Accounting Grade 12 KZN June 2019 Memo

education Department: Education PROVINCE OF KWAZULU-NATAL NATIONAL SENIOR CERTIFICATE GRADE 12 MARKS: 300 MARKING PRINCIPLES: Penalties for foreign items are applied only if the candidate is not losing marks elsewhere in the question for that item. No double penalty applied. Penalties for placement or poor presentation (e.g. details) are applied only if the candidate is earning marks on the figures for that item. Full marks for correct answer. If answer incorrect, mark the workings provided. If a pre-adjustment figure is shown as the final figure, award one mark. Not the method mark for the answer. Unless otherwise indicated, the positive or negative effect of any figure must be considered to award the mark. If no + or — sign or bracket is provided, assume that the figure is positive. Where indicated, part-marks may be awarded to differentiate between differing qualities of answers from candidates. This memorandum is not for public distribution, as certain items might imply incorrect treatment. The adjustments made are due to nuances in a certain question. Where penalties are applied, the marks for that section of the question cannot be a final negative. Where method marks are awarded for operation, the marker must inspect the reasonableness of the answer before awarding the mark. Operation’ means ‘Check operation’. ‘One part correct’ means ‘Operation & one part correct’. In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect. Be aware of candidates who provide valid alternatives beyond the marking guideline. Codes: f=foreign item; p=placement. This memorandum consists of 14 pages

Downloaded from hlayiso.com Accounting 2 June 2019 Common Test QUESTION 1 1.1 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. 1.2.1 Calculate the correct totals for the Cash Receipts Journal and Cash Payment Journal for May 2019. Cash Receipts Journal 146 970 1 800v 12 340v Cash Payment Journal 68 900 2 100v 920” 600” 50 000v v 161 110M 122 520M 1.2.2. Prepare the Bank Reconciliation Statement on 31 May 2019. Credit Credit balance as per bank statement 42 440v Credit outstanding deposit 18 000” Debit outstanding cheques No. 897 8 700V No. 905 1 200v No. 908 3 100v Credit amount wrongly debited Debit balance as per bank account “Operation 48 240M Operation one part correct 61240M| 61 240M 10 10 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 3 June 2019 Common Test 1.2.3 Explain how cheque No. 908 should be treated when preparing the financial statements as at 31 July 2015 the end of the financial year. Explanation: vv Increase bank and increase creditors in the Balance Sheet notes. Increase cash and cash equivalents as well as trade and other payables in the notes. The amount is not recognised as paid and the debt is not reduced. : debit Bank and credit Creditors control 1.2.4 Refer to information G. The bookkeeper has decided to write off the amount of R50 000. e Which GAAP principle will the bookkeeper be applying? e The bookkeeper wants to prevent a similar problem in future. Give TWO suggestions to improve internal control in this regard. Principle of prudence v Solutions: vv Division of duties/separation of duties Encourage EFT payments by customers / debtors All cash received must be deposited daily/deposit slip must agree to receipts/ bank notifications by SMS or email Regular and timely check / monitor all large transaction 1.3. | Calculate the amount receivable from or payable to SARS for VAT on 31 March 2019. v vv v vv v v w 21 375 — 44 550 + 4 725 — 2 130 + 72 000 — 1 800 = 49 620 on Te — 21375 + 44 550 — 4 725 + 2 130 — 72 000 + 1 800 = 49 620 or Pe Balance at beginning = 21 375 Output 72 000 - 1 800 — 2 130 = 68 070 Input 44 550-4 725 = (39 825) 49 620 OR VAT CONTROL VAT CONTROL 21 375 44 550 44 550 21 375 4725 2130 2130 4725 72 000 1800 1800 72 000 49 620 49 620 98 100 98 100 98 100 98 100 Receivable/Payable: Payable — Donotaccept Receivable especive of workings) | TOTAL MARKS 40 40 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 4 QUESTION 2 2.1 10 11 17 June 2019 Common Test INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019. Copyright reserved Sales (6 200 000v — 20 000Y + 80 000 v — 70 000v ) 6190000 M Cost of sales (3 000 000v + 62 500v — 43 750v ) (3 187 750) @M Gross profit Operation one part correct 3171250 YW Other operating income Operation one part correct 122989 Rent income ( 128 740v — 27 060v) 101680 v Bad debts recovered (2 760v + 2 400v) 5160 v Provision for bad