Accounting Grade 12 Paper 1 KZN June 2020 Question Paper

Downloaded from hlayiso.com equcation Department: Education PROVINCE OF KWAZULU-NATAL NATIONAL SENIOR CERTIFICATE GRADE 12 MARKS: 150 TIME: 2HOURS This question paper consists of 14 pages and an answer booklet of 7 pages.

Downloaded from hlayiso.com Accounting Paper One 2 JUNE COMMON TEST 2020 INSTRUCTIONS AND INFORMATION Read the following instructions carefully and follow them precisely. 1. Answer ALL the questions. 2. A special ANSWER BOOK is provided in which to answer ALL the questions. 3. Show workings in order to achieve part-marks. 4. You may use a non-programmable calculator. 5. You may use a dark pencil or blue/black ink to answer the questions. 6. Where applicable, show all calculations to ONE decimal point. 7. Write neatly and legibly. 8. Use the information and table below as a guide when answering the question. Try NOT to deviate from it. QUESTION 1: 40 Marks; 32 Minutes Topic of the question This question integrates: Concepts Concepts and Financial Statement Statement of Comprehensive Income (Income Statement) QUESTION 2: 45 Marks; 36 Minutes Topic of the question This question integrates: Ordinary share capital Note, Cash Flow Statement and Ratio Analysis and interpretation of financials Analysis Cash Flow Statement QUESTION 3: 35 Marks; 28 Minutes Topic of the question This question integrates: Audit report Audit Report, Note and Financial Retained income Statement Statement of Financial Position (Balance sheet) QUESTION 4: 30 Marks; 24 Minutes Topic of the question This question integrates: Ratio Analysis Analysis and interpretation of financials Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting Paper One 3 JUNE COMMON TEST 2020 QUESTION 1 CONCEPTS AND STATEMENT OF COMPREHENSIVE INCOME (INCOME STATEMENT) (40 Marks; 32 Minutes) 1.1 CONCEPTS Choose an explanation from COLUMN B that matches a concept in COLUMN A. Write only the letter (A-E) next to the question number (1.1.1-1.1.4) in the ANSWER BOOK. COLUMN A COLUMN B (CONCEPT) (EXPLANATION) 1.1.1 Materiality A Financial statements are prepared with the understanding that the company will continue operating in the future. 1.1.2 Matching B All assets are recorded at their original cost price. 1.1.3 Going concern C Income and expenses must be recorded in the correct financial year. 1.1.4 Historical cost D All important items should be shown separately in financial statement E Figures used in financial statement should be realistic. (4x1) (4) Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting Paper One 4 JUNE COMMON TEST 2020 1.2 WINTERTON LIMITED REQUIRED: Complete the Statement of Comprehensive Income (Income Statement) for the year ended 31 May 2020. (36) A. INFROMATION: Figures extracted from the Pre-adjustment Trail Balance on 31 May 2020. R Balance Sheet Accounts Section Mortgage loan: Super Bank 1 700 000 Fixed deposit: New Bank 800 000 Trading stock 1 200 000 Bank (favourable) 626 000 Petty cash 7 800 Debtors control 792 200 Creditors control 750 000 Provision for bad debts 45 000 SARS: Income tax (Dr) 600 000 SARS: PAYE 48 000 Pension fund 18 000 Packing material on hand (1 June 2019) 3 000 Nominal Accounts Section Sales ? Cost of sales 9 700 000 Salaries and wages 541 000 Employers contributions 21 000 Directors fees 480 000 Audit fees 38 000 Rent income 202 500 Sundry expenses ? Bad debts 45 000 Packing material 78 000 Insurance 55 000 Interest on fixed deposit 72 000 Interest on loan ? Bad debts recovered 15 700 Ordinary share dividends 24 000 Depreciation 65 000 B. Goods with a cost price of R62 500 sold on credit was not recorded. A 10% trade discount was allowed on this sale. All selling prices are determined by using a mark-up of 60% on cost. Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting Paper One 5 JUNE COMMON TEST 2020 C. An amount of R2 000 received from Ngubane had been credited to the debtors control account in May 2020. The account of Ngubane was written off as a bad debt during December 2019. D. Provision for bad debts must be adjusted to 5% of debtors. E. The physical stocktaking on 31 May 2020 reflect the following stock on hand : • Trading stock R1 130 000 • Packing material R78 500 F. There were two directors at the start of the accounting period. Directors fee have been paid for the first half of the accounting period. Due to COVID 19 shareholders decided to reduce the director’s fees by 5 % p.a for all directors as from 1 March 2020. On 1 May 2020, one director was retrenched from work. All directors earn the same monthly fee. Provide for the outstanding fees owed to the directors. G. Rent income for June 2020 has already been received. The monthly rent was increased by 10% on 1 February 2020. H. The business received R36 000 from the insurance company for the claim of trading stock that was damaged in a fire which broke out in the storeroom. This amount was received on 31 May 2020, but was not recorded in the books of the business. Write off 20% balance. Note: the damaged stock was recorded in trading stock account of a business. I. Sifiso, a retired employee was inadvertently included in the salaries journal for May 2020. The details from his pay-slip were: Net salary R18 375 PAYE deduction R4 500 Pension deduction R1 875 UIF deduction R250 The business contribution were: • Pension fund : 10% of gross salary • UIF: rand-for-rand basis J. Use the following to calculate certain figures: • Operating profit on sales is 28% K. Income tax for the financial year was calculated as R1 320 000. This is 30% of the net profit before tax. 40 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting Paper One 6 JUNE COMMON TEST 2020 QUESTION 2 NOTE, CASH FLOW STATEMENT AND RATIO ANALYSIS (45 Marks; 36 Minutes) The information below was extracted from the books of Dududu Ltd. Study the information and answer the questions that follow. REQUIRED: 2.1 Ordinary share capital note of the Balance Sheet on 31 May 2020. (8) 2.2 Prepare the reconciliation between net profit before tax and cash generated (10) from operations. (Show workings in brackets) 2.3 Complete the Cash Flow Statement for the year ended 31 May 2020. (20) 2.4 Besides paying back the loan, the directors have taken other major decisions that have affected the cash balance. State TWO other major decisions (exceeding R200 000) and quote the figures from the Cash Flow Statement. In EACH case, state how the decision will affect the future of the company. (4) 2.5 Calculate the following for the year ended 31 May 2020. 2.5.1 Debt/equity ratio (3) Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting Paper One 7 JUNE COMMON TEST 2020 INFORMATION A. EXTRACT FROM THE BALANCE SHEET (STATEMENT OF FINANCIAL POSITION) ON 31 MAY 2020 2020 2019 ASSETS NON-CURRENT ASSETS Fixed assets 979 440 814 800 Financial assets 130 000 190 000 CURRENT ASSETS Inventory 1 125 000 1 145 000 Trade and other receivables 1 115 000 1 143 000 CAPITAL AND RESERVES ORDINARY SHAREHOLDERS EQUITY 2 499 900 ? Ordinary share capital 2 375 000 2? Retained Income 124 900 85 100 CURRENT LIABILITIES Trade and other payables 1 150 940 1 070 800 B. Notes to the Balance Sheet (Statement of Financial Position) 2020 2019 1. TRADE AND OTHER RECEIVABLES 1115 000 1 143 000 Debtors Control 1 102 000 1 130 000 Accrued Income 9 000 6 000 Prepaid Expenses 4000 3.000 SARS: Income Tax 0 4 000 2. TRADE AND OTHER PAYABLES 1 150 940 1 070 800 Creditors Control 1 043 565 1 047 300 Accrued expenses 7 000 9 500 SARS: Income Tax 10 375 ie} Shareholders for Dividends 260 000 14 000 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting Paper One 8 JUNE COMMON TEST 2020 C. ADDITIONAL INFORMATION 1 Ordinary share capital: ▪ The authorised share capital comprises 300 000 shares. ▪ 1 June 2019: 100 000 shares issued @ R10 each ▪ 1 January 2020:100 000 new shares were issued ▪ 31 May 2020: repurchased 10 000 shares at R2.50 above average price 2 Depreciation ▪ Total depreciation for the year amounted to R16 645. 3 Sale of equipment Details of Equipment sold at carrying value: Cost price R40 000 Accumulated depreciation to date sold R20 570 Date sold 1 April 2019 Selling price ? 