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ACCOUNTING GRADE 12 QUESTIONS - 2018 SEPTEMBER PREPARATORY EXAM PAPERS AND MEMOS

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ACCOUNTING
GRADE 12
NATIONAL SENIOR CERTIFICATE
SEPTEMBER 2018

INSTRUCTIONS AND INFORMATION
Read the instructions carefully and follow them precisely.

  1. Answer ALL the questions.
  2. A special ANSWER BOOK is provided in which to answer ALL the questions.
  3. Show ALL workings to earn part-marks.
  4. You may use a non-programmable calculator.
  5. You may use a dark pencil or black/blue ink to answer the questions.
  6. Where applicable, show all calculations to ONE decimal place.
  7. A breakdown of the questions is provided. Attempt to comply with the suggested time allocation for each question.
Main topic: This question integrates:
QUESTION 1: 45 marks; 30 minutes   
Cost Accounting  Managerial Accounting
• Concepts; Production Cost Statement
• Break-even and unit cost analysis
Managing resources
• Internal control 
QUESTION 2: 40 marks; 25 minutes  
Budgeting  Managerial Accounting
• Calculations and Interpretation of budgets
Managing Resources
• Internal control 
QUESTION 3: 75 marks; 45 minutes 
Company Financial Statements  Financial Accounting
• Concepts; Income Statement
Managing Resources
• Fixed Assets management
• Audit Report 
QUESTION 4: 65 marks; 40 minutes 
Financial Statements, Cash flow
and Interpretation
Managerial Accounting
• Concepts; Balance Sheet notes
• Cash Flow Statement
• Interpretation of financial information
QUESTION 5: 45 marks; 25 minutes
Stock Valuation Managing resources
• Stock valuation methods
• Internal control
QUESTION 6: 30 marks; 15 minutes
Reconciliations and VAT Financial accounting
• Creditors Reconciliation
• VAT calculations
Managing resources
• Internal control

 

QUESTION 1: COST ACCOUNTING (45 marks; 30 minutes)
1.1 Choose the correct answer from the words provided within brackets. Write only the answer next to the numbers (1.1.1–1.1.3) in the ANSWER BOOK.
1.1.1 (Office stationery/packing material) will NOT be regarded as an administration cost.
1.1.2 Cleaning detergents used in the factory is an example of (direct material/indirect material).
1.1.3 An increase in the number of units produced will lead to a/an (decrease/increase) in the fixed cost per unit. (3 x 1) (3)
1.2 LOLO MANUFACTURERS
Lolo Manufacturers makes plastic buckets. Information for the financial year ended 28 February 2018 is provided.
REQUIRED:
1.2.1 Calculate the cost of the raw materials issued to the factory during the financial year. (8)
1.2.2 Calculate the following for the Production Cost Statement:

  • Direct Labour Cost (7)
  • Factory Overhead Cost (complete the table provided). (5)

1.2.3 Prepare the Production Cost Statement on 28 February 2018. (11)
INFORMATION:
A. Stock balances:

  28 FEB. 2018
1 MAR. 2017
Raw materials  76 300   87 250 
Work-in-process   ?  30 000
Finished goods  31 800  27 800 
Factory consumables  7 700 5 300 

B. Summary of transactions for the year ended 28 February 2018:

Purchases of raw materials  R 694 150 
Carriage on raw materials purchased   21 200 
Consumable stores used in the factory  22 830 
Cleaning materials purchased for the office  12 330 
Production wages   423 400
UIF – Contribution for factory employees  ?
Salaries: Factory foreman  154 200 
Administration  189 000 
Sales 217 000
Water and electricity 132 360
Sundry expenses: Factory 89 910
Administration 76 200
Sales department 68 390

C. Additional information:

  1. An invoice for transport of raw materials, R4 200, has not yet been recorded.
  2. During the physical stock take of raw materials on 28 February 2018, 3 000 bucket handles were recorded at R5,00 each instead of R1,50 each. This must be corrected.
  3. The wage of a factory worker was omitted from the February 2018 wages journal. Her details are:
    Net wage R9 614 
    PAYE tax  R2 860 
    UIF (1% of gross)  R126 
    The employer contributes 1% to the UIF 

     

  4. The water and electricity account for February 2018, R3 240, was not paid. 75% of the water and electricity is allocated to the factory.