debts adjustment 3149 vv Profit on sale of an asset 13 001 vv Gross income Operation one part correct 3 294 240 Operating expenses (Operation one part correct (2 676 240) M Audit fees 33 800 Insurance 21 222 Bad debts 74 000 Bank charges 3 200 Directors fees (260 000” + 260 000 ) 520000 v Salaries (1 220 000v + 15 368v) 1235368 v Pension fund contribution (36 200v + 3 900v) 40100 v Packing material (22 000v — 4 000v ) 18000 v | Sundry expenses Accept (137322) Balancing figure Operation 77100 Trading stock deficit 81 250 vv Depreciation (525 200M+ 47 000M) See 224 572200 WM Operating profit 618000 v Interest income Operation 32000 4 Operating profit before interest expense Operation 650 000 MJ Interest expense (30 000) v Net profit before taxation Operation 620000 4 Income tax (186 000) v Net profit after tax Operation 434000 MJ 47 Please turn over

Downloaded from hlayiso.com Accounting 5 June 2019 Common Test 2.2.1 CALCULATIONS ANSWER A. [5700 000 — 3800000 Operation one patconet | 1900 000 1 1 B. | 294 000 — 294 000 Operation one part corect Ov 2 2 C. | 24 000% +501 200v Operation one panconet | 626 2001 3 3 D. | 36 000 x 10/100 X 2/12 = 600 ~~ Operalion one part conect 914 000 — 450 000 = 464 000 5 464 000 X 10/100 = 46 400 vv 47 000 5 2.2.2 | Trade and other payables Creditors 660 000 Creditors for salaries 10 538v SARS PAYE (64 100¥ + 2880”) 66 980 Pension Fund (45 400” +3 900Y + 19507) 51 250V Shareholders for dividends 244 800 Income received in advance 27 060v Accrued expenses 260 000v 12 Operation one part correct 1 320 628M 12 Copyright reserved TOTAL MARKS Please turn over

Accounting QUESTION 3: INVENTORY SYSTEMS 3.1.1 3.1.2 3.1.3 3.1.4 3.1.5 Downloaded from hlayiso.com Value of closing stock using the FIFO method of stock valuation. The value of closing stock according to the Weighted Average method is R756 750. 6 June 2019 Common Test (40 marks; 18 minutes) taking. Copyright reserved First in First Out (FIFO) Weighted Average 120 units 80 X R6500 = R520 000vv 40 X R5500 = R220 000v v 120X 1375 = R165 000vv 7 = R905 000 1 Operation one part correct R756 750 7 Calculate Cost of Sales using the FIFO method. O/S + purchases + Import duties - closing stock 5 = 70000V + R1930000Y + 522500 v —905 000 M1 See314 = _R1617 500% Operation one part corect 5 Calculate the number of units missing. 20 VY + 380 Y —258 VY —120 Y = 22 M missing Operation one part correct What solutions would you offer to the CEO to help solve the problem of the missing units. Provide TWO good solutions. Two solutions: vv vv e Convert to perpetual / regular stock counts and better internal control over stock. Safe secure environment/ improved security Improve documentation by ensuring proper authorisation, receiving of goods, recording and packaging. 4 e Division of duties / separation of duties 4 Cool Traders uses the Periodic Stock system. Briefly explain to the CEO how the Perpetual Stock System works. In your explanation state TWO main sea of the sate Stock System. Explanation: vv Cost of sale is recorded with each sale/ cost of goods sold recorded at the point of sale/ continuously updating the stock on hand when sales are made. Two Advantages: v v Trading Stock balance is adjusted immediately. Deficits can be identified timeously through physical stock taking. 4 Gross profit can be calculated at any point in time without physical stock 4 Please turn over

Downloaded from hlayiso.com Accounting 7 June 2019 Common Test 3.1.6 | The CEO has asked you to prepare the financial report based on the FIFO method. Would you agree to comply with the request? Provide a detailed explanation to support your answer. Opinion: NOv Explanationsv v = FIFO method would yield a higher gross profit. « Manipulating figures is fraudulent and unethical. = Contrary to SARS requirements. = Professional accountant is bound by a code of ethics. 3 3 3.1.7. | What other method of stock validation can Cool Traders use? Specific identification method v 1 1 3.2 Identify ONE problem relating to each branch. Quote figures to support your answer. In each case, offer Bennie advice. i vvv BRANCH Problem wiTH A FIGURE Advice Stock piling 75% (330/440) on Decrease mark-up % / hand / Reduce selling price / =| 9 i MALAHLENI Mark- up percentage of 80% too | Sales promotions / order high% / stock as required Sales are only 25% (110/440) of the stock Missing cash of R120 000 Check the money before MBIZENI (1 800 000 — 1 680 000) banking / ; Division of duties / Use EFT Poor stock control — 400 orders | Purchase more stock/ and only 280 in stock (120 more | Take stock from could have been sold) / Malahleni branch Not enough stock to meet SIVUKILE demand (400 orders and only 280 in stock) / No (zero) stock on hand (poor 6 planning) 6 TOTAL MARKS Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 8 June 2019 Common Test QUESTION 4 4.1. Indicate whether the following statements are TRUE or FALSE. Write only ‘true’ or ‘false’ next to the question numbers (4.1.1 to 4.1.5) in the ANSWER BOOK 4.1.1 | Truev 4.1.2 | Falsev 4.1.3 | Falsev 4 4.1.4 | Falsev 4 4.2 BALANCE SHEET ON 28 FEBRUARY 2019. ASSETS NON CURRENT ASSETS TA-caA 4962750 H Fixed assets Operation one part comect |_ 4.507 750 M1 6 Fixed deposit (195 000 v X 70/30 Vv) 455000 4 CURRENT ASSETS 637 250 4 Inventory 1.690 500v / 2 450v = 690M X 325v Operation one partconect |__ 224 250 M1 Trade and other receivables (210 000v— 11 000” + 9000v + 4000”) 212000 v Cash and cash equivalent (5 000v +1 000v + 195 000v ) 201000 v 16 TOTAL ASSETS 5 600 000 4 EQUITY AND LIABILITIES SHAREHOLDERS EQUITY 1i75x41600000)/100 2800 000 v Ordinary share capital Operation one part conect | 1850000 Mi Retained income 950000 v NON CURRENT LIABILITIES Beoooox0s 1680000 4 Loan 1 680 000 CURRENT LIABILITIES 1120000 4 Trade and other payables ( 208 250v + 150 000v +6 000v + 15 000” +7 400v ~22 650” +8000) _Operationonepartcomect | 372 000 M1 Current portion of loan 570 000 Bank overdraft 178 000 36 10 TOTAL EQUITY AND LIABILITIES Operation one partcorrect_ 5 600 000 M1 36 TOTAL MARKS 40 40 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 9 June 2019 Common Test QUESTION 5 5.1.1 | ORDINARY SHARE CAPITAL Authorised shares 1 200 000 Issued shares 900 000 _| Shares Operation onepanconed] 4726000 M1 150 000 v | shares @ R6.30 945 000 v (70 000) v | shares bought back @ R5.40 __ One part comect (378 000) 41 980 000 4 | Shares @ R5.40 5 292 000 v 7 5.1.2 _RETAINED INCOME Balance at the beginning of the year 147 370 Net profit after tax 438 130 v Buy back of shares (437 500 — 378 000) (59 500) 4 Dividends a (276 000) 4 Paid (900 000 X 0.12) 108 000 v Final _(1 050 000 X 0.16) 168 000 v 6 Balance at the end of the year One part correct 250 000 M1 6 5.2 CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019. Cash flow from operating activities 485 500 4 Cash generated by operations Interest paid (86 100) Dividends paid (120 000 V+ 108 000M See5.1.2) One part correct (228 000) 4 (120 000 + 276 000 — 168 000) 8 Tax paid (187 770v — 11 800” —2 400v) (173 570) v -187 770 + 11 800 + 2 400 Cash flow from investing activities Operation one pari correct (1 442 000) Purchases of fixed assets (6 177 000 v + 320 000 v (1 846 000) + 324 000 v — 4 975 000 v) One part correct Proceeds on sale of asset 324 000 v 7 Changes in investment (300 000 — 220 000) 80 000 Cash flow from financing activities "One part correct 1 042 500 Proceeds on shares issued See 5.1.1 945 000 4 Buy-back of shares (437 500) v 3 Changes in non-current liabilities( 450 000 -985 000) 535 000 Net change in cash and cash equivalent ‘Operation one part correct 86 000 4 Cash and cash equivalent at the beginning (62 600) v (65 100 — 2 500) 21 3 Cash and cash equivalent at the end 23 400 v 21 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 10 June 2019 Common Test 5.3 Current ratio 637 000 v : 490 000 v 1.3: 1 © Operation one part comect 3 3 5.4 Significant decisions above Consequence of the decision 500 000 Purchases of fixed asset by To improve the productivity of the business 1 846 000 Proceeds on shares issued by To finance the purchases of fixed asset 945 000 6 Loan increased by R535 000 To finance the purchases of fixed asset 6 5.5 ALWANDE LTD 5.5.1 | Comment on the price of R10.20 charged by Alwande Ltd for the new shares issued. Compare issue price to market price or NAV Vv ¥ Figures R'14,00 or R11,70 “Cou quote iteeneos Bg RSS 3 Expected responses: e The shares were issued at the average share issue price. The existing shareholders are being rewarded as the price is lower than the R14,00 charged on the JSE and the NAV of R11,70. The shares could have been issued at the market price of R14,00 or the NAV of R11,70 (they have diluted the value of the shares). 5.5.2 | Explain how the issue of new shares has affected the financial gearing and risk of Alwande Ltd. Quote TWO financial indicators. Explanationv v Financial indicators vv Figures v v Expected responses: one mark e Gearing has improved — less risk (as there was an issue of new shares) one mark debt-equity ratio decreased from 0,8: 1 to 0,5: 1 (by 0,3 : 1) one mark e ROTCE improved (due to increased efficiency / profits on new branch) from 19 % to 21 bas Fi 6 o Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 11 June 2019 Common Test 5.5.3 | If Sizwe wanted to retain his 55% shareholding in the company, how many shares would he have had to buy? v v ica} (1 150 000 x 55%) — (1000 000 x 55%) = 82 500 632 500 550 000 OR two marks ‘one method mark (if x 60%) 150 000 x 55% = 82500 How much would he have had to pay? 82 500 shares at R10.20 each = R841 500 MM it=number of shares (above) x R9,10 Sizwe 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. eres v “ater voev Expected responses: Any two e His dividends would have increased by R42 075 (51c x 82 500 shares). This is more than the interest he earned on the savings account R38 709 (841 500 see above x 4.6%) e He could buy the shares for capital growth - bought the shares for R10.20 and then could sell them on the JSE for R14,00 / total profit could have been R313 500 / would be a good buy as R14,00 exceeds NAV R11,70 He would have earned more dividends on bigger investment (51¢/1020c = 5,%) 7) EE ROSHE would be 25% on a bigger investment. He would lose 82 500 votes at the AGM. SUKOLUHLE LTD 5.5.4 | Comment on the liquidity of Sukoluhle Ltd. Quote TWO financial indicators. Explanation: vv The liquidity situation has improved / is able to meet current debts / liquidity ratios have decreased / liquidity ratios are more efficient Financial indicators anytwoVv Vv Figures v v e Current ratio has decreased (from 3,5 : 1) to 1,9: 1 e Acid-test ratio has decreased (from 1,7: 1) to 1,1: 1 e Stock-holding period appears to be efficient at 54 days (less than 2 months) 6 oa 5.5.5 Comment on the price paid by Sukoluhle Ltd for the repurchase coer of shares. Expected response with any figure: vv The company is paying a premium above the average share price in order to entice shareholders to give up their shares / they wanted to increase returns by decreasing equity / this is a fair value same as the price on the JSE. Compare price paid (R17,00) to e market value R17,00 2 e net asset value R15,40 2 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 12 June 2019 Common Test e_average issue price of shares R11.50 5.5.6 | Explain THREE ways in which Sizwe has benefited from the repurchase of the shares by Sukoluhle Ltd. fs eo vvv se vvv Expected responses: Three different responses e He has now become a majority shareholder. His 550 000 shares are 61.1% of the total shares (40% before the share buy-back) e Due to the reduced number of shares, his return has improved i.e. EPS has increased by 80c / from 190c to 270c / ROSHE increased from 14% to 16%. (NOTE: EPS and ROSHE reinforce the same point). e The reduced number of shares could have contributed to an increase in the DPS by 57c / by 55.3% / from 103c to 160c (Directors may have maintained the dividend pay-out policy). 6 TOTAL MARKS 75 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 13 June 2019 Common Test QUESTION 6: RECONCILIATIONS 6.1 6.2 6.2.1 6.2.2 6.2.3 Choose the correct answer from the words provided within brackets. Write only the answer, next to each number. 6.1.1 | Cash Payments Journal (CPJ) v 6.1.2 | Debit v v v 6.1.3 | Credit note 6.1.4 | Cash discount 7 DEBTORS RECONCILIATION Calculate the correct Debtors Control balance on 31May 2018. 74 600 - 3.500 v +4500 vv” =75 600 © One part correct (4 230 + 270) 4 4 Calculate the balances for the following debtors: v- vv N. Zulu 21 600 1 600 + 45004 24500 (—800 — 800) C.Ntazi 24900 v -2500v 22400 A. Botha 11100 vv +2 700v 13800 M* 12 + One part corect | [22 Calculate the percentage of debtors that are not complying with the 30 days credit terms. 28 000 + 8 400 36400” x100 = 52% Mone part correct 70 000 v 3 3 List TWO internal control measures that MGM Traders can use to ensure that only reliable clients are granted credit. e Perform credit checks (references / listing / credit bureau). e Check employment history and salary advice. e Contact details (residential/postal address and contact numbers). 4 4 Copyright reserved Please turn over

Accounting 14 6.3 CREDITORS RECONCILIATION Downloaded from hlayiso.com June 2019 Common Test CREDITOR’S LEDGER NO. ACCOUNT BALANCE STATEMENT BALANCE Balance 35 000 38 420 ; 2970 ') 7740-4770 ”” ii) (750) vv iii) 1000 vv (1 960) iv) 980+980 VY (1. mark each) v) (3 860) vv vi) 7120 vv mal 13 TOTAL 38 970 38 970 13 Copyright reserved TOTAL MARKS 40