4 Income tax ▪ Income tax at 28% of the net profit for the year amounted to R165 200. 5 Dividends ▪ The interim dividend of 100 cents per share was declared and paid on 31 December 2019. The final dividend was declared on 31 May 2020. 6 Loan The loan statement from Alan Bank on 31 May 2020 reflected: Balance at the beginning of financial year R1 070 000 Repayments during the year (including interest) 840 000 Interest capitalised (interest rate 15% p.a.) ? Balance at end of financial year 350 000 45 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting Paper One 9 JUNE COMMON TEST 2020 QUESTION 3 AUDIT REPORTS AND STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) (35 Marks; 28 Minutes) 3.1 AUDIT REPORTS Choose the audit opinion from COLUMN B that describes the audit report in COLUMN A. Write only the letter (A – C) next to the numbers (3.1.1 – 3.1.3) in ANWER BOOK. COLUMN A COLUMN B 3.1.1 Qualified audit A We were not able to obtain sufficient evidence to report provide for an audit opinion. Accordingly, we do not express an opinion on the financial statements of Dumbe Ltd for the year then ended. 3.1.2 Unqualified B Except for the effect of the unauthorised bonus to the audit report Chief Executive Officer, the annual financial statements present fairly, in all material respects, the financial position of Harding Ltd. 3.1.3 Disclaimer C The annual financial statements fairly present, in all report material respects, the financial position of Molweni Ltd. (3) 3.2 NDALENI LTD Ndaleni Ltd is a listed company with an authorised share capital of 900 000 ordinary shares. The information provided is for the financial year ended 30 April 2020. REQUIRED: 3.2.1 Prepare the Retained Income note to the Balance Sheet. (7) 3.2.2 Complete the Statement of Financial Position (Balance Sheet) on 30 April 2020. Show all workings in brackets. Some amounts are provided in your ANSWER BOOK. (25) Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting Paper One 10 JUNE COMMON TEST 2020 INFORMATION: A. — The following balances/totals were extracted from the company records on 30 April 2020: R Ordinary share capital 2 Retained income (1 May 2019) 7 480 Fixed assets at carrying value 4079 800 Fixed Deposit: Londa Bank 415 000 Loan: Dube Bank 1 035 000 Inventory (all Trading Stock) 222 600 Creditors 231 920 SARS: Income tax (provisional tax payments) 280 000 Cash in bank 212 400 Share Capital and Dividends: The company is authorised to issue 900 000 shares. No new shares were issued during the year. Fixed Deposit: R215 000 of the fixed deposit matures on 30 June 2020. The balance matures in 2025. Loan: Dube Bank The loan statement received reflected the following: On 1 May 2019, 80% of the authorised share capital was in issue. On 20 November 2019, the company repurchased 40 000 shares at R1,25 above the average share price of R6,00. This transaction was recorded. An interim dividend of R179 200 was paid on 31 October 2019. A final dividend of R210 000 was declared on 30 April 2020. Balance on 1 May 2019 R 1500 000 Total of monthly repayments (including interest) 465 000 Interest capitalised 165 000 Balance on 30 April 2020 ? A portion of the loan will be settled during the next financial period. Profit and tax: The net profit after tax amounted to R681 720. Income tax is calculated at 31% of the net profit. Financial indicators on 30 April 2020: Current ratio 2:1 Net asset value (NAV) 610 cents Copyright reserved [35] Please turn over

Downloaded from hlayiso.com Accounting Paper One 11 JUNE COMMON TEST 2020 QUESTION 4 ANALYSIS AND INTERPRETATION (30 Marks; 24 Minutes) 4.1 WEMBEZI LTD Veli is a shareholder in Wembezi Ltd. • He purchased 23 000 shares two years ago at R3,80 each. • On 1 March 2019 he purchased a further 2 000 • On 1 February 2020 the company repurchased 3 000 of his shares. REQUIRED: 4.1.1 Calculate the amount of dividends Veli earned for the financial year ended 29 February 2020. Shares repurchased do not qualify for final dividends. (3) 4.1.2 Veli is not satisfied with the dividend policy of Wembezi Ltd. Explain why. Quote and compare relevant financial