MARKING PRINCIPLES:

1. Penalties for foreign items are applied only if the candidate is not losing marks elsewhere in the question for that item (no foreign item penalty for misplaced items). No double penalty applied.
2. Penalties for placement or poor presentation (e.g. details) are applied only if the candidate is earning marks on the figures for that item.
3. Full marks for correct answer. If the answer is incorrect, mark the workings provided.
4. If a pre-adjustment figure is shown as a final figure, allocate the part-mark for the working for that figure (not the method mark for the answer).
5. 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.
6. Where indicated, part-marks may be awarded to differentiate between differing qualities of answers from candidates.
7. In calculations, do not award marks for workings if numerator and denominator are swapped – this also applies to ratios.
8. Where penalties are applied, the marks for that section of the question cannot be a final negative.
9. Where method marks are awarded for operation, the marker must inspect the reasonableness of the answer before awarding the mark.
10. Operation means ‘Check operation’. ‘One part correct’ means ‘Operation and one part correct’.
11. In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect at least in part. In such cases, do not award the method mark. Indicate by way of x.
12. Be aware that some candidates provide valid alternatives beyond the marking guideline.
13. Codes: f = foreign item; p = placement/presentation.

MEMORANDUM

QUESTION 1
1.1

1.2 CREDITORS’ RECONCILIATION
1.2.1

* 1 work with for both totals. Doesn’t need to be the same, but opening balance/total has to be included.
1.3 DEBTORS ANALYSIS
1.3.1 Give TWO reasons why preparing a Debtors age analysis is a useful tool in managing debtors.
Any TWO 🗸🗸 🗸🗸

• Help to identify problematic debtors
• Identify debtors who are not adhering to credit terms
• See how collections are made

1.3.2 Calculate the debtors’ collection period for 2020 and comment on your findings. Keep in mind that the debtors’ collection period for 2019 was calculated at 45 days. Provide figures in your comments.
Discuss TWO points of advice which you can offer to the credit manager.
Calculation:
 🗸                      🗸
½ (68 540 + 104 190) x 365 = 70 days ☑ One part correct
           448 320     🗸
Comment:
The debtors’ collection period deteriorated from 45 days to 70 days, which is bad for the liquidity of the business. 🗸🗸

Advice:
Any TWO 🗸🗸 🗸🗸

• Encourage debtors to settle their accounts within 30 days by charging interest on accounts in arrears or by offering discounts for early settlements.
• No more credit sales allowed for debtors if account is not up to date.
• Remind debtors of oustanding amounts by sending them SMSs/e-mails.       10

QUESTION 1 TOTAL MARKS: 32

QUESTION 2
2.1 MATCHING CONCEPTS
2.1.1 C 🗸
2.1.2 B 🗸
2.1.3 A 🗸
2.1.4 D 🗸        4
2.2 INVENTORY
2.2.1 Calculate the value of closing stock for rugby jerseys.

• 988 x 500 = 494 000 🗸
  12 x 490 = 5 880 🗸☑ One part correct
  499 880 ☑ One part correct        4

2.2.2 Calculate the cost of sales for rugby jerseys.

                    🗸               🗸              🗸          ☑                  ☑ One part correct

• 528 000 + 1 358 000 – 6 000 – 499 880 = 1 380 120                                5

2.2.3 Calculate the mark-up percentage on rugby jerseys.

• 2 271 200 – 1 380 120 = 891 080 (GP)
  🗸☑ One part correct
  891 080 x 100 = 64,6% ☑ One part correct Accept 65%        4
  1 380 120 ☑ See 2.2.2

2.2.4 How many months will it take to sell the rugby jerseys on hand on 31 May 2020?

               ☑ See 2.2.1               🗸

• =   499 880   x 12 = 4,2 months ☑ One part correct                    4
     1 380 120
  ☑ See 2.2.2

2.2.5

2.2.6

2.3 FIXED ASSETS
2.3.1

2.3.2 Calculate the balance of the Accumulated Depreciation on Equipment account on 30 April 2020. (You don’t need to show the account.)

• 1 440 000 x 20% = 288 000 one mark
  But carrying value is only 120 000 à Dep =    119 999 🗸🗸🗸
  Opening balance = 1 320 000 🗸
  1 439 999 ☑ One part correct

2.3.3  Complete the Accumulated Depreciation on Vehicles account. The account must be balanced on 30 April 2020.

2.3.4  Complete the Asset Disposal account.

QUESTION 2: TOTAL MARKS 58

QUESTION 3
3.1 

3.2.1 Note for Factory overhead costs

* 1 part must be correct; -1 Foreign items; Max. 1
3.2.2 Production cost statement on 29 February 2020.

* 1 part must be correct
3.3 COST ACCOUNTING
3.3.1 Calculate the break-even point for 2020.

                   🗸               🗸             2 marks

• 2 193 510 + 990 000 = 3 183 510 = 96 470 ☑ One part correct
  80 – (18 + 22 + 7)             33
  🗸               🗸☑                 3 marks

3.3.2 Calculate the units produced during 2020. (All products were sold.)

• 1 981 800 / 18 = 110 100 🗸☑ One part correct
  OR 2 422 200 / 22 = 110 100
  OR 770 700 / 7 = 110 100

3.3.3 Should Mickey, the owner, be concerned about the level of production for Nail Art? Give TWO reasons, with supporting figures, to motivate your answer.
TWO reasons 🗸 🗸 Figures 🗸 🗸
Mark comments on 2020, according to candidate’s calculations.

• No need for concern.
• During 2019, 92 000 units were produced and sold and the break-even was 102 000. No profits were made.
• During 2020, 110 100 (see 3.3.2) units were produced and sold and the break- even was 96 470 (see 3.3.1). Profits were made on 13 630 units. 

QUESTION 3: TOTAL MARKS 42
QUESTION 4
4.1 CONCEPTS
4.1.1 External 🗸
4.1.2 Shareholders 🗸 
4.2.1 What kind of audit report did Knights Sports Ltd receive for the financial year ended 31 May 2020? Give ONE reason for your answer.
Unqualified 🗸
The report states that the statements fairly represent the financial position. 🗸
4.2.2 Why does the Companies Act in South Africa require public companies to be audited?
Any ONE 🗸🗸

• To protect shareholders.
• Public funds are used.
• To be accountable to stakeholders eg. shareholders, SARS.
• To discourage fraud.

4.2.3 The directors feel that the audit fees charged by the external auditors are excessive. Explain how better internal control will have a positive effect on fees charged by the external auditors.
Any ONE 🗸🗸

• Internal auditors will correct mistakes made by bookkeepers.
• Internal auditors will make sure all documents are in order and easy to find. External auditors will spend less time on the auditing process.

4.3.1 To which GAAP principle was the internal auditor