.6 Comment on the issue price of the new shares issued on 30 June 2018. Was this fair? Quote figures. (6) 2.2.7 Comment on the dividend pay-out policy of the company by comparing 2018 to 2019 and quote relevant figures. (6) 2.2.8 Comment on the degree of risk and gearing of the business. Quote TWO financial indicators with figures. (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? (4) INFORMATION: A Information from the Income Statement for the financial year ended 31 March: Page 35 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2019 2018 Sales 8 300 000 6 650 000 Cost of sales 5 187 500 3 800 000 Gross Profit 3 112 500 2 850 000 Net profit before taxation 1 240 000 931 000 Net profit after taxation 892 800 651 700 Interest on loan 211 000 Depreciation 425 000 B Extract from the Balance Sheet on 31 March: 2019 2018 Fixed assets 10 152 700 7 915 400 Fixed deposit: SSB BANK 250 000 400 000 Shareholders' equity 9 209 000 6 458 200 Current assets (including stock) 794 500 681 300 Trading stock 430 000 198 000 Current liabilities 688 200 538 500 SARS (Income tax) 8 500 (Dr) 12 000 (Cr) Cash & cash equivalents 0 45 300 Bank overdraft 34 200 2 000 Loan from Zipho Bank 1 300 000 2 000 000 Shareholders for dividends 378 000 300 000 C Share Capital and dividends 1 000 000 Ordinary shares on 1 April 2018 6 360 000 400 000 Shares issued on 30 June 2018 @ R8,60 ? (120 000) Shares repurchased on 30 March 2019 ? 1 280 000 Ordinary shares on 31 March 2019 8 960 000  An amount of R168 000 above the average share price was paid to repurchase the shares on 30 March 2019. An interim dividend of 15 cents per share was paid on 30 September 2018.  A final dividend was declared on 31 March 2019. D Fixed Assets  Old equipment valued at R389 500 was sold at carrying value.  Extensions to land and buildings costing R2 250 000 were completed during the financial year.  Additional delivery vehicles were also purchased. Page 36 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT E Financial indicators calculated on 31 March: 2019 2018 Gross profit on cost of sales 60% 75% Gross profit on sales 38% 43% Operating expenses on sales 22% 23% Operating profit on sales 16% 16% Market price per share on the JSE 728 cents 630 cents Net asset value per share ? 636 cents Earnings per share 69 cents 62 cents Dividends per share 41 cents 60 cents % return on shareholders' equity ? 11% % return on total capital employed 15,3% 13% % interest rate on loans 13% 13% Debt/Equity ratio ? 0,3 : 1 Current ratio 1,2 : 1 1,3 : 1 Acid-test ratio 0,5 : 1 0,9 : 1 Period for which stock is on hand 22 days 18 days Average debtors' collection period 44 days 47 days C2 (Free State Sept 2019, Q4 ) 2.1 2.1.1 2.1.2 4 2.1.3 2.1.4 2.2.1 Calculate the following for the Cash Flow Statement: Income tax paid Dividends paid Cost of new delivery vehicles purchased \ 14 Page 37 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.2.2 Cash effects of financing activities 9 Net change in Cash and Cash equivalents 4 2.2.3 Calculate the debt/equity ratio. 3 Calculate the net asset value per share. 3 Calculate the % return on average shareholders' equity. 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. 3 2.2.5 Comment on the management of expenses. Quote TWO relevant financial indicators to support your comment. 4 Page 38 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.2.6 Comment on the issue price of the new shares issued on 30 June 2018. Was this fair? Quote figures. 6 2.2.7 Comment on the pay-out policy of the company by comparing 2018 to 2019 and quote relevant figures. 2018 6 2019 2.2.8 Comment on the degree of risk and gearing of the business. Quote TWO financial indicators with figures. Comment: 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? 4 Page 39 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT C3 (Mpumalanga Sept 2018 Q4) CASH FLOW STATEMENT AND INTERPRETATION (75 marks; 45 minutes) 3.1 TINAMERA Ltd You are provided with information relating to Tinamera Ltd for the financial year ended 30 June 2018. REQUIRED: 3.1.1 Refer to Information C. Complete the Fixed/Tangible Asset Note for the year ended 30 June 2018. (15) 3.1.2 Complete the Cash Flow Statement Ltd for the year ended 30 June 2018. Some of the details and figures have been entered in the ANSWER BOOK. (25) 3.1.3 Calculate the following financial indicators on 30 June 2018:  Percentage operating profit on sales (3)  Debt-equity ratio (3)  Net asset value per share (3) 3.1.4 Refer to Information E. The following statement was taken from the minutes of the annual general meeting: ‘We, the shareholders, would like to express our concern over the directors’ decision to repurchase 80 000 shares during this financial year.’ Provide a reason supported by information from the Cash Flow Statement as to why the (2) shareholders feel this way.  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. (2) Briefly explain why you as a shareholder may find this to be a problem. INFORMATION: A. Information extracted from the Income Statement on 30 June 2018: Sales 5 611 000 Operating profit 1 410 550 Interest on loan 86 760 Net profit before tax 1 323 790 B. Figures extracted from the Balance sheet and notes on 30 June: 2018 2017 Shareholder’s equity R4 607 300 R3 808 100 Fixed assets ? 3 948 600 Mortgage loan 1 142 000 920 000 Inventories 759 600 589 500 Bank overdraft ? 91 000 Shareholders for dividends 30 000 60 000 Page 40 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT C. Fixed/Tangible assets Buildings Vehicles Equipment Carrying value - 1 July 2017 3 452 000 413 400 83 200 Cost 3 452 000 872 000 340 000 Accumulated depreciation 0 (458 600) (256 800) Movement Additions at cost ? 0 ? Disposals at carrying value 0 ? 0 Depreciation 0 ? ? Carrying value - 30 June 2018 4 522 800 ? ? Cost 4 522 800 Accumulated depreciation 0 Additional information in respect of fixed assets:  An extension to the office block was undertaken during the year.  The business had three vehicles at the beginning of the year. The following details appeared in the Fixed Asset Register on 1 July 2017: Vehicle 1 Vehicle 2 Vehicle 3 Cost 240 000 352 000 280 000 Accumulated depreciation (225 000) (70 400) (163 200) Carrying value 15 000 281 600 116 800 NOTE: Vehicle 1 is old and is reaching the end of its useful life. Vehicle 3 was sold at its carrying value of R102 800 during the year.  Equipment of R116 000 was purchased on 1 December 2017. No equipment was sold.  Depreciation policy: Vehicles: 20% on cost Equipment: 15% on carrying value D. Loan The company took out an additional loan on 30 June 2018. Repayments on the old loan, including interest totalled R164 760. Interest on loan is capitalised. E. Shares  Jim Jeffs, a shareholder, is very concerned about the liquidity and profitability situation of the company and has decided to sell his shares. The directors repurchased all 80 000 ordinary shares from him at a price of R4,20 per share. The average issue price on this date was R3,05.  No new shares were issued.  Number of shares in issue on 30 June 2018 was 750 000. F. Dividends Total dividends paid and declared for the financial year ended 30 June 2018 amounts to R170 000. Page 41 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 3.2 INTERPRETATION OFFINANCIAL INDICATORS Your friend, Phakamile, is a director in two companies. You are considering buying shares in one of the companies. He presents you with the financial indicators of the two companies. The companies are of similar size and they have issued the same number of shares. REQUIRED: Study the financial indicators given and answer the questions that follow. 3.2.1 Which company uses more loans? Explain whether this is a good idea or not. In each case, quote a (6) financial indicator to support your answer. 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. (9) 3.2.3 Although the market price of the shares of Lauren Ltd is higher than those of Thabiso Ltd, 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. (4) 3.2.4 In which company is Phakamile a major shareholder? Support your answer with a calculation. (3) FINANCIAL INDICATORS Thabiso Ltd Lauren Ltd Number of shares in issue 500 000 500 000 Phakamile’s shareholding 50 000 300 000 Market price per share on the JSE 630 cents 680 cents Net asset value per share 520 cents 790 cents Earnings per share 165 cents 813 cents Dividends per share 182 cents 552 cents % return on shareholders' equity 11,8% 28,5% % return on total capital employed (before tax) 12,4% 30,3% % interest rate on loans 14% 14% Debt/Equity ratio 1,8 : 1 0,3 : 1 Current ratio 1,7 : 1 5,8 : 1 Acid-test ratio 0,8 : 1 3,7 : 1 Period for which enough stock is on hand 80 days 140 days Debtors' average collection period 26 days 55 days Page 42 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT C3 (Mpumalanga Sept 2018 Q4) 3.1 TINAMERA LTD 3.1.1 FIXED ASSET NOTE TO THE BALANCE SHEET ON 30 JUNE 2018 Land and Vehicles Equipment Buildings Carrying value – 1 July 2017 3 452 000 413 400 83 200 Cost 3 452 000 872 000 340 000 Accumulated depreciation 0 (458 600) (256 800) Movements Additions at cost 0 Disposal at carrying value 0 0 Depreciation 0 Carrying value – 30 June 2018 4 522 800 Cost 4 522 800 Accumulated depreciation 0 15 3.1.2 TINAMERA LTD CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2018 CASH FLOW FROM OPERATING ACTIVITIES Cash generated from operations 1 295 760 Interest paid (86 760) Dividends paid Income tax paid (625 000) CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets CASH FLOW FROM FINANCING ACTIVITIES Proceeds of new loans Repayment of loan Net change in cash and cash equivalents Cash and cash equivalents beginning of year (91 000) Cash and cash equivalents at the end of year 25 3.1.3 Calculate the percentage operating profit on sales Page 43 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 3 Calculate the debt-equity ratio 3 Calculate the net asset value per share 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.  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. 4 3.2 INTERPRETATION OF FINANCIAL INDICATORS 3.2.1 Which company uses more loans? Quote a financial indicator to support your answer. Explain whether this is a good idea or not. Quote a financial indicator to support your answer. 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. 9 Page 44 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 3.2.3 Although the market price of the shares of Lauren Ltd is higher than those of Thabiso Ltd, 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. 4 3.2.4 In which company is Phakamile a major shareholder? Support your answer with a calculation. 3 ACTIVITY C4 (Gauteng Sept 2019 Q4) FIXED ASSETS, CASH FLOW STATEMENT AND INTERPRETATION (70 marks; 45 minutes) The given information relates to Hadley Ltd. The company has an authorised share capital of 900 000 ordinary shares. The financial year ended on 28 February 2019. REQUIRED: 4.1 Refer to Information A, B and C. Calculate the missing figures indicated by (a) to (e) in the Fixed Asset Note below. (17) 4.2 Prepare the Cash Flow Statement for the year ended 28 February 2019. (Where applicable show calculations / figures in brackets to earn part marks). (30) 4.3 Calculate the Debt-Equity ratio for 2019. (Round-off to TWO decimal points.) (3) 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. (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. (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 these decisions on the company. Quote figures. (6) INFORMATION: A Extract from the Income Statement for the year ended 28 February 2019 R Depreciation ? Interest expense 208 800 Net profit before tax ? Income tax 713 250 Net profit after tax ? B Extract from the Balance Sheet on 28 February Page 45 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2019 2018 Land and Buildings 5 800 000 6 800 000 Vehicles 2 700 000 ? Equipment ? 