indicators to support his feelings. (4) 4.1.3 Veli wants to sell his shares in Wembezi Ltd and invest his funds in an alternative investment. Quote and explain TWO relevant indicators, other than dividends and earnings, to support his intention. (4) 4.1.4 Why would the company spend money on skills development? Explain ONE point. (2) 4.1.5 Refer to Information A. How did the company benefit from this (4.1.4)? Name ONE example and quote figures. (2) INFORMATION A. Extract from the Income Statement for the year ended: 29 Feb 2020 28 Feb 2019 Sales 18 500 000 13 700 000 Cost of Sales 13 200 000 9 500 000 Directors fees 2 530 000 1 800 000 Audit fees 620 000 570 000 Skills development 140 000 80 000 Salaries and wages 480 000 375 000 Workplace accident cost 8 000 23 000 Electricity 121 000 118 000 Loss of production 2 000 7 000 Interest expense 175 500 270 000 Net profit before tax 1 875 000 Net profit after tax 1 592 500 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting Paper One 12 JUNE COMMON TEST 2020 B. Dividends • The company paid an interim dividend of 30c per share on 1 December 2019. • A final dividend of 50c per share was declared at the end of the financial year. The shares repurchased do not qualify for final dividends. C. The following ratios were calculated on: 29 Feb 2020 28 Feb 2019 Return on shareholders’ equity 20% 23% Closing price on JSE 640 cents 750 cents Dividends per share 85 cents 120 cents Earnings per share 170 cents 160 cents Return on total capital employed 27% 28% Net asset value 655 cents 760 cents Debt/Equity ratio 0.11:1 0.14:1 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting Paper One 13 JUNE COMMON TEST 2020 4.2 ZINKWAZI LTD You are provided with information relating to Zinkwazi Ltd for the financial year ended 30 June 2020. REQUIRED: 4.2.1 Comment on the liquidity position of the company. Quote THREE financial indicators (with figures) in your answer. (6) 4.2.2 One of the directors feel that the loan should be paid as soon as possible. Do you agree? Explain. Quote TWO financial indicators with figures to support your answer. (5) 4.2.3 The shareholders should be satisfied with the return on their investment and the companies’ earnings. Explain TWO financial indicators with figures to support this opinion. (4) INFORMATION The following financial indicators were calculated: INDICATORS 30 June 2020 30 June 2019 Return on shareholders’ equity 18% 10.6% Return on capital employed 24% 14% Debt/equity ratio 0.06 : 1 0.28 : 1 Earnings per share 49 cents 45 cents Dividends per share 30 cents 45 cents Net Asset Value per share 695 cents 572 cents Current ratio 0.9 : 1 1.7 : 1 Acid-test ratio 0.4 : 1 0.6 : 1 Rate of stock turnover 3 times 5 times Interest rate on loan 16% 12% Interest rate on investment 6% 5% Market value per share on JSE 810 cents 720 cents 30 TOTAL MARKS: 150 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting Paper One 14 JUNE COMMON TEST 2020 GRADE 12 ACCOUNTING FINANCIAL INDICATOR FORMULA SHEET Gross profit X 100 Gross profit X 100 Net profit before tax X 100 Sales 1 Cost of sales 1 Sales 1 Net profit after tax X 100 Operating expenses X 100 Operating profit X 100 Sales 1 Sales 1 Sales 1 Total assets : Total liabilities Current assets : Current liabilities Average trading stock X 365 (Current assets — Inventories) : Current liabilities Cost of sales 1 (Trade and other receivables + Cash and cash equivalents) : Current liabilities Average debtors X 365 Cost of sales Credit sales 1 Average trading stock Trading stock X 365 Average creditors X 365 Average creditors X 365 Cost of sales 1 Credit purchases 1 Cost of sales 1 Net profit after tax X 100 Long-term liabilities : Shareholders’ equity Number ofissued shares 1— Net income after tax X 100 Average shareholders’ equity 1 Net income after tax + Interest on loans x 100 Average Shareholders’ equity + Average Long-term liabilities 1 Shareholders’ equity X 100 Dividends forthe year_ X 100 Dividends pershare X 100 Number of issued shares 1 Number of issued shares 1 Earnings per share 1 Copyright reserved Please turn over