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 ALL workings to earn 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. If you choose to do so, you may use the Financial Indicator Formula Sheet attached at the end of this question paper. The use of this formula sheet is NOT compulsory.
8. Write neatly and legibly.
9. Use the information in the table below as a guide when answering the question paper. Try NOT to deviate from it.

QUESTIONS

QUESTION 1: CONCEPTS, ANALYSIS OF TRANSACTIONS AND AUDIT REPORT
(25 marks; 20 minutes)
1.1 CONCEPTS
Choose the correct word(s) from those given in brackets. Write only the word(s) next to the question number (1.1.1–1.1.3) in the ANSWER BOOK.
1.1.1 The (shareholders / directors) are responsible for the management duties of the company.
1.1.2 The management of the company appoints the (external / internal) auditor.
1.1.3 (Inside trading / White-collar crime) is the use of confidential information by someone in the company in order to get advantage over others. (3 x 1) (3)
1.2 ANALYSIS OF TRANSACTIONS
REQUIRED:
Complete the table provided to indicate the account to be debited and credited as well as the effect on the accounting equation for each transaction:
Note:
Accept that the bank balance is favourable.
TRANSACTIONS:
1.2.1 The income tax for the year is calculated at R330 000.
1.2.2 Paid R120 000 for the repurchase of shares. This is R15 000 more than the value of the shares in the books of the company. (11)
1.3 AUDIT REPORT FOR YEAR ENDED 31 DECEMBER 2019
The financial statements of Zenko Ltd were audited. You are provided with extracts from the audit report.
EXTRACTS FROM THE AUDIT REPORT:

REQUIRED:
1.3.1 Explain why the auditors found it necessary to stipulate the page numbers in the report. (2)
1.3.2 What type of report did Zenko Ltd receive from the independent auditors? Explain your answer. (3)
1.3.3 State TWO possible consequences for the independent auditor if he had NOT mentioned the donation in his report. (2)
1.3.4 Explain why the company would make contributions towards outreach programmes in the local community. Mention TWO points. (4)
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QUESTION 2: BALANCE SHEET (STATEMENT OF FINANCIAL POSITION) AND NOTES
(55 marks; 45 minutes)
MAKIZOLE LIMITED
You are provided with information for the financial year ended 29 February 2020.
REQUIRED:
2.1 Complete the following notes for the financial year ended 29 February 2020.

1. Ordinary share capital (8)
2. Retained income (12)

2.2 Complete the Balance Sheet (Statement of Financial Position) on 29 February 2020.
Where notes are not required, show ALL workings. (35)
INFORMATION:
A. Extract from the books on 29 February 2020:

B. Share capital:

• The company is authorised to sell 1 400 000 ordinary shares.
• 650 000 shares were in issue on 1 March 2019.
• 250 000 new shares were issued on 1 September 2019. The amount of R1 300 000 was received and has been properly recorded.
• 100 000 shares were repurchased on 5 February 2020 from an unsatisfied shareholder for 30 cents above the average share price. This transaction was not recorded. This shareholder does not qualify for final dividends.

C. Dividends:

• An interim dividend was paid on 20 August 2019.
• The directors declared a final dividend of 40 cents per share on 29 February 2020.

D Stock records:
The first-in-first-out method of valuing stock is used.

E. The following adjustments have not been taken into account:

• Consumable stores used during the year amounts to R109 950.
• Interest on fixed deposit still outstanding, R7 150.
• The three directors earn the same monthly fees. The third director was appointed on 1 January 2020 and has not been paid yet.

F. 75% of the fixed deposit matures on 31 March 2020.
G. After the actual tax was calculated on the corrected net profit for the year, it was found that the provisional tax paid was R35 500 less than the actual tax.
H. Income tax is calculated at 30% of net profit.
I. After processing all adjustments the debt-equity ratio is 0,1 : 1.
[55]

QUESTION 3: CASH FLOW CALCULATIONS, FINANCIAL INDICATORS AND INTERPRETATION
(50 marks; 40 minutes)
3.1 Choose the correct term to complete each of the following statements. Write only the letter (A–D) next to the question numbers (3.1.1 to 3.1.3) in the ANSWER BOOK.

3.1.1 … is regarded as a non-cash item.
3.1.2 A decrease in trading stock will indicate a/an …
3.1.3 Current assets minus current liabilities are referred to as … (3 x 1) (3)
3.2 CACADU LTD
The following information was taken from the accounting records of CACADU Ltd. The financial year ended on 30 June 2019.
REQUIRED:
3.2.1 Calculate the following amounts for the Cash Flow Statement:

• Operating profit before changes in working capital (6)
• Income tax paid (5)
• Dividends paid (4)

3.2.2 Complete the following sections of the Cash Flow Statement:

• Cash effects from investing activities (7)
• Cash effects from financing activities (4)
• Net change in cash and cash equivalents (2)

3.2.3 Calculate the following financial indicators on 30 June 2019:

• % Operating expenses on sales (4)
• % Return on average shareholders equity (ROSHE) (5)

3.2.4 Quote TWO financial indicators with figures and trends which should be a concern to the company’s liquidity.(4)
3.2.5 Comment on the degree of financial risk and gearing of the company. Quote TWO financial indicators with figures and trends to support your answer.(6)
INFORMATION:
A. Information taken from the Income Statement on 30 June 2019:

B. Information taken from the Balance sheet on 30 June:

C. Ordinary shares:

• On 1 March 2019 shares were bought back from the insolvent estate of a shareholder. A cheque for R117 000 was issued which is R12 000 more than the average price.
• On 30 June 2019, R2 984 800 was received from new shareholders and their names were entered into the shareholders register.

D. Ordinary dividends:
The total dividend for the year amounted to R1 255 000.
E. Fixed assets were sold at carrying value, R900 250..
F. The loan statement received from V&R Bank on 30 June 2019 reflected the following:

G. Other financial information and indicators for the past two years:

[50]

QUESTION 4: ANALYSIS AND INTERPRETATION OF TWO COMPANIES
(20 marks; 15 minutes)
Alton Jantjes owns shares in Lion Ltd and in Bull Ltd.
He recently inherited R130 000 and wants to increase his investment in either of these companies.
NOTE: Both companies have no intention in issuing additional shares (to increase the share capital).
REQUIRED:
Where necessary, quote figures, percentages and financial indicators to motivate your answers.
4.1 Calculate the number of shares that Alton can buy in Lion Ltd. (2)
4.2 REFER TO THE SHARE CAPITAL AND THE SHARE PRICES:
Alton is more interested in purchasing the additional shares in Lion Ltd. Provide TWO reasons why he feels this way.
Make reference to a comparison between both companies in your answer.  (6)
4.3 REFER TO THE DPS AND THE EPS:

• Alton is happy with the DPS at Lion Ltd. Provide ONE reason why. (3)
• Provide ONE reason for the dividend policy at Bull Ltd. (3)

4.4 Comment on the return on investment of both companies. Provide ONE separate point for each company. (6)
INFORMATION:
Information is for both companies for the year ended 29 February 2020.

[20]
TOTAL:150