  5. Buckets are sold at R96 each (60% mark-up on cost). Total sales for the financial year amounted to R2 457 600.

1.3 GRENS BAKERY
Information relating to the production of cakes is presented. The business is owned by Sydney.
REQUIRED:
1.3.1 Calculate the break-even point for 2018. (4)
1.3.2 Explain whether Sydney should be concerned about the break-even point and the level of production. Quote figures. (3)
1.3.3 Give a possible reason for the change in unit costs of direct material and of direct labour. (4)
INFORMATION:

    30 APRIL 2018   30 APRIL 2017 
UNIT COSTS     Direct material R14,50 R18,20 
Direct labour   R17,30   R12,40
Selling and distribution  R8,40 R8,00 
Variable cost  R40,20  R38,60 
Total fixed cost   R249 000   R242 720 
Number of cakes produced and sold   15 000   14 800 
Break-even point     ? 13 950 
Selling price per unit R61,60 R56,00

(45)

QUESTION 2: BUDGETING (40 marks; 25 minutes)
2.1 Indicate whether the following statements are TRUE or FALSE. Write only True or False next to the numbers (2.1.1–2.1.3) in the ANSWER BOOK.
2.1.1 A Cash Budget is prepared to show the actual receipts and payments for a specific period.
2.1.2 A Projected Income Statement would reflect the expected profit or loss for the budget period.
2.1.3 Only nominal accounts are recorded in a Cash Budget. (3)
2.2 BANYAMA LTD
The information relates to Banyama Ltd for the budget period ended 30 September 2018.
REQUIRED:
2.2.1 Complete the Debtors Collection Schedule. (7)
2.2.2 Calculate the amounts denoted by (i) to (vi) on the extract of the Cash Budget provided. (19)
2.2.3 Refer to Information J:

  • Calculate the percentage increase in the manager’s salary.(4)
  • Comment on whether the salary and wage decision was justified.(3)
    Quote figures.
  • Provide TWO possible consequences of this decision.(4)

INFORMATION:

  1. The business sells kitchen appliances at a profit mark-up of 80% on cost.
    Stock is replaced in the month of sale. A base stock is maintained.
  2. Actual and budgeted figures for 2018:
      JULY  AUGUST SEPTEMBER 
    Sales  225 000 207 000 216 900
    Purchases 125 000 ? 120 500

     

  3. 70% of total sales are on credit. Debtors pay as follow:

  4. 60% in the month following the sales month;

    • 36% in the second month following the month of sales;

    • 4% is written off.

    • All goods are purchased on credit. Creditors are paid after 30 days subject to a 5% discount.

  5. Extract from the Cash Budget for August and September 2018:

      AUGUST
    SEPTEMBER
    Cash sales  62 100  (i)
    Loan received 316 800  0
    Payment to creditors  118 750  (ii) 
    Salary of manager  15 300  16 830
    Wages of sales staff   38 400  38 400
    Operating expenses (iii)
    Drawings  13 250  (iv) 
    Water and electricity 15 400 16 632
    Deposit on new equipment 12 600 0
    Instalment on new equipment 0 (v)
    Instalment on loan 0 (vi)
    Interest on loan 0 2 310

     

  6. Operating expenses amounts to R163 440 annually and is spread evenly throughout the budget period.

  7. The owners plan to draw 50% more than their usual monthly drawings to attend a live concert during September 2018.

  8. New equipment will be purchased during August 2018. A 15% deposit will be paid. The balance will be settled in equal instalments over 24 months, commencing on 30 September 2018.

  9. The loan was received from a partner. A fixed instalment will be paid on the 1st of each month. Interest at 9% p.a. will be paid at the end of each month, commencing in September 2018.

  10. Salaries and wages are revised in August each year. The manager’s salary will increase on 1 September 2018. Due to the poor economic situation, the owner decided that a wage increase cannot be afforded.
    (40)

QUESTION 3: FIXED ASSETS, INCOME STATEMENT AND AUDIT REPORT (75 marks; 45 minutes)
3.1 CONCEPTS
Choose a category from the list provided for each example below. Write only the category next to the numbers (3.1.1–3.1.4) in the ANSWER BOOK.
non-current asset; current liability; expense; equity; current asset; income
3.1.1 Retained income
3.1.2 Amount due by SARS in respect of income tax for the year
3.1.3 Extensions to land and buildings
3.1.4 An increase in the Provision for Bad Debts (4 x 1) (4)
3.2 YASHPAL LTD
The information relates to the financial year ended 28 February 2018.
REQUIRED:
3.2.1 Refer to Information A:
Calculate the figures denoted by (i) to (iii) on the Fixed Asset note. (11)
3.2.2 Prepare the Asset Disposal account on 1 January 2018. (5)
3.2.3 Prepare the Income Statement for the year ended 28 February 2018. (46)
INFORMATION:

  1. Fixed Assets:
      VEHICLES EQUIPMENT
    Cost (1 March 2017) 838 000 622 000 
    Accumulated depreciation (1 March 2017) (420 000)   (264 000) 
    Carrying value (1 March 2017)  (i)  358 000 
    Movements:     
    Additions   216 000   0
    Disposals  0 (iii) 
    Depreciation  (ii)  (35 400)
    Carrying value (28 February 2018)    
    Cost (28 February 2018)   517 000
    Accumulated depreciation (28 February 2018)    
    • A new vehicle was purchased on 1 October 2017.
    • Vehicles are depreciated at 15% on cost.