850 000 Accumulated depreciation on vehicles ? 960 000 Accumulated depreciation on equipment ? 180 000 Financial Assets (Fixed Deposit) 2 000 000 2 000 000 Trade and other receivables 405 750 168 300 Trade debtors 378 675 144 600 Accrued income 27 075 0 SARS (Income tax) 0 23 700 Inventories 360 750 436 185 Cash and cash equivalents 2 841 250 1 429 465 Shareholders’ equity 11 000 250 10 200 000 Ordinary share capital 10 260 000 9 000 000 Retained income 740 250 1 200 000 Mortgage loan SS Bank 2 100 000 1 380 000 Trade and other payables ? 763 950 Trade creditors 55 200 72 450 Income received in advance 19 350 15 000 SARS (Income tax) 31 950 0 Shareholders for dividends ? 676 500 C Fixed Asset Note Land and Vehicles Equipment Building Carrying value on 28 Feb 2018 6 800 000 840 000 (c) Cost 6 800 000 (b) 850 000 Accumulated depreciation 0 (960 000) (180 000) Movements Additions at cost 900 000 400 000 Disposals (a) 0 (d) Depreciation (171 000) (e) Carrying value on 28 Feb 2019 5 800 000 Cost 5 800 000 2 700 000 Accumulated depreciation Land and Building  Part of the Land and Building was sold at carrying value during the financial year. Vehicles  A new delivery van was bought on 1 November 2018.  No vehicles were sold during the financial year. Equipment  A printer bought for R150 000 on 1 March 2016, was sold at carrying value on 31 August 2018.  A new printer was purchased on 31 August 2018.  Depreciation on equipment is written-off at 10% p.a. on the cost price. D The following is an extract from Note 1 to the Cash Flow Statement: Reconciliation between Net Profit before Tax and Cash Generated from Operations Page 46 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT R Operating profit before changes in working capital 2 854 800 Cash effects of changes in working capital (198 615) E Share capital and Dividends  Authorised shares: 900 000  On 1 March 2018, there were 600 000 shares in issue.  On 31 August 2018 an interim dividend of 243 cents per share was paid.  On 1 November 2018, 40% of the unissued shares were issued for R1 800 000.  On 28 February 2019, 5% of the issued shares were repurchased at R16 each.  A final dividend of 90 cents per share was recommended. All shares, including the shares repurchased, qualified for final dividends. F Income Tax  Tax is 30% of the net profit. G Financial indicators on 28 February: 2019 2018 Earnings per share 252 cents 110 cents % return on average shareholders’ equity (ROSHE) 15,7% 12,3% % return on average capital employed (ROTCE) 20,9% 21,3% Net asset value per share 1 608 cents 1 700 cents Debt-equity ratio ? 0,13:1 The market price of shares on the JSE 1 680 cents 1 560 cents Interest on alternative investments 7,5% 6,5% Interest on loans 12,0% 10,5% ACTIVITY C4 (Gauteng Sept 2019 Q4) 4.1 Calculate the missing figures indicated by (a) – (e) in the Fixed Asset Note. 17 Page 47 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT CALCULATIONS AMOUNT (a) (b) (c) (d) (e) Page 48 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 4.2 CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019 R CASH EFFECTS OF OPERATING ACTIVITIES Cash generated from operations Interest paid (208 800) Dividends paid Income Tax paid CASH EFFECTS FROM INVESTING ACTIVITIES CASH EFFECTS FROM FINANCING ACTIVITIES 30 Net change in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 4.3 Calculate the Debt-Equity ratio for 2019. (Round-off to TWO decimal points.) 3 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. 8 Page 49 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 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. 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 these decisions on the company. Quote figures. DECISION EFFECT ON COMPANY 6 C5 (Eastern Cape September 2019 Q5) CASH FLOW AND INTERPRETATION (80 marks; 50 minutes) The following information relates to Frankfurt Ltd that distributes perfumes to retailers. The financial year ended on 31 August 2019. REQUIRED: 5.1 Calculate the following concerning the cash flow statement: 5.1.1 The cash generated from operations. (15) 5.1.2 The cash flow from investing activities. (10) 5.1.3 The cash flow from financing activities. (7) 5.1.4 The net change in cash and cash equivalents. (5) Page 50 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 5.2 Calculate the following financial indicators for 2019:  Acid test ratio (4)  Debt-equity ratio (4)  Net asset value per share (4)  Percentage return on total capital employed. (8) 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. (6) 5.4 One of the shareholders want to sell his shares at 550 cents per share. Explain why the business should not repurchase these shares. Quote TWO financial indicators (with figures) to support your opinion. (4) 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. (8) 5.6 Lee Jenkins owns 20 000 shares in the company. She is not satisfied with the low dividends she obtained this year.  Calculate the amount of money she received this year in the form of dividends. (2)  Explain to her why you think the directors changed the dividend pay-out policy this year. Quote figures. (3) INFORMATION: A. Extract from the Income Statement on 31 August 2019. Depreciation R950 000 Interest expense 144 150 Net profit before tax 1 230 000 Income tax ? Net profit after tax 861 000 B. Extract from the Balance Sheet on 31 August: Note 2019 2018 Fixed assests at carrying value R3 616 400 R2 300 000 Financial assets 300 000 712 500 Current assets 1 231 050 1 116 650 Inventories 903 900 1 044 700 Trade and other receivables See (iv) 257 150 70 950 Cash and cash equivalents 70 000 1 000 Ordinary share capital 1 932 000 2 000 000 Retained income 1 413 800 1 156 000 Loan 1 622 000 300 000 Bank overdraft 62 000 Trade and other payables See (v) 1 138 000 ? C. Additional information: (i) Ordinary share capital: 1 000 000 Shares in issue at beginning of year R2 000 000 200 000 Additional shares issued on 30/11/2018 520 000 280 000 Shares repurchased on 31 May 2019 (588 000) 920 000 Issued shares on 31 August 2019 1 932 000 (ii) Extract from Retained income: Repurchase of shares (R266 000) (iii) Fixed assets  Fixed assets were bought during the year for R?  Fixed assets were sold during the year at book value, R225 000. Page 51 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT (iv) Trade and other receivables: 2019 2018 Net Trade debtors R208 150 R70 000 Prepaid expenses 0 950 SARS (Income tax) 49 000 (v) Trade and other payables: 2019 2018 Trade creditors R944 800 R860 700 Income received in advance 0 28 300 SARS (Income tax) 163 700 Shareholders for dividends 193 200 120 000 D. Financial indicators: 2019 2018 % Return on shareholder’s equity ? 16,3% Earnings per share 80 cents 56 cents Dividends per share 33 cents 50 cents % Return on total capital employed ? 21,2% Interest rate on loan 15% 14% Net asset value per share (NAV) ? 315,6 cents Debt–equity ratio ? 0,1: 1 Market price per share 380 cent 360 cent Current ratio 1,6: 1 1,5: 1 Acid-test ratio ? 0,4: 1 80 Page 52 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY C5 (Eastern Cape September 2019 Q5) 5.1.1 CASH GENERATED FROM OPERATIONS Net profit before tax Adjustments in respect of: Depreciation 950 000 Changes in working capital 15 5.1.2 CASH FLOWS FROM INVESTING ACTIVITIES 10 5.1.3 CASH FLOWS FROM FINANCING ACTIVITIES 7 Page 53 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 5.1.4 NET CHANGE IN CASH AND CASH EQUIVALENTS 5 USE ADDITIONAL PAPER TO ANSWER THE REMAINING QUESTIONS ACTIVITY C6 (NSC NOV 2017 – Q4) CASH FLOW STATEMENT AND INTERPRETATION 6.1 Choose a term to complete each of the following statements. Write only the term next to the question number (6.1.1–6.1.4) in the ANSWER BOOK. shareholder(s); external auditor(s); director(s); internal auditor(s) 6.1.1 … are appointed by the shareholders to manage the company. 6.1.2 The ... is employed by the company to set up functional internal control processes. 6.1.3 A … is a person who invests in a company by buying shares. 6.1.4 … are appointed by shareholders to give an unbiased opinion on the financial statements. (4) 6.2 SO-FINE LTD The given information relates to So-Fine Ltd for the financial year ended 31 August 2017. REQUIRED: 6.2.1 Prepare the following notes to the Balance Sheet on 31 August 2017:  Ordinary share capital (7)  Retained income (9) 6.2.2 Complete the Cash Flow Statement by inserting only the details and figures indicated by a question mark (?). (19) 6.2.3 Calculate the following financial indicators on 31 August 2017:  Percentage operating profit on sales (3)  Debt-equity ratio (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. (4) INFORMATION: A. Information from the Income Statement for the financial year ended 31 August 2017: Sales R8 652 000 Operating expenses 1 760 000 Depreciation 320 000 Interest expense 86 100 Operating profit 697 000 Income tax 187 770 Net profit after income tax 438 130 Page 54 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT B. Information from the Balance Sheet on 31 August: 2017 2016 (R) (R) Fixed assets (carrying value) 6 177 000 4 975 000 Fixed deposits 220 000 300 000 Loan: Dolphin Bank 985 000 450 000 Current assets 619 600 663 300 Current liabilities 490 000 614 300 Shareholders' equity ? ? Ordinary share capital 5 292 000 ? Retained income ? 147 370 Cash and cash equivalents 23 400 2 500 Bank overdraft - 65 100 Shareholders for dividends 168 000 120 000 SARS: Income tax 11 800 (Cr) 2 400 (Dr) C. Share capital and dividends  The authorised share capital comprises 1 200 000 ordinary shares.  900 000 ordinary shares were in issue on 1 September 2016.  The company issued 150 000 ordinary shares at R6,30 per share on 1 May 2017.  70 000 ordinary shares were repurchased from shareholders on 30 August 2017. A cheque for R437 500 was issued for these shares. These shareholders qualify for final dividends.  An interim dividend of 12 cents per share was paid on 1 February 2017.  A final dividend was declared on 30 August 2017. D. Fixed assets: Transactions during the current financial year.  Old equipment was sold for cash at the carrying value of R324 000.  Additional equipment and delivery vehicles were purchased. 6.3 CASTRO LTD AND RONKI LTD You are provided with information relating to two companies. BACKGROUND INFORMATION:  Henry Harries owns 300 000 shares in each company.  Castro Ltd issued 200 000 new shares only to existing shareholders at the average issue price (R9,10). These funds were used to establish a new branch. No new loans were raised.  Ronki Ltd paid R4 800 000 to repurchase 320 000 shares. REQUIRED: NOTE: Where comments or explanations are required, quote financial indicators and figures to support your answer. CASTRO LTD 6.3.1 Comment on the price of R9,10 charged by Castro Ltd for the new shares issued. (3) 6.3.2 Explain how the issue of new shares has affected the financial gearing and risk of Castro Ltd. Quote TWO financial indicators. (6) 6.3.3 Henry had the option to buy some of the new shares issued by Castro Ltd. He had saved sufficient funds (interest rate 5% p.a.) for this purpose.  