    • Old equipment was sold on 1 January 2018 for R26 250, cash. A profit of R4 250 was made on this sale.

  2. Balances/totals extracted from the Pre-adjustment Trial Balance on 28 February 2018:

    Loan: GT Bank R 542 000 
    Fixed deposit (8% p.a. interest) 195 000
    Debtors control   112 245 
    Provision for bad debts  7 480 
    Trading stock  728 400 
    Sales   ?
    Cost of sales   4 250 000 
    Directors fees  336 500 
    Salaries and wages 222 700
    Fee income 79 350
    Audit fees 19 450
    Rent expense 146 080
    Packing material 43 730
    Discount received 14 280
    Bad debts  23 555
    Sundry expenses ?
  3. ADDITIONAL INFORMATION AND ADJUSTMENTS:

a )A credit sales invoice for R32 200 was not taken into account. Goods are sold at a profit mark-up of 75% on cost.

 

b) Stock-taking on 28 February 2018 revealed the following stock on hand

  • Trading stock, R706 350
  • Packing material, R3 880

c) A debtor who owed R17 300 was declared insolvent. His estate paid 35 cents to the Rand and this was correctly recorded. The remaining balance must be written off as irrecoverable.

 

d) The provision for bad debts must be adjusted to 5% of debtors.

 

e) Directors’ fees of R23 500 were still outstanding on 28 February 2018.

 

f) 50% of the audit fees were paid to the external auditor. The balance will be settled in March 2018.

 

g) Rent paid includes the rent for March 2018. Note that the rent increased by 7% on 1 December 2017.

 

h) The loan statement received on 28 February 2018 reflected an outstanding balance of R565 800. Interest, capitalised, was not taken into account.

 

i) Take into account interest on fixed deposit at 8% p.a. This investment was made on 1 September 2017.

 

 j) After taking into account all the adjustments, the income tax for the year at 29% of the net profit amounted to R560 860.\

3.3 AUDIT REPORT: PICOLI LTD

REQUIRED:
3.3.1 Briefly explain the role of the external auditor. (2)
3.3.2 What type of audit report did Picoli Ltd receive? Explain. (3)
3.3.3 Why would an existing shareholder be concerned about this report?
Provide TWO points. (4)
INFORMATION:

EXTRACT FROM THE REPORT OF THE INDEPENDENT AUDITORS

We have audited the annual financial statements of Picoli Ltd, for the financial year
ended 30 June 2018. Our responsibility is to express an opinion on these financial
statements based on our audit.
Audit opinion
In our opinion, the financial statements fairly represent the financial position of the
company at 30 June 2018, except for the advertising expenses in the Income
Statement which could not be verified, as no documentation existed for this
expenditure.

Mashele and Fouche
Chartered Accountants (SA) 12 August 2018 

(75)

QUESTION 4: FINANCIAL STATEMENTS, CASH FLOW AND INTERPRETATION (65 marks; 40 minutes)
4.1 CONCEPTS: MATCHING
Choose a description from COLUMN B that matches the concept in COLUMN A. Write only the letter (A–F) next to the numbers (4.1.1–4.1.5) in the ANSWER BOOK.

COLUMN A COLUMN B
4.1.1 Balance Sheet
4.1.2 Liquidity
4.1.3 Income Statement
4.1.4 Solvency
4.1.5 Gearing 
  1. Reflects the financial performance of a business for a specific period
  2. The extent to which a business is making use of borrowed capital 
  3. The ability of a business to pay off all its debts
  4. This is the return earned by shareholders’ investments in the business
  5. The ability of a business to meet its current liabilities
  6. Shows the financial position of a business in terms of its assets, liabilities and equity

(5 x 1) (5)
4.2 KHLOE LTD
The information relates to the financial year ended 31 May 2018.
REQUIRED:
4.2.1 Complete the cash generated from operations note for the Cash Flow Statement. (9)
4.2.2 Calculate the following amounts for the Cash Flow Statement:

  • Income tax paid (4)
  • Dividends paid (4)
  • Fixed assets purchased (5)

4.2.3 Calculate the Net change in cash and cash equivalents. (4)
INFORMATION:
A. Extract from the Balance Sheet and notes on 31 May 2018:

  2018  2017
Fixed assets (carrying value) R1 437 200 R1 120 400
Current assets     
Inventories  123 800  163 300 
Trade and other receivables:   168 300   149 100 
Trade debtors  155 600  134 700 
SARS: Income tax   12 700 0
Expenses prepaid   0 14 400
Cash and cash equivalent 76 750 15 500
Current liabilities    
Trade creditors 122 900 162 600
SARS: Income tax 0 27 200
Shareholders for dividends 142 400 111 000
Income received in advance 11 100 0
Bank overdraft 0 124 300

B. Additional Information:

  1. Net profit before income tax, R988 700;
    Net profit after income tax, R692 100.
  2. Old equipment were sold at carrying value of R283 500. Equipment were purchased during the financial year to upgrade the facilities.
  3. Depreciation for the year, R221 400.
  4. Total dividends (paid and recommended) as per the Retained Income note, R317 400.

4.3 KWEZI LTD: ANALYSIS AND INTERPRETATION
The information relates to the financial year ended 28 February 2018.
REQUIRED:
4.3.1 Prepare the Ordinary Share Capital note. (7)
4.3.2 Calculate the following financial indicators on 28 February 2018:

  • Net asset value per share (3)
  • Return on shareholders’ equity (5)

4.3.3 Quote TWO financial indicators (with figures and trends) that indicate an improvement in the liquidity position of the business. (4)
4.3.4 The company paid back a large portion of the loan. Explain why this was a good decision. Quote TWO financial indicators (with figures). (6)
4.3.5 Comment on the dividend pay-out policy over the past two years. Provide a possible reason for the policy adopted. Quote figures. (5)
4.3.6 Explain whether the price paid for the share buy-back was fair. Quote TWO financial indicators (with figures) in your explanation. (4)

INFORMATION:
A. Extract from the Income Statement on 28 February:

  2018
2017
Interest on loan 77 400  211 700 
Net profit after tax   545 600  494 000 

B. Extract from the Balance Sheet on 28 February:

  2018
2017
Shareholders’ Equity  4 488 000  3 724 000 
Ordinary share capital  4 291 500  ?
Retained income   ? 76 000 
Loan: Buzza Bank (11% p.a.)  692 000   1 920 000 

C. Share Capital:

  • On 1 March 2017, the company had 760 000 shares in issue.
  • On 1 June 2017, 30 000 shares were repurchased at R5,20 per share.
  • On 31 October 2017, a further 150 000 shares were issued.

D. Financial indicators on 28 February:

  2018 2017
Current ratio  1,9 : 1  1,4 : 1 
Acid test ratio   0,7 : 1  0,8 : 1 
Average debtors collection period 38 days  57 days 
Average creditors payment period 50 days  63 days 
Debt/equity ratio   0,2 : 1  0,5 : 1 
Earnings per share  62 cents  65 cents
Dividends per share  31 cents 52 cents 
Return on shareholders’ equity ? 13,7%
Return on capital employed 20,8% 22,3%
Net asset value ? 490 cents
Market price on JSE 515 cents 485 cents

(65)

QUESTION 5: INVENTORY VALUATION (45 marks; 25 minutes)
5.1 Provide a stock valuation method that is best described by each statement below.
Write only the valuation method next to each number (5.1.1–5.1.3) in the ANSWER BOOK.
5.1.1 Unique stock items of high value such as motor cars are valued individually.
5.1.2 Stock of appliances such as microwave ovens are always reflected at their most recent cost price.
5.1.3 Low-cost items such as golf balls are purchased in large quantities and reflect a similar value over time. (3 x 1) (3)
5.2 CASUAL OUTFITTERS
The information relates to Casual Outfitters, owned by Funiwe, for June 2018. The business sells men’s jeans. Stock is valued using the weighted-average method and the periodic inventory system.
REQUIRED:
5.2.1 Calculate:

  • Amount paid for carriage on 11 June 2018 (4)
  • Value of the closing stock on 30 June 2018 (9)

5.2.2 Funiwe wants to change the method of valuing stock. The value of closing stock using the FIFO method will be R4 853 higher than the value using the weighted-average method.