If Henry wanted to retain his 60% shareholding in the company, how many shares would he have had to buy and how much would he have had to pay? (5)  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. (6) Page 55 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT RONKI LTD 6.3.4 Comment on the liquidity of Ronki Ltd. Quote TWO financial indicators. (6) 6.3.5 Comment on the price paid by Ronki Ltd for the repurchase (buy-back) of shares. (3) 6.3.6 Explain THREE ways in which Henry has benefited from the repurchase of the shares by Ronki Ltd. (6) ADDITIONAL INFORMATION: Financial indicators and additional information from annual reports: CASTRO LTD RONKI LTD 2017 2016 2017 2016 Debt-equity ratio 0,5 : 1 0,8 : 1 Current ratio 1,9 : 1 3,5 : 1 Acid-test ratio 1,1 : 1 1,7 : 1 Stock-holding period 54 days 54 days Number of shares in issue 700 000 500 000 580 000 900 000 Average share issue price R9,10 R10,20 Price paid for share repurchase R15,00 Price of share on JSE R12,00 R15,00 Net asset value per share R10,73 R11,38 R13,30 R13,22 % return on shareholders' equity 23% 17% 16% 13% % return on total capital employed 20% 15% Earnings per share 140 cents 196 cents 266 cents 171 cents Total dividends R357 000 R325 000 R928 000 R928 000 Dividends per share 51 cents 65 cents 160 cents 103 cents ACTIVITY C6 (NSC NOV 2017 – Q4) 6.1 6.1.1 6.1.2 6.1.3 6.1.4 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 Ordinary shares on 31 August 2017 5 292 000 7 Page 56 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT RETAINED INCOME Balance on 1 September 2016 147 370 Net profit after income tax 438 130 Ordinary share dividends ` Balance on 31 August 2017 9 6.2.2 SO-FINE LTD CASH FLOW STATEMENT FOR THE YEAR ENDED 31 AUGUST 2017 CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations Interest paid Dividends paid Income tax paid ? CASH FLOWS FROM INVESTING ACTIVITIES Purchases of fixed assets ? ? ? Change in investments CASH FLOWS FROM FINANCING ACTIVITIES ? ? ? ? Change in non-current liabilities Net change in cash and cash equivalents ? Cash and cash equivalents – opening balance ? Cash and cash equivalents – closing balance ? 19 6.2.3 Calculate the percentage operating profit on sales. 3 Calculate the debt-equity ratio. 4 Page 57 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 6.2.4 Calculate the dividends per share (DPS) of a shareholder who owned the same number of shares for the entire financial period. 4 6.3 CASTRO LTD 6.3.1 Comment on the price of R9,10 charged by Castro Ltd for the new shares issued. 3 6.3.2 Explain how the issue of new shares has affected the financial gearing and risk of Castro Ltd. Quote TWO financial indicators. 6 6.3.3 If Henry wanted to retain his 60% shareholding in the company, how many shares would he have had to buy? 3 How much would he have had to pay? 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. Reason 1: Reason 2: 6 Page 58 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT RONKI LTD 6.3.4 Comment on the liquidity of Ronki Ltd. Quote TWO financial indicators. 6 6.3.5 Comment on the price paid by Ronki Ltd for the repurchase (buy-back) of shares. 3 6.3.6 Explain THREE ways in which Henry has benefited from the repurchase of the shares by Ronki Ltd. Point 1: Point 2: Point 3: 6 E. AUDIT REPORTS ACTIVITY E1 (Gauteng Sept 2019 Q 3) AUDITING You are provided with an extract from the report of the independent auditors. Audit Opinion – To the shareholders: We have examined the financial statements as set out on Pages 23 to 89. In our opinion, the financial statements fairly present, in all material respects, the financial position of the company as at 28 February 2019 and the results of their operation and cash flows for the year ended are in accordance with International Financial Reporting Standards (IFRS), and in the manner as required by the Companies Act in South Africa. Mxo and Frank Chartered Accountants (SA) Registered Accountants and Auditors Midrand, 31 March 2019 Page 59 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT REQUIRED: 1.1 Explain why the shareholders would be satisfied with this audit report. (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. (2) 1.3 Explain why the auditors found it necessary to stipulate the page numbers in the report. (2) 1.4 Explain TWO major consequences for Mxo and Frank should they be negligent in performing their duties. (4) ACTIVITY E1 AUDITING 1.1 Explain why the shareholders would be satisfied with this audit report. 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. 2 1.3 Explain why the auditors found it necessary to stipulate the page numbers in the report. 2 1.4 Explain TWO major consequences for Mxo and Frank should they be negligent in performing their duties. 4 Page 60 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY E2 (North West Sept 2019 Q 4) You are provided with the extracts of the independent audit reports of Giovanni Ltd. REQUIRED: 2.1 Provide ONE reason why public companies must be externally audited. (2) 2.2 What type of report did Giovanni Ltd receive from the independent auditors? Explain your answer. (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. (6) INFORMATION: A. Extract from the Independent Auditors’ Report: In our opinion, these financial statements present fairly, in all material respects, the financial position of Giovanni Ltd as at 31 March 2019, in accordance with International Financial Reporting Standards (IFRS) and the requirements of the Companies Act (Act 71 of 2008) of South Africa. B. The following extract appeared in the Directors’ report of Giovanni Ltd: In terms of the outreach/ programme, Giovanni Ltd has established a sports academy for the local community. The company is providing sporting facilities to schools and is maintaining the sports ground. ACTVITY E2 (North West Sept 2019 Q 4) 2.1 Provide ONE reason why public companies must be externally audited. 2 2.2 What type of report did Giovanni Ltd receive from the independent auditors? Explain your answer. Type: 3 Explanation: 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. 6 Page 61 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY E3 (Limpopo Sept 2019 Q 3) AUDIT REPORT The following media release from the Auditor General appeared in the national newspapers. PWC reports on overall deterioration in the audit results of Richard Distributors Ltd. The audit report for Richard Distributors Ltd, a public owned company that is a leader in the transport and logistics industry, continues to cause concern – seven of the eleven provincial head offices received reports showing problems. Answer the following questions: 3.1 What is the purpose of an independent auditor report and to whom is it addressed? (3) 3.2 Explain the difference between a qualified and an unqualified audit report. (4) 3.3 Predict THREE implications for the company or directors after PWC release their report. (3) 3.1 AUDIT REPORT 3.1 What is the purpose of an independent auditor report and to whom is it addressed? Purpose: Addressed to: 3.2 Explain the difference between a qualified and an unqualified audit report. Qualified: 3 Unqualified: 3.3 Predict THREE implications for the company or directors after PWC release their report. 4 Page 62 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY E4 (Mpumalanga Sept 2019 Q 3) 4. AUDIT REPORT You are provided with an extract from the audit report of the independent auditors of Cooper Ltd. Read the report and answer the questions that follow. To Shareholders Point 1 We have audited the annual financial statements of Cooper Limited for the year ended 30 June 2019, set out on pages 25 to 51….. Basis for Opinion Point 2 An amount that was shown as additions to Land and buildings was for revaluations of the Buildings. No audit evidence was provided. Opinion Point 3 In our opinion, the financial statements fairly present the financial position of the company at 30 June 2019, except for the increase in the value of the fixed assets in the Balance Sheet. REQUIRED: 4.1 Explain why the auditors did specifically address the report to shareholders? (2) 4.2 Refer to point 1. Explain why the independent auditors referred to pages 25-51 in the report. (2) 4.3 Refer to point 2. 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. (2) 4.4 Refer to point 3.  The company received a/an (unqualified/qualified/disclaimer) audit report. (1)  Give a reason for your answer. (1) ACTIVITY E4 (Mpumalanga Sept 2019 Q 3) 4.1 2 4.2 2 4.3 2 4.4 2 Page 63 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT F. INVENTORY SYSTEMS ACTIVITY F1 WEIGHTED AVERAGE & FIFO (35 marks; 20 minutes) Omega Electronics is a business that sells televisions. The business is owned by Ching Lee. They make use of the WEIGHTED AVERAGE method for stock valuation and use the periodic inventory system. The financial year ended on 28 February 2019. The mark-up is 25% on cost price. REQUIRED: 1.1 Calculate the following on 28 February 2019: 1.1.1 Value of the closing stock. (10) 1.1.2 Gross profit for the year ended. (5) 1.2 The owner and the accountant disagree on the method of stock valuation. The accountant wants to use the FIFO method. 1.2.1 Calculate the stock value on 28 February 2019 using the FIFO method. (7) 1.2.2 Explain the effect on gross profit if the FIFO method is used. (2) 1.2.3 As an internal auditor, explain the benefits of using the FIFO method to the owner and the accountant. State TWO points. (4) 1.3 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. (3)  Provide TWO suggestions that can be implemented in order to improve profitability. (4) INFORMATION: A. Stock of television sets: Date: Details: Total: 1 March 2018 49 units R195 424 28 February 2019 220 units ? ACTIVITY F1 Page 64 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY F 2: INVENTORY SYSTEM (46 marks; 30 minutes) The information provided is from the accounting records of Clan William Ltd. The company sells cooler boxes and tents. The financial year ended on 28 February 2018. The business uses the periodic inventory system and the weighted average method of stock valuation for cooler boxes and the specific identification method for tents. REQUIRED: 2.1 Explain the difference between the specific identification and the weighted average methods of valuing stock. (2) COOLER BOXES: 2.2 Provide a calculation to show the number of missing cooler boxes on 28 February2018. (4) 2.3 Calculate the following in respect of cooler boxes: The value of closing stock (3) Cost of sales of cooler boxes (5) Gross profit on cooler boxes (3) 2.4 The manager feels that the business is more efficient in controlling stock. 2.4.1 Calculate the stock holding period (in days) of cooler boxes for 2018. Use the closing stock. (4) 2.4.2 Comment on your findings in response to the manager’s opinion. (3) TENTS: 2.5 Calculate the value of the closing stock of tents. (4) 2.6 The mark-up percentage on tents is 25% on cost. Calculate the total sales of tents for the financial period. (6) INFORMATION: COOLER BOXES A Value of Stock on hand Date No. of Items Unit Price Total (R) 01 March 2017 520 R60 31 200 28 February 2018 850 ? ? B Purchases of cooler boxes PURCHASES Date No. of Items Unit Price Total (R) August 2017 1 600 R64 102 400 February 2018 2 700 R70 189 000 TOTAL 4 300 291 400 C SALES OF COOLER BOXES: 3 900 units were sold for R387 000. Page 65 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT D RETURNS: 20 damaged cooler boxes costing R60 each were returned to the supplier. The supplier only agreed to give an allowance of R1 000 due to late notification. E. Financial Indicators 2018 2017 Stock Holding Period ? 125 days Stock Turnover Rate 5.7 times 2.9 times INFORMATION: TENTS STOCK ON NUMBER OF PURCHASES PRICE PER TENT RANGE HAND TENTS SOLD DURING THE TENT 1 MARCH DURING THE YEAR 2017 YEAR 1. Bush Baby 14 - R1 260 14 2. Leopard 10 32 R1 400 28 3. Lizzard 7 28 R1 680 28 4. Buffalo 8 34 R1 540 35 ACTIVITY F2 Page 66 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY F3: STOCK VALUATION (45 marks; 25 minutes) 3.1 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. 3.1.1 In the (perpetual / periodic) inventory system, the cost of sales must be calculated at the end of the year. 3.1.2 The (specific identification / weighted-average) stock valuation method is best suited for unique high- value products. 3.1.3 In the perpetual inventory system, merchandise purchased is recorded as an (asset / expense) to the business. 3.1.4 The (first-in-first-out / weighted-average) stock valuation method is best suited for products of similar value purchased in large quantities. (4) 3.2 KROOKED SKATEBOARD TRADERS You are provided with information relating to Krooked Skateboard Traders owned by G Gonzales. The business sells a type of skateboard that is imported from California. The financial year ended on 28 February 2019. The business uses the weighted-average method to value their stock and uses the periodic inventory system. REQUIRED: 3.2.1 Calculate the following on 28 February 2019: (a) The value of closing stock using the weighted-average method. (9) (b) Cost of Sales (4) (c) Gross Profit (3) 3.2.2 G Gonzales 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? (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. (2) INFORMATION: A Stock records of skateboards Number of Date Total value units 01 March 2018 860 R238 600 28 February 2019 420 ? B Purchases of skateboards Purchases: TOTAL TOTAL NO. OF PRICE TOTAL CARRIAGE ON CARRIAGE ON DATE PURCHASE UNITS PER UNIT PURCHASES PURCHASES PURCHASES COST R R R R R 31/05/18 1 200 280 336 000 20 24 000 360 000 01/07/18 1 600 300 480 000 20 32 000 512 000 12/09/18 1 000 290 290 000 24 24 000 314 000 15/01/19 600 320 192 000 24 14 400 206 400 Totals 4 400 1 298 000 94 400 1 392 400 Page 67 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT C Returns of skateboards Forty (40) skateboards from the July purchases that were not of good quality were returned to the supplier. They credited the business account with the total cost, including carriage on purchases. D Sales 4 800 units at R350 each: R1 680 000 3.3 PROTEC TRADERS Patrick Ace is the owner of PROTEC Traders, who sells safety helmets. He has three different stores that are managed by Lucas, Pitso and Pepe. He is concerned that the stores are not running effectively and gave you the following information to analyse for February 2019. REQUIRED: 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. (9) Store 1 Store 2 Store 3 Lucas Pitso Pepe Sales R280 000 R340 000 R300 000 Returns from customers for the month R4 000 R28 000 R3 000 Returns policy 7 days 21 days 7 days Stock stolen during the month 0 units 4 units 50 units Advertising R30 000 R10 000 R24 000 Number of employees 6 4 6 3.1 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. 3.1.1 3.1.2 3.1.3 3.1.4 4 3.2 KROOKED SKATEBOARD TRADERS 3.2.1 Calculate the following on 28 February 2019: (a) The value of closing stock using the weighted-average method. 9 (b) Cost of sales: 4 (c) Gross Profit: 3 Page 68 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 3.2.2 G Gonzales 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? 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. 2 3.3 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. Problem (Quote figures.) Solution / Advice Store 1: Lucas Store 2: Pitso 9 Page 69 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT Store 3: Pepe G. TANGIBLE ASSETS ACTIVITY G1 (32 Marks, 19 Minutes) HB Contractors purchased a second hand caravan, to accommodate their four staff members while working on building sites far from their homes in Durban. This asset is considered to be part of the equipment that is taken to building sites. The businesses financial year ends on 31 July each year. Information:  Caravan details: Asset Caravan Cost Price R80 000 Registration No. ND 455 789 Depreciation Method Diminishing Bal Date Purchased 1 August 2017 Depreciation Rate 20% p.a.  The caravan was sold for R50 000 cash on 30 January 2020. Required: 1.1 Provide TWO advantages of purchasing a caravan for the staff, rather than booking them alternative (4) accommodation. 1.2 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? 1.3 Complete the Fixed Asset Register for this caravan. (9) 1.4 Draft the Asset Disposal account in the General Ledger to calculate whether a profit or a loss was made on (10) the disposal of this caravan. 1.5 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. Page 70 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY G1 (32 Marks, 19 Minutes) 1.1 Provide TWO advantages of purchasing a caravan for the staff, rather than booking them alternative (4) accommodation. 1.2 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? 1.3 Complete the Fixed Asset Register for this caravan. (9) Accumulated Carrying Depreciation Depreciation Value 31 July 2018 31 July 2019 30 January 2020 1.4 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 1.5 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. Page 71 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY G2: (30 Marks, 18 Minutes) You are provided with the asset disposal account in the books of Elan Square that recorded the sale of a vehicle on 31 August 2019, and some additional information. Required: 2.1 Complete the fixed assets note in the books of Elain Square for the financial year ended 28 February 2020. The (14) incomplete note is in your answer book. Show detailed calculation for depreciation in the space provided. 2.2 Answer the following questions: 2.2.1 Which GAAP principle is used when assets are depreciated? Explain the purpose of the principle. (3) 2.2.2 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. 2.2.3 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 measures that she could use in future to prevent these great differences. (8) Information: General Ledger of Elain Square Asset Disposal 2019 2019 Accumulated depreciation on vehicles Aug 31 Vehicles 80 000 Aug 31 48 800 Bank 25 000 Loss on sale of asset 6 200 80 000 80 000 Additional Information: 1. During the year additions were made to the land and buildings by taking out a mortgage loan from NFB Bank. 2. On 31 August 2019 an old vehicle was sold for cash. This money was then used as a deposit on a new vehicle, purchased 1 September 2019, for which the business still owes an amount of R179 000 to MH Motors. The accumulated depreciation on the asset sold was R44 000 on 1 March 2019. 3. Vehicles are depreciated by 20% p.a. on the diminishing balance method. Page 72 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY G2 (30 Marks, 18 Minutes) Elain Square Notes to the financial statements for the year ended 28 February 2020 2. 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 (1/03/08) 1 260 000 Movements Additions at cost Disposals at carrying value 0 Depreciation for the year 0 Cost price (28/02/09) 1 450 000 Accumulated Depreciation (28/02/20) 0 Carrying Value (28/02/20) 1 450 000 Calculation Of Depreciation: Old / Remaining Vehicles Sold Vehicle New Vehicle Total Depreciation 2.2 2.2.1 Which GAAP principle is used when assets are depreciated? Explain the purpose of the principle (3) 2.2.2 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 this decision. (5) Page 73 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.2.3 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 measures that she could use in future to prevent these great differences. (8) Possible reasons: (4 marks) - - Suggestions: (4 marks) - - ACTIVITY G3 (68 Marks, 41 Minutes) Jenny Khuzwayo owns Jenny’s Transport Services. This business provides transport for pensioners’ who cannot drive and need assistance with their shopping, doctor’s visits etc. The businesses financial year ends on 31 January 2020. Required: 3.1 Identify the GAAP concept that is applied in the following cases: 3.1.1 Penny’s vehicles need to be recorded at their original cost price (1) 3.1.2 Each vehicle’s value depreciates annually due to wear and tear (1) 3.2 Complete the Fixed Asset Register to calculate the Accumulated Depreciation on ONE Toyota Corolla on 1 (16) December 2019 by completing the table in your answer sheet. (see bottom of page for information) 3.3 Complete the following General Ledger Accounts, correctly balanced / closed off, for the year ended 31 January 2020: 3.3.1 Accumulated Depreciation on Vehicles (21) 3.3.2 Asset Disposal (12) 3.4 The Tangible Assets note to the Balance Sheet on 31 January 2020 (10) 3.5 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. 3.6 Identify TWO things that Penny can do to ensure that her employees drive her vehicles in a responsible manner. (4) Information:  Jenny started this business, by purchasing THREE identical Toyota Corolla’s, at a cost price of R120 000 each on 1 August 2016.  No additional vehicles have been bought or sold between 1 July 2016 and 1 February 2019, the beginning of the financial year.  Vehicles are depreciated at 20% per annum according to the diminishing balance method.  On 1 December 2019, Penny decided to replace ONE Toyota Corolla with a second hand Kombi costing R180 000. The Corolla was traded in for R50 000. The sold Corolla had a book value of R57 600 on the date of sale. Page 74 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY G3 (68 Marks, 41 Minutes) 3.1 Identify the GAAP concept that is applied in the following cases: 3.1. Penny’s vehicles need to be recorded at their original cost price (1) 3.1.2 Each vehicle’s value depreciates annually due to wear and tear (1) 3.2 Complete the Fixed Asset Register to calculate the Accumulated Depreciation on ONE Toyota Corolla on 1 (16) December 2019 by completing the table in your answer sheet. Corolla Number 1 Make Toyota Cost price Model Corolla Depreciation Method Registration number ND 638 - 376 Depreciation Rate Date Bought Depreciation Accumulated Depreciation Carrying Value 31 January 2017 31 January 2018 31 January 2019 1 December 2019 3.3.1 Accumulated Depreciation: Vehicles (21) Page 75 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 3.3.2 Asset Disposal (12) 3.4 Notes to the Financial Statements for the year ended 31 January 2020 (10) Vehicles Carrying value at the beginning of the year Cost Accumulated Depreciation Movements Additions at cost Disposals at carrying value Depreciation Carrying value at the end of the year Cost Accumulated Depreciation 3.5 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. 3.6 Identify TWO things that Jenny can do to ensure that her employees drive her vehicles in a responsible manner. (4) Page 76 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT H. COST ACCOUNTING ACTIVITY H1 (50 marks, 30 minutes) 1.1 CHUNKY CHAIRS Chunky Chairs produces kitchen chairs. The financial year ended on 31 May 2019. REQUIRED 1.1.1 Calculate the total purchases of raw material for the financial year ended 31 May 2019. (4) 1.1.2 Complete the Production Cost Statement on 31 May 2019. (9) 1.1.3 Calculate the following for the financial year ended 31 May 2019: ● Number of units sold during the year (5) ● Cost of sales (5) ● Net profit for the year (8) INFORMATION A. The business uses the FIFO-method to value their stock and the periodic inventory system. B. Balances: 31 May 2019 1 June 2018 Raw material stock ? R325 000 Work in Progress R94 000 ? Finished Goods ? R285 000 9 500 units 15 000 units C. Carriage on raw materials amounted to R27 000 for the year. D. Raw Material available for production was R1 450 000, while raw materials used in the factory were R1 140 000. E. Salaries and wages amounted to R650 000 for the year. 40% of this was wages of workers who worked on the chairs. The rest was divided equally between Factory overheads and Administrative cost F. 80 000 chairs were completed during the year at a unit cost of R21,25. G. Sales: chairs were sold at R42,50 per unit. H. After all expenses above were taken into account, the Distribution cost was R625 600 and Administrative cost R787 400. 1.2 GLITTERATI BAGS AND PROBLEM SOLVING Glitterati Bags manufactures exclusive evening handbags. REQUIRED 1.2.1 Calculate the following: (a) the variable cost per unit. (4) (b) the breakeven point. (5) 1.2.2 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: (a) Direct material: Identify ONE problem and suggest ONE possible solution for the problem. (2) (b) Direct labour and Sewing machine maintenance: Identify TWO different problems with each item and suggest a solution for EACH separate problem. 8) Page 77 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT INFORMATION A. The business manufactured and sold 23 400 handbags during this year. The bags were sold at R299 each. B. Analysis of cost: Total Per unit Direct Material R1 989 000 R85 Direct Labour R2 527 200 R108 Factory Overhead R842 400 R36 Administrative cost R538 200 R23 Selling and distribution R795 600 R34 C. After an analysis of cost and efficiency, the internal auditor is concerned about the following points: ● Direct material: o 50 cm of material is needed to produce one handbag. o It was determined that 1 meter of material was used per handbag. ● Direct labour: o 8 workers are employed that produce the handbags. o The average production per worker is 2 925 handbags. o The wage records reflected that one worker, Tarren, produced 2 100 handbags and she earned the highest overtime pay. ● Sewing machines maintenance: o The maintenance cost increased significantly in the last year. o The maintenance on two workers’ machines, those of Roger and Gary, were three times higher than the other machines. 1.1 CHUNKY CHAIRS 1.1.1 Calculate the total purchases of raw material for the financial year ended 21 May 2019. 4 1.1.2 Production cost statement for the year ended 31 May 2019 1 140 000 Prime cost Total cost of production 1 712 000 Total cost of production of complete products 9 Page 78 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 1.1.3 Calculate the following for the financial year ended 31 May 2019: Number of units sold during the year. 5 Cost of Sales 5 Calculate the Net Profit for the year ended 31 May 2019. 8 1.2 GLITTERATI BAGS AND PROBLEM SOLVING 1.2.1 Calculate the following: (a) the variable cost per unit. 4 (b) the breakeven point. 5 Page 79 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 1.2.2 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: (a) Direct material: Problem Solution 2 Direct labour: Problem Solution (b) Sewing machine maintenance: Problem Solution 4 4 ACTIVITY 2 MANUFACTURING (45 marks; 25 minutes) 2.1 VUMA MANUFACTURERS You are provided with information relating to VUMA Manufacturers for the year ended 28 February 2019. The business produces handbags. Page 80 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT REQUIRED: 2.1.1 Prepare the following notes to the Production Cost Statement: ● Direct labour cost (6) ● Factory overhead cost (10) 2.1.2 Prepare the Production Cost Statement for the year ended28 February 2019. (10) INFORMATION: A. Stock on hand on 1 March 2018 Raw Materials R138 000 Work in progress 79 000 Finished goods 68 000 B. Stock on hand on 28 February 2019: Raw Materials R142 000 Work in progress ? ‘ Finished goods 172 000 C. Raw materials ● Raw materials purchased during the year amounted to R1 450 000. ● Raw materials costing R19 000 were returned to the supplier. D. Labour ● The factory has five workers involved in production. Together they worked a total of 800 hours per month at R50 per hour (normal time). Only three workers worked 60 hours each per month for overtime during the current financial year. The overtime rate is 1½ times the normal rate. ● The employer contributes 1% of normal wage to UIF for all employees. ● Indirect labour amounts to R135 340 including benefits. E. Figures obtained from the Trial Balance: Water and Electricity R77 000 Rent expense 288 000 Depreciation on factory equipment 18 900 Depreciation on office equipment 5 300 Insurance 108 000 Sundry expense 84 000 Page 81 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT Additional information relating to the above: ● The water and electricity bill are shared among factory, office and sales departments in the ratio 4:2:1. ● 75% of all sundry expenses relates to the factory. ● Rent remained unchanged throughout the financial year. Rent is allocated according to floor area occupied, as follows: 1 500 square meters, 500 square meters and 400 square meters for factory, sales and office departments respectively. ● Insurance cost on equipment is split amongst factory, sales and office as follows. o Factory R48 500 o Sales 37 400 o Office 22 100 2.2 JPC MANUFACTURERS You are provided with information relating to JPC Manufacturers consisting of two factories producing different products: Suitcases and Laptop bags. The owner, JP has found out that his profit has declined from 2018 to 2019. He asks for advice. REQUIRED: 2.2.1 Identify ONE variable cost that was not well controlled in each department. Quote figures. In each case, provide a solution for the problem identified. (8) 2.2.2 Calculate the break-even point of suitcases for 2019. (5) 2.2.3 Explain whether the business should be satisfied with the production of suitcases. Quote figures to support your answer. (3) 2.2.4 JP wants to adjust the selling price of ONE of the products. What advice would you offer him? Provide a valid reason for your suggestion by quoting relevant figures. (4) ACTIVITY 2 2.1.1 DIRECT LABOUR COST Workings Answer 6 FACTORY OVERHEAD COST Indirect Material 128 000 Indirect labour 135 340 10 Page 82 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.1.2 PRODUCTION COST STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019 Prime Cost Total cost of production Work in process at the beginning of the year 79 000 10 Cost of production of finished goods 2 690 190 2.2.1 Identify ONE variable cost that is not well controlled in each department. Quote figures. In each case provide a solution for the problem identified. Suitcases Laptop Bags Cost Identified Figures Solution 8 Page 83 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.2.2 Calculate the break-even point of suitcases for 2019. Workings Answer 5 2.2.3 Explain whether the business should be satisfied with the production of suitcases. Quote figures to support your answer. 3 2.2.4 JP wants to adjust the selling price of ONE of the products. What advice would you offer? Provide a valid reason for your suggestion, quoting relevant figures. 3 ACTIVITY H3 (35 marks; 20 minutes) 3.1 KLEMISH MANUFACTURERS The business produces study desks. REQUIRED: Prepare the following for the financial year ended 28 February 2019: 3.1.1 Production cost statement (13) 3.1.2 Abridged Income Statement (11) INFORMATION: A Stock on hand: 28 February 2019 28 February 2018 Work-in-progress ? R500 800 Finished goods R18 000 R672 000 B ● 10 800 tables were produced at a unit cost of R495 each. ● Sales of 16 000 tables amounted to R8 160 000. C Prime cost: R4 600 000 (after adjustments) D The bookkeeper calculated the following costs before taking into account the adjustments below: Administration R296 800 Factory overheads R974 400 Direct materials R3 100 000 Direct labour ? Selling and distribution R844 000 Page 84 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ● An amount of R204 000 for raw materials, purchased on credit, was not taken into account. ● Stationery valued at R1 000, purchased for the Administration department was incorrectly allocated to the Selling and Distribution department. ● Rent Expense, R252 000, was shared between the Factory and Selling and Distribution department in the ratio of 2:1. 85% should have been allocated to the Factory. Correct the error. 3.2 DAMARA’S JEWELLERY Damara owns a jewellery business. REQUIRED: 3.2.1 Break-even point: (a) Calculate the break-even point for February 2019. (4) (b) Damara is satisfied with the results. Explain ONE reason with figures to support Damara’s satisfaction. (3) 3.2.2 Refer to the unit costs. (a) Explain why the fixed costs per unit decreased. (2) (b) Provide ONE possible reason for the change in Direct Material Costs. (2) INFORMATION: February 2019 February 2018 Total units produced and sold 18 000 units 15 000 units Break-even point in units ? 13 500 units Selling price per unit R407,00 R330,00 TOTAL VARIABLE COSTS R4 410 000 R3 510 000 VARIABLE COSTS PER UNIT R245,00 R234,00 Direct material cost per unit R128,00 R135,00 Direct labour cost per unit R80,00 R62,00 Selling and distribution cost per unit R37,00 R37,00 TOTAL FIXED COSTS R1 296 000 R1 296 000 FIXED COST PER UNIT R72,00 R86,40 Factory overhead cost per unit R52,00 R62,40 Administration cost per unit R20,00 R24,00 35 Page 85 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY 3.1 3.1.1 PRODUCTION COST STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019 Direct material cost Direct labour cost Prime cost Factory overhead cost Total cost of production 13 3.1.2 ABRIDGED INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019 Sales 8 160 000 Cost of Sales 11 3.2 DAMARA’S JEWELLERY 3.2.1 Break-even point: (a) Calculate the break-even point for February 2019. 4 (b) Damara is satisfied with the results. Explain ONE reason with figures to support Damara’s satisfaction. 3 Page 86 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 3.2.2 Refer to the unit costs. (a) Explain why the fixed costs per unit decreased. 2 (b) Provide ONE possible reason for the change in Direct Material Costs. 2 ACTIVITY H4 MANUFACTURING (50 marks; 25 minutes) 4.1 CONCEPTS Indicate whether the following statements are TRUE or FALSE. Write only 'true' or 'false' next to the question number (2.1.1–2.1.3) in the ANSWER BOOK. 4.1.1 Commission on sales will be classified as an administration cost. (1) 4.1.2 Advertising is part of factory overhead costs. (1) 4.1.3 Carriage on raw materials purchased increases the cost of raw materials issued for production. (1) 4.2 STAR WHEELS MANUFACTURERS You are provided with information relating to Star Wheels Manufacturers for the year ended 31 December 2015. The business manufactures one type of bicycle. REQUIRED: 4.2.1 Prepare the following notes to the Production Cost Statement: ● Direct labour cost (9) ● Factory overhead cost (13) 4.2.2 Prepare the Production Cost Statement. (10) INFORMATION: This business produces and sells one type of breakfast cereal. The sole owner is Craig Manning. The financial year-end is 31 October. REQUIRED: 4.3.1 Calculate the break-even point for the year ended 31 October 2015. (4) 4.3.2 Should the business be satisfied with the number of units that they produced and sold during the current financial year? Explain. Quote figures. (3) 4.3.3 Give TWO possible reasons for the increase in the direct material cost per unit in the current financial year. (4) 4.3.4 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. (4) Page 87 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT INFORMATION: The following information was taken from the accounting records: 31 October 2015 31 October 2014 Total Per unit Total Per unit Sales R1 792 000 R28,00 R1 794 000 R23,00 Variable costs R1 024 000 R16,00 R975 000 R12,50 Fixed costs R736 000 R11,50 R630 000 R8,08 Direct material cost R656 000 R10,25 R592 800 R7,60 Break-even point ? 60 000 units Number of units produced 64 000 units 78 000 units and sold INFORMATION: SUITCASES LAPTOP BAGS 2019 2018 2019 2018 General information: Total fixed costs R3 500 000 R3 500 000 R2 100 000 R2 100 000 Net profit (118 000) 1 050 000 1 692 000 1 932 000 Variable costs per unit: R242 R218 R92 R82 Direct material cost R68 R70 R54 R40 Direct labour cost R150 R130 R32 R32 Selling & distribution cost R24 R18 R6 R10 Additional information Selling price per unit charged by JP R420 R400 R250 R250 Selling price per unit charged by competitors R405 R405 R265 R260 Number of units produced & sold 19 000 25 000 24 000 24 000 Break-even units ? 19 231 13 292 12 500 ACTIVITY H4 4.1 4.1.1 4.1.2 4.1.3 3 4.2 STAR WHEELS MANUFACTURERS Page 88 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 4.2.1 DIRECT LABOUR COST 9 FACTORY OVERHEAD COST 13 4.2.2 PRODUCTION COST STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2015. 10 4.3 NUTRITIOUS EATS 4.3.1 4 4.3.2 Should the business be satisfied with the number of units that they have produced and sold during the current financial year? Explain. Quote figures. 3 4.3.3 Give TWO possible reasons for the increase in the direct material cost per unit in the current financial year. 4 Page 89 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 4.3.4 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. 4 I] RECONCILIATIONS A. BANK RECONCILIATION (30 minutes) ACTIVITY I1. You are provided with information relating to Simms Traders for July 2019. REQUIRED: 1.1 Indicate whether the following statements are TRUE or FALSE. Write only ’true’ or ‘false’ next to the question number (a)-(d) in the ANSWER BOOK. (a) A cheque that is more than six months old will not be cashed by the bank because it is a stale cheque. (b) Service fees and interest on bank overdraft will be recorded as bank charges in the Cash Payments Journal. (c) A debit balance on the bank statement reflects an unfavourable balance. (d) An internal auditor should inspect the bank reconciliation statement at the end of each month. (4) 1.2 Calculate the correct totals for the Cash Receipts Journal and the Cash Payments Journal for July 2019. Use the tables provided. (14) 1.3 Prepare the Bank Reconciliation Statement on 31 July 2019. (10) 1.4 Explain how cheque No. 908 should be treated when preparing the financial statements on 31 July 2019, the financial year-end. (2) 1.5 Refer to information F. The bookkeeper has decided to write off the amount of R50 000.  Identify the GAAP principle applied by the bookkeeper. (1)  Provide TWO suggestions on how a similar problem can be prevented in the future. (4) INFORMATION: A. BANK RECONCILIATION STATEMENT ON 30 JUNE 2019 Debit Credit Balance as per Bank Statement R19 310 Outstanding deposit (10 May 2019) R50 000 Outstanding cheques: No. 892 (1 January 2019) 12 340 No. 897 (22 June 2019) 8 700 Balance as per Bank Account 9 650 50 000 50 000 Page 90 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT B. Before receiving the July 2019 Bank Statement, the following provisional totals appeared in the Cash Journals for July 2019:  CRJ R 127 670  CPJ R 68 900 C. The Bank Statement for July 2019 reflected the following:  Bank charges R1 300  Interest on overdraft R920  Debit order for insurance R600  Direct deposit of R1 800 for rent from a tenant. D. Cheque No. 892 was issued as a donation. It was not cashed. E. Cheque No. 897 did not appear in the July 2019 bank statement. F. The outstanding deposit (10 May 2019) cannot be traced and the cashier at that time has since disappeared. It was decided to write off this amount. G. A cheque received from Redman Traders dated 25 November 2019 for R15 000 was not recorded in the July 2019 Cash Receipts Journal. It was also not deposited during July. H. The following items appear in the July 2019 Cash Journals but not on the July Bank Statement:  A deposit of R18 000, dated 27 July 2019  Cheque No. 905, dated 31 July 2019  Cheque No. 908, R3 100, dated 15 December 2019 was issued to a creditor D. Hart for supplying goods. I. The Bank Statement on 31 July 2019 reflects a credit balance of R44 040 ACTIVITY I1 BANK RECONCILIATION 1.1 (a) (b) (c) (d) 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 journal Cash payments journal 127 670 68 900 14 Page 91 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 1.3 Bank reconciliation statement on 31 July 2019. 10 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. 2 1.5 Identify the GAAP principle applied by the bookkeeper. Provide TWO suggestions on how a similar problem can be prevented in the future. 5 ACTIVITY I2 (40 MARKS; 25 MINUTES) BANK RECONCILIATION, GAAP, INTERNAL CONTROL 2.1 Indicate whether the following statements are TRUE or FASLE. Write only ‘true’ or ‘false’ next to the question number 1.1.1 – 1.1.4 in the answer book. 2.1.1 A post–dated cheque issued by the business on 20 May 2019 but dated 24 August 2019, will only be entered in the Cash Payments Journal of Quick Traders on 24 August 2019. (1) 2.1.2 A debit balance on the bank statement reflects an unfavourable balance. (1) 2.1.3 Service fees and interest on an overdraft will be recorded as bank charges in the Cash Payment Journal. (1) 2.1.4 An internal auditor will want to inspect the bank reconciliation statement at the end of each month. (1) Page 92 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.2 You are provided with information related to Quick Traders on 31 May 2019. REQUIRED: 2.2.1 Calculate the correct totals for the Cash Receipts Journal and Cash Payment Journal for May 2019. (9) 2.2.2 Prepare the Bank Reconciliation Statement on 31 May 2019. (10) 2.2.3 Explain how cheque No.908 should be treated when preparing the financial statements as at 31 (2) May 2019 the end of the financial year. 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 apply in this case?  The bookkeeper wants to prevent a problem such as this in future. Give TWO solutions to (1) improve internal control in this regard. (4) INFORMATION: A. The following items appeared in the Bank Reconciliation Statement on 30 April 2019: DEBIT CREDIT Debit balance as per Bank statement 19 310 Outstanding deposit (10 January 2019) 50 000 Outstanding cheques: No.892 (1 November 2018) 12 340 No.897 (10 April 2019) 8 700 Debit balance as per Bank Account 9 650 50 000 50 000 B. Before receiving the May 2019 Bank Statement, the following provisional totals appeared in the Cash Journals on 31 May 2019:  CRJ R146 970  CPJ R 68 900 C. The Bank Statement for May reflected the following:  Bank charges R2 100.  Interest on an overdraft R920.  Debit order for insurance R600.  Direct deposit of R1 800 for rent received from tenant. D. The bank charges was over stated by R800 for May 2019. The bank has agreed to correct the error during June 2019. E. Cheque no. 892 must be cancelled. F. Cheque no. 897 did not appear in the May 2019 Bank Statement. Page 93 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT G. The outstanding deposit (10 January 2019) cannot be traced and the cashier at that time has since disappeared. It was decided to write off this amount. H. A cheque received from Zulu Traders dated 25 August 2019 for R15 000 was not recorded in the May 2019 Cash Receipts Journal. It was also not deposited in May. I. The following items appear in the May 2019 Cash Journals but not on the Bank Statement:  A deposit of R18 000, dated 27 May 2019.  Cheque No. 905, R1 200, dated 31 May 2019.  Cheque No. 908, R3 100, dated 15 September 2019. J. The Bank Statement on 31 May 2019 reflects a favourable bank balance of R42 440. ACTIVITY I2 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 2.1.2 2.1.3 2.1.4 4 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 9 Page 94 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.2.2 Prepare the Bank Reconciliation Statement on 31 May 2019. Debit Credit 10 2.2.3 Explain how cheque No. 908 should be treated when preparing the financial statements as at 31 May 2019 the end of the financial year. 2 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. 5 Page 95 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT CREDITORS RECONCILIATION ACTIVITY I 1.1 CREDITORS’ RECONCILIATION The information relates to Kirsten Traders for August 2019. Kirsten Traders buys goods on credit from Amla Suppliers. REQUIRED: Use the table provided to indicate the changes that must be made:  In the Creditors' Ledger Account in the books of Kirsten Traders  In the Creditors' Reconciliation Statement on 31 August 2019 (9) INFORMATION: The following differences were discovered when comparing the account in the Creditors' Ledger with the statement received from Amla Suppliers: A An invoice for R14 800 was recorded incorrectly as R1 480 on the statement received from the creditor. B The bookkeeper of Kirsten Traders recorded an invoice for R1 350 as a credit note. C The discount of R850 was in error, overstated by R350 in the Creditors’ Ledger. D A cheque for R7 200 issued by Kirsten Traders did not appear on the statement due to the statement been processed early. E Goods for R2 700, returned by Kirsten Traders, was not recorded. ACTIVITY 1 Creditors' Reconciliation Creditors' Ledger Statement Balance 28 370 25 300 9 Page 96 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY 2 Veli Traders buys goods on credit from Pillay Suppliers. The information presented is for May 2019. REQUIRED: 2.1 Reconcile the Creditors Ledger account of Pillay Suppliers in the books of Veli Traders with the statement received. Commence with the opening balances as provided in the ANSWER BOOK. (13) INFORMATION: A. Creditors Ledger of Veli Traders Pillay Suppliers (CL6) DATE DETAILS FOL DEBIT CREDIT BALANCE May 1 Balance b/d 34 200 5 Invoice No. 443 CJ 4 770 38 970 10 Cheque No. 2810 CPJ 15 000 23 970 Discount CPJ 750 23 220 12 Invoice No. 568 CJ 5 640 28 860 18 Debit Note No. 114 CAJ 980 27 880 28 Invoice No. 667 CJ 7 120 35 000 B. Statement received from Pillay Suppliers PILLAY SUPPLIERS No. A732 STATEMENT OF ACCOUNT Customer: 112 Willow Street Veli Traders Statement date: Willowmore 25 May 2017 5 570 DATE DETAILS DEBIT CREDIT BALANCE April 28 Account rendered 38 830 30 Invoice No. 376 3 370 42 200 May 1 Receipt No. 1144 8 000 34 200 5 Invoice No. 443 7 740 41 940 10 Receipt No. 1328 15 000 26 940 12 Invoice No. 568 6 640 33 580 18 Credit Note No. 743 980 34 560 22 Invoice No. 772 3 860 38 420 Includes transactions up to 25th of each month C. Differences noted: (i) Invoice No. 443 was recorded incorrectly in the creditors ledger. (ii) The statement did not reflect the discount for early payment on the 10th. This will be rectified on the next statement. (iii) It was discovered that Invoice No. 568 on the statement included goods valued at R1 000 ordered by the warehouse manager. The manager is facing disciplinary action. (iv) Goods valued at R980 were returned on the 18th. It is shown as a debit entry in both the creditor’s ledger account as well as the statement of account. (v) Invoice No. 772 on the statement was an error made by Pillay Suppliers. These goods were not purchased by Veli Traders. (vi) The statement was received on 25 May 2019. Page 97 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY 2 CREDITOR’S LEDGER ACCOUNT NO. STATEMENT BALANCE BALANCE Balance 35 000 38 420 i) ii) iii) iv) v) vi) TOTAL DEBTORS RECONCILIATION AND DEBTORS AGE ANALYSIS ACTIVITY 1 (30 Marks; 18 Minutes) ILLOVU TRADERS The debtors’ age analysis on 31 May 2018 is provided. Credit terms are 30 days REQUIRED: 1.1 Explain how a debtors’ age analysis can assist with internal control over debtors. (2) 1.2 Calculate the percentage of total debts exceeding the credit terms. (4) 1.3 Explain ONE problem (with figures) relating to each of the following debtors:  Mswane P (3)  Hambrok V (3) INFORMATION: DEBTORS’ AGE ANALYSIS ON 31 MAY 2018: CREDIT AMOUNT CURRENT 30 DAYS 60 DAYS 90 LIMIT OWING MONTH DAYS R R R R R R P. MSWANE 10 000 11 000 1 980 9 820 W. SMITH 14 000 13 450 4 100 3 902 5 448 N. CELE 2 800 2 550 2 550 V. HAMBROK 14 000 11 192 9 112 2 080 K. PRICE 5 000 2 608 1 408 1 200 41 600 7 4 88 17 472 14 560 2 080 100% ? ? ? ? Page 98 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY 1 1.1 Explain how a debtors’ age analysis can assist with internal control over debtors. 2 1.2 Calculate the percentage of total debts exceeding the credit terms. 4 1.3 Explain ONE problem (with figures) relating to each of the following debtors: Mswane P Hambrok V 6 ACTIVITY 2 : DEBTORS' RECONCILIATION 2.1 DEBTORS' AGE ANALYSIS The information below relates to Witbank Hardware. REQUIRED: 2.1.1 Explain why the debtors' age analysis is considered to be an effective internal control measure. State ONE point. 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). INFORMATION: A. Debtors are granted 30 days to settle their accounts. Page 99 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT B. Debtors' age analysis on 31 October 2017: CREDIT AMOUNT CURRENT 30 60 90 DEBTORS LIMIT OWING MONTH DAYS DAYS DAYS Z Zulu 6 000 5 000 2 100 2 900 P Botha 3 500 4 200 3 800 400 M Valley 7 000 1 450 500 950 S Walker 13 000 12 500 1 000 3 000 4 500 4 000 O Klein 3 000 3 000 1 900 1 100 26 150 9 300 6 300 5 600 4 950 100% 36% 24% 21% 19% 2.2 DEBTORS' RECONCILIATION Information from the records of Amber Traders for November 2017 is presented. Some errors and omissions were noted. See information B. REQUIRED: 2.2.1 Calculate the correct Debtors' Control Balance on 30 November 2017. Show figures and indicate '+', '–' or 'No change' at EACH adjustment. (7) 2.2.2 Calculate the correct total of the debtors' list on 30 November 2017. (10) INFORMATION: A. Balances on 30 November 2017 before errors and omissions: (i) Debtors' Control, R25 700 (ii) Debtors' list: DEBIT CREDIT L Nkosi R5 700 S Muller R11 100 M Welthagen R1 900 B Sandleni R15 900 R32 700 R1 900 B. Errors and omissions: (i) The total of the Debtors' Journal was undercast by R2 700. (ii) Interest of R350 must be charged on the overdue account of S Muller. (iii) An amount of R3 100 received from L Nkosi was incorrectly recorded as R1 300 in the Cash Receipts Journal and posted as such to the General Ledger and the Debtors' Ledger. (iv) Trading stock returned by B Sandleni was posted to the wrong side of his Debtors' Ledger Account, R1 200. (v) No entry was made for a credit sales invoice issued to M Welthagen, R1 500. Page 100 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY2 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. 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). PROBLEM DEBTOR AND FIGURE(S) 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) (ii) (iii) (iv) (v) Correct Debtors' Control balance 7 Page 101 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 2.2.2 DEBTORS' LIST ON 30 NOVEMBER 2017 L Nkosi (5 700 S Muller (11 100 M Welthagen ( –1 900 B Sandleni (15 900 Correct total of Debtors' List 10 ACTIVITY J1: VAT 1.1 Bigshow Traders is registered for VAT. The VAT rate is 15%. The business is owned by Des Damons. REQUIRED: 1.1.1 Calculate the amount of VAT receivable or payable to SARS. Indicate whether it is receivable or payable. (13) 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 point (2) INFORMATION: INCLUSIVE EXCLUSIVE VAT Total sales 368 000 (i) Total cost of goods bought 174 560 (ii) Goods returned by debtors 2 500 Goods returned to suppliers 11 201 9 740 (iii) Bad debts 2 000 Goods taken by the owner for 5 750 750 personal use Discount given to customers 1 059 ACTIVITY J2: VAT 2.1. VAT CONCEPTS REQUIRED Indicate if the following items are VAT Exempt or Zero Rated items. (3) 2.1.1 Public road transport 2.1.2 Vegetables 2.1.3 Residential rent 2.2 WINSTON TRADERS The following information was taken from the accounting records of Winston Traders. The financial year end is 28 February 2018. All goods bought and sold are subject to 15% VAT. REQUIRED Use the information below to answer the following questions: 2.2.1 Calculate the amount that would be entered next to Debtors Control on the credit side of the VAT Output account. (3) 2.2.2 Calculate the VAT amount owed to SARS on 28 February 2018. (5) 2.2.3 In which section of the Balance Sheet will you record the amount calculated in 2.2.2? (1) Page 102 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT INFORMATION A The General Ledger reflects the following accounts: VAT Input Feb18 28 Bank CPJ 8 600 Feb18 28 Creditors Control CAJ 150 Creditors Control CJ 6 000 VAT Output Feb18 15 Debtors Control GJ 276 Feb18 28 Bank CRJ 18 000 28 Debtors Control DAJ 350 Debtors Control DJ ? B Additional information:  Total cash sales for February 2018 was R120 000 (excluding VAT). 75% of all goods were sold for cash and the rest on credit. ACTIVITY J3 CASH BUDGET, AGE ANALYSIS AND VAT 3.1 CASH BUDGET You are provided with an incomplete cash budget and additional information in respect of Fashion Expression Ltd. The financial year-end is 28 February each year. REQUIRED: 3.1.1 Calculate the Debtors’ Collection for June 2018. (4) 3.1.2 Calculate the figure that would appear in the Cash Budget for Salaries and Wages for May 2018. (5) 3.1.3 The purchases payment policy needs to be changed.  Explain the need to change the policy. (3)  Provide TWO points of change that would benefit the company. (2) 3.1.4 The directors took significant decisions to address their concerns about the cash balance. Mention TWO (6) strategies used to improve the cash balances. Explain why you agree or disagree with these strategies. INFORMATION: FASHION EXPRESSION LTD Extract of the Cash Budget for the period 1 April 2018 to 30 June 2018 RECEIPTS April May June Commission income 60 000 65 000 * Sale of Land and Buildings 0 380 000 0 Proceeds from 50 000 shares issued 239 000 0 0 TOTAL RECEIPTS 443 000 * 195 000 PAYMENTS – extract Salaries and wages 48 000 * * TOTAL PAYMENTS 204 500 * 340 700 Surplus (Deficit) 238 500 110 000 (145 700) Bank balance at beginning of month (60 000) 178 500 288 500 Bank balance at end of month 178 500 288 500 142 800 Page 103 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT .2 AGE ANALYSIS The Debtors’ Age Analysis of Multiplex Ltd was prepared on 30 June 2018. REQUIRED: 3.2.1 The internal auditor is concerned that the credit controller is not managing the debtors effectively. (4)  Provide TWO points of evidence from the Age Analysis, to substantiate his concern. Quote figures.  Suggest TWO ways in which the problems identified can be rectified. 3.2.2 What would H. Jacob’s outstanding balance be on 31 July 2018 if he paid R1 310 during July (2) 2018? INFORMATION: A. DEBTORS’ AGE ANALYSIS Debtor Limit Total due Overdue 60 days + 30 days + Current H. Jacob R 10 000 R 15 310 R 9 800 R 1 200 R 1 000 R 3 310 W. Grey R 15 000 R 15 000 R 12 000 R 3 000 L. Conrad R 8 000 R 4 254 R 3 000 R 1 254 Total R 34 564 R 21 800 R 4 200 R 4 000 R 4 564 100% 63% 12% 12% 13% Credit terms: Strictly 30 days from date of statement B ADDITIONAL INFORMATION: (i) Debtors and sales:  Debtors are expected to settle their accounts as follows: - 25% of debtors will settle their accounts in the same month as the credit sale, subject to a 5% discount. - 68% of debtors will settle their accounts in the month following the credit sale. (ii) Purchase of stock:  Goods are replaced monthly to maintain a fixed stock level.  Goods are purchased as follows: 25% for cash and 75% on credit.  All credit purchases are settled during the following calendar month. iii) Salaries and wages:  The manager will receive an increase of 30% on his present monthly salary of R6 000 from 1 May 2018.  The ten shop assistants, who receive an equal salary, will each receive an increase of R300 per month, from 1 May 2018. 3.3 VAT 3.3.1 Choose the correct word from those within brackets. Write only the word next to the question number in your ANSWER BOOK. (i) VAT is a / an (direct / indirect) tax. (ii) VAT on purchase of R35 400 will (increase / decrease) the amount payable to SARS. (iii) VAT refundable by SARS is a / an (asset / liability) to the business. (3) 3.3.2 The bookkeeper of Cooper Ltd. calculated the amount payable to SARS to be R112 539. The internal auditor found discrepancies in the calculation. REQUIRED: Calculate the correct amount payable to SARS. VAT is charged at 15%. Page 104 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT INFORMATION: (i) VAT on shop rent paid was not taken into account. The rent amount of R15 525 was inclusive of VAT. (ii) VAT of R22 500 on a vehicle purchased by the company was recorded as output VAT. (iii) VAT of R7 500 was incorrectly added to a sale of R50 000. The sale of R50 000 was subject to a trade discount of 8%. (7) ACTIVITY J4: BUDGETS 4.1 Choose an explanation from COLUMN B that matches a concept in COLUMN A. Write only the letter (A–D) next to the question number (4.1.1 to 4.1.4) in the ANSWER BOOK. (4) COLUMN A COLUMN B 4.1.1 Cash budget A Outlay of funds for large projects 4.1.2 Forecast Income B Used to determine the expected bank balance Statement 4.1.3 Capital budget C No reference is made to any previous budget estimates 4.1.4 Zero based budget D Used to determine the expected net profit 4.2 SHELDON TRADERS The information provided relates to Sheldon Traders, owned by Sheldon Turner. The business specialises in electrical products. 4.2.1 Identify an incorrect entry in the cash budget and explain why it is incorrect. (2) 4.2.2 State THREE ways in which the purchasing of Land and Building will be financed. (3) 4.2.3 Complete the Debtors' Collection Schedule for the budgeted period. Some figures have already been entered. (9) 4.2.4 Calculate the missing figures denoted by A – E on the cash budget. (12) 4.2.5 Refer to information F Sheldon is concerned about certain aspects of the business.  Comment on the cash and credit sales. Explain how these amounts are affecting the (6) cash flow of the business? Quote figures.  Has the Advertising campaign been beneficial to the business? Explain. Quote figures. (5)  Do you think the collection from debtors is well controlled? Explain. Quote figures. Give (9) TWO points of advice Page 105 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT INFORMATION: A. EXTRACT FROM CASH BUDGET FOR SEPTEMBER AND OCTOBER 2019: September October Cash Receipts Cash Sales 110 000 E Additional Loan 800 000 Fixed deposit matured 500 000 Collections from debtors Total Receipts Cash Payments Cash Purchases 70 000 77 000 Payments to Creditors D 143 000 Salaries C 118 800 Advertising 22 000 30 000 Telephone 16 800 18 000 Vehicle expenses 13 812 14 226 Rent expense 24 000 Land and buildings 2 400 000 Municipal rates on property 2 000 Depreciation 10 000 Interest on loan 8 000 Equipment Repairs 16 400 20 400 Drawings of cash 60 000 60 000 Total Payments Cash Surplus/Deficit B Opening Bank Balance 1 100 000 Closing Bank Balance A (71 406) B. Debtors Debtors are granted 30 days to settle their accounts as per policy. However, debtors' pattern of payment is as follows:  20% pay in the month of sale subject to a discount of 5%.  30% pay in the month following the month of sale.  48% pay in the following month. The remaining 2% must be written off in the third month following the sale. C. 75% of all sales are on credit. D. Creditors and Trading Stock  The business keeps a fixed base stock of R350 000. (Goods are replaced monthly.)  The business uses a mark-up of 100% on cost.  35% of all stock is purchased on credit.  Creditors' terms are strictly 30 days. The business complies with these terms. E. Salaries: There was a general salary increase of 8% from 1 October 2019. Page 106 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT F. Extract from the August 2019 Cash Budget: Budgeted Actual Cash Sales 110 000 84 000 Credit Sales 270 000 360 000 Collection from debtors 282 300 173 000 Advertising 22 000 44 000 ACTIVITY J4 4.1 4.1.1 4.1.2 4.1.3 4.1.4 4 4.2 SHELDON TRADERS 4.2.1 Incorrect entry: Reason: 2 4.2.2 State THREE ways in which the purchasing of Land and Building will be financed. 3 Debtors' Collection Schedule: 4.2.3 MONTH CREDIT SALES SEPTEMBER OCTOBER July R270 000 R129 600 August R300 000 September October R68 400 9 Page 107 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 4.2.4 Item Calculations Answer A B C D E 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: Explanation: 6 Has the Advertising campaign been beneficial to the business? Explain. Quote figures. YES/NO Explanation: 5 Page 108 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 4.2 BUDGET 4.2.1 Explain the importance of comparing the actual figures to the budgeted figures in the cash budget. 1 4.2.2 Calculate the values marked (A) ‒ (F). Calculations A B C D E F 4.2.3 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. . 8 4.2.4 No new workers were employed during July and August 2018. What could possibly be a 3 reason for the change in each of the actual figures for those two months? Reason July August 4.2.5 The owner feels that the business pays less money by renting equipment than purchasing 2 Page 109 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT the equipment. Do you agree with her opinion? Provide TWO points to support your answer. 4.2.6 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 4.2.5), identify TWO other items, with figures, that needs attention. Also provide advice how these items can be managed. Item Figure Advice 6 4.2.7 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 Driver Finance officer 2 Page 110 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY J5 You are provided with information relating to Billy Traders, a business owned by Billy Willy. The business sells catering equipment for cash and on credit. REQUIRED: 5.1 Complete the following statements: 5.1.1 The main purpose of a Projected Income Statement is … (2) 5.1.2 The main purpose of a Cash budget is … (2) 5.2 Complete the partially completed Debtors' Collection Schedule. (6) 5.3 Calculate the following amounts for the Cash Budget: 5.3.1 The percentage increase in rent income. (4) 5.3.2 Payments to creditors during December. (4) 5.3.3 The amount of the loan to be received on 1 December. (4) 5.3.4 The salaries and wages for December. (5) 5.4 An amount of R123 000 for staff training. Provide ONE reason why this is considered to be a necessary expense. (2) 5.5 Refer to information G: The manager is of the opinion that some items in the budget are not well controlled. He identified the following 3 items:  Cash sales  Delivery expenses  Rent income  Provide a possible reason for the variance. In each case, give one point of advice to address this problem. (6) INFORMATION A. Sales:  50% of the total sales are for cash.  Goods are sold at a profit mark-up of 60% on cost. B. Debtors pay according to the following trend:  40% settled in the same month of transaction. They qualify for a 5% discount for prompt settlement.  45% settled in the one month after the transaction month.  13% settled in the two months after the transaction month.  2% is written off as bad debts in the third month after sales. C. Purchases and payments to creditors  The business maintains a fixed stock base level. Goods sold in a month are replaced in the same month.  80% of all merchandise purchased is on credit. Creditors are paid the month following the month of sales. Page 111 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT D. Extract for the cash budget for November and December 2019: CASH RECEIPTS NOVEMBER DECEMBER Cash sales 160 000 165 000 Cash from debtors ? ? Rent income 18 000 19 440 Loan from Mashonisa Bank ? CASH PAYMENTS Cash purchases of stock 40 000 41 250 Payments to creditors 152 000 ? Interest on loan 0 3 375 Salaries and wages 48 000 ? Staff training 123 000 Sundry expenses 23 000 45 000 Surplus/Deficit Opening balance 69 090 (103 310) Closing balance (103 310) 9 915 E. A loan will be received on 1 December 2019. Interest at 9% p.a. will be paid commencing on 31 December 2019. F. The four workers receive the same monthly salary. Three of them will receive a bonus equal to 75% of their monthly salary and the last one will receive 50%. G. Actual and budgeted figures for August 2019: BUDGET ACTUAL R R Cash sales 160 000 105 700 Delivery expenses 11 990 17 600 Rent Income 18 000 12 000 35 Page 112 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY J5 5.1.1 The main purpose of a Projected Income Statement is … 2 5.1.2 The main purpose of a Cash budget is … 2 5.2 DEBTORS' COLLECTION SCHEDULE Month Credit Sales November December September 150 000 19 500 October 152 000 68 400 November 160 000 60 800 December 165 000 6 5.3 Calculate: 5.3.1 % increase in Rent Income. 4 5.3.2 Payments to creditors in December. 4 Page 113 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 5.3.3 The amount of the loan on 1 December. 4 5.3.4 Salaries and wages for December. 5 5.4 An amount of R123 000 for staff training. Provide ONE reason why this is considered to be a necessary expense. 2 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 6 Delivery expenses Rent income Page 114 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY J6 You are provided with information relating to Magic Traders. The business is owned by Tony Salotte. REQUIRED: 6.1 Complete the following statements: 6.1.1 The main purpose of a Cash Budget is to … (2) 6.1.2 The main purpose of a Projected Income Statement is to … (2) 6.2 Debtors' Collection Schedule and Projected Income Statement: 6.2.1 Complete the Debtors' Collection Schedule for June 2018. (7) 6.2.2 Determine the following amounts that will appear in the Projected Income Statement:  Discount allowed for May 2018 (3)  Bad debts written off in June 2018 (3) 6.3 Calculate the following:  Cash sales for May 2018 (2)  Payment to creditors in June 2018 (4)  Salaries for May 2018 (5) 6.4 Tony compared the budgeted figures to the actual figures for April 2018. BUDGETED ACTUAL Sales R480 000 R576 000 Advertising R8 000 R11 000 Wages of cleaners R9 000 R12 500 Cleaning materials R1 200 R2 700 Payment to creditors R224 000 R0 6.4.1 Tony is not concerned about the overspending in advertising. Explain why this is so. Quote figures to support your answer. (4) 6.4.2 State ONE consequence of not paying the amount due to creditors in April 2018. (2) 6.4.3 Refer to the figures above and to Information F. State TWO points in favour of appointing Gentex Cleaning Services. Also explain ONE point that Tony should consider before making this decision. (6) Page 115 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT INFORMATION: A. Total sales: ACTUAL BUDGETED March 2018 R420 000 April 2018 R480 000 May 2018 R300 000 June 2018 R360 000 B. Cash sales amount to 40% of the total sales. C. Debtors are expected to pay as follows:  30% in the month of sales. They receive a 5% settlement discount.  60% in the month following the sales month  9% in two months after the sales month  1% is written off as bad debts in the third month after sales D. Purchases and payment to creditors:  The business maintains a fixed-stock base level.  Goods are sold at a mark-up of 50% on cost.  80% of all merchandise purchased is on credit.  Creditors are paid in full in the month following the purchase month. E. Salaries:  Total salaries are R101 500 for April 2018.  There are 7 employees who earn the same monthly salary.  1 employee will resign and leave on 30 April 2018.  4 employees will each receive a bonus of 80% of their salaries in May 2018. F. The business pays wages to two cleaners, one of whom has been on sick leave in April and a substitute had to be employed. Tony is concerned that too much money is wasted on cleaning. He thinks that he should contract Gentex Cleaning Services to take over the cleaning process entirely. They will charge R8 000 per month. 40 ACTIVITY J6 6.1.1 The main purpose of a Cash Budget is to … 6.1.2 The main purpose of a Projected Income Statement is … 4 Page 116 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 6.2.1 Debtors' Collection Schedule: CREDIT SALES MAY 2018 JUNE 2018 March 2018 252 000 22 680 April 2018 288 000 172 800 May 2018 51 300 June 2018 216 000 Cash from debtors 246 780 7 6.2.2 Determine the discount allowed for May 2018. Workings Answer 3 Determine the bad debts written off in June 2018. Workings Answer 3 6.3 Calculate the cash sales for May 2018. Workings Answer 2 Calculate the payment to creditors in June 2018. Workings Answer 4 Page 117 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT Calculate the salaries for May 2018. Workings Answer 5 6.4.1 Tony is not concerned about the overspending in advertising. Explain why this is so. Quote figures to support your answer. 4 6.4.2 State ONE consequence of not paying the amount due to creditors in April 2018. 2 6.4.3 State TWO points in favour of appointing Gentex Cleaning Services. Point 1: Point 2: Explain ONE point that Tony should consider before making this decision. 6 Page 118 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT ACTIVITY J7 Hayley Westra owns Boxes Etc., a business selling packing material. Her business is experiencing cash flow problems and she asked you to assist in correcting this. Budgeted and actual figures were provided in the cash budget. REQUIRED 7.1.1 Explain the importance of comparing the actual figures to the budgeted figures in the cash budget. (1) 7.1.2 Calculate the values marked (A) ‒ (F). (8) 7.1.3 Refer to the figures for “Cash received from debtors”. Are the debtors adhering to the credit (3) terms of the business? Provide figures to support your answer. 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? (2) 7.1.5 The owner feels that the business pays less money by renting equipment than purchasing (5) the equipment. Do you agree with her opinion? Provide TWO points to support your 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 7.1.5), identify TWO other (6) items, with figures, that needs attention. Also provide advice how these items can be managed. 7.1.7 The owner, Hayley, 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 (2) reason for each. INFORMATION Boxes Etc ‒ Cash budget for July and August 2018 July August Cash receipts Budget Actual Budget Actual Cash sales (40% of total sales) 720 000 840 000 360 000 378 000 Receipts from debtors 864 000 624 000 (A) 920 000 Rent income (F) (F) 49 680 49 680 Fixed deposit 360 000 360 000 ‒ ‒ Sundry income ? ? ? ? Loan: FNB 300 000 300 000 ‒ ‒ Sale of vehicle 189 000 120 000 ‒ ‒ TOTAL RECEIPTS ? ? ? ? Cash payments Payments to creditors 960 000 960 000 (B) 1 200 000 Wages and salaries 144 000 180 000 144 000 108 000 Fixed deposit (ABSA) ‒ ‒ (C) (C) Drawings 150 000 210 000 150 000 168 000 Repayment of loan ‒ ‒ 30 000 30 000 Rent of equipment 507 000 459 000 511 080 ? Interest on loan ? ? TOTAL PAYMENTS 1 761 000 1 809 000 ? ? Surplus (Deficit) 720 200 483 200 (675 400) (757 070) Bank opening balance (432 000) (432 000) (D) 51 200 Bank closing balance 288 200 51 200 (E) (705 870) Page 119 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT Additional information:  Debtors must pay their outstanding debts after 30 days and will receive a 5% discount for prompt payment.  All stock is bought on credit and a fixed basis of stock is maintained. Creditors’ accounts are settled after 30 days.  A gross profit margin of 60% is used.  Half of the fixed deposit received in July, was reinvested in August 2018. Interest is receivable every 6 months (at the end of June and December)  The loan was obtained to help solve the cash flow problem. It is repayable in monthly instalments.  The monthly rent increased on 1 August 2018 with 15%.  In the past, when the business wanted to sell a business vehicle, the driver of that vehicle usually had first option to purchase it at carrying value. No deposit was required and the balance would have been deducted in monthly instalments from his salary. ACTIVITY J7 7.1.1 Explain the importance of comparing the actual figures to the budgeted figures in the cash budget. 7.1.2 Calculate the values marked (A) ‒ (F). Calculations A B C D E F 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. . Page 120 of 122

KZN ACCOUNTING GRADE 12 2020 MIP DOCUMENT 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? Reason July August 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. 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 7.1.5), identify TWO other items, with figures, that needs attention. Also provide advice how these items can be managed. Item Figure Advice Page 121 of 122

KZN ACCOUNTING GRADE 12 2020 MIP 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 Driver Finance officer Page 122 of 122