  • Explain the effect that this decision will have on the gross profit. (2)
  • Give ONE valid reason for and ONE valid reason against changing the stock valuation method. (4)

5.2.3 Funiwe is concerned about the control of her stock of jeans. She has sold 1 788 pairs of jeans during the year. Provide a calculation to support her concern. (5)
5.2.4 Comment on the stock balance on 30 June 2018. Is this appropriate?
Explain. Provide ONE point. (3)
INFORMATION:
A. Stock balances:

DATE NO. OF UNITS TOTAL COST
1 June 2018 230  R28 633 
30 June 2018 415 ?

B. Purchases and returns:

Date No. of units  Price per unit  Carriage on purchases Total cost
11 June 2018 835   R130   ? R116 065
18 June 2018 780  R142  R7 020  R117 780
26 June 2018 380  R148   R3 420  R 59 660
Total purchases 1 995       R293 505 
Returns from 18 June purchases 15 The supplier refunded the purchase price, excluding the carriage cost. ?

5.3 PROBLEM-SOLVING
Jay’s Furnishers sells desks and chairs. The financial year ended on 28 February 2018.
REQUIRED:
Where applicable, provide relevant figures for ALL questions below.
5.3.1 Desks:

  • What decision did Jay take regarding the selling price of the desks? (3)
  • Explain TWO points on how this decision has affected the business. (6)

5.3.2 Chairs:
Jay decided to buy his chairs from a cheaper supplier. Provide TWO points on why you feel that this was NOT a good decision. (6)
INFORMATION:

  DESKS  CHAIRS
  2018 2017 2018 2017
Orders received from customers 250 330  500 450
Gross units sold  250  318 380 450 
Returns by customers   12 56  0
Selling price per unit   R420 R360 R126 R168
Cost price per unit   R240 R240 R90 R120
Mark-up %  75% 50% 40%  40% 
Gross profit R45 000 R36 720 R11 664 R21 600
Stock turnover rate 5,4 times 7,4 times 5,2 times 5,2 times

(45)

QUESTION 6: RECONCILIATION AND VAT (30 marks; 15 minutes)
6.1 CREDITORS RECONCILIATION
Ladoo Traders buys goods on credit from Anami Suppliers. The information relates to August 2018.
REQUIRED:
6.1.1 Use the table in the ANSWER BOOK to indicate how the balances will change when preparing the creditors' reconciliation. Indicate the figure as well as a + for increase and a – for decrease. (11)
6.1.2 Refer to Information (vi):
An investigation revealed that only R21 500 of these goods were entered in the stock records. The remaining goods were ordered by M. Rice, the credit manager.

  • Provide TWO possible actions that can be taken against M. Rice. (4)
  • Explain TWO internal control measures that the business can use to prevent such incidents in future. (4)

INFORMATION:
A. Balances:

Account of Anami Suppliers in the Creditors' Ledger of Ladoo Traders on 31 August 2018  R95 160 Cr
Statement from Anami Suppliers 25 August 2018  R143 460 Dr 

B. Errors and omissions discovered during an investigation:

  1. An invoice for R26 000 received from Anami Suppliers was recorded correctly by Ladoo Traders. The statement reflects it as R20 600.
  2. Ladoo Traders had correctly recorded a discount of R820 for an early payment. This did not appear on the statement from Anami Suppliers.
  3. The statement reflected interest of R1 240 on an overdue balance. Anami Suppliers acknowledged that an error had been made.
  4. A debit note for R1 520 issued to Amanda Ltd was incorrectly recorded in the account of Anami Suppliers by Ladoo Traders.
  5. A credit note for R2 440 received from Anami Suppliers for goods returned was incorrectly recorded as an invoice by Ladoo Traders.
  6. An invoice for R47 500 was reflected on the statement from Anami Suppliers but was not recorded by Ladoo Traders.
  7. A payment of R7 500 by Ladoo Traders on 27 August 2018 was recorded in the Creditors Ledger account of Anami Suppliers.

6.2 VAT: XEGO STORES
Xego Stores accounts for VAT every alternative month. All goods and services are subjected to VAT at the standard rate of 15%.
REQUIRED:
Calculate the final amount payable to SARS on 31 July 2018. (11)
INFORMATION:

  INCLUDING VAT
EXCLUDING VAT
VAT AMOUNT
Balance due to SARS (1 July 2018)      6 665 
Cash and credit sales invoices  828 000  720 000  108 000 
Purchase of trading stock  534 750 465 000  ?
Stock returned to suppliers    3 200  480 
Debtors’ accounts written off      915 
Office computer bought on credit    9 800 ?
Discount allowed to debtors  10 810    ?

TOTAL: 300

Last modified on Wednesday, 08 September 2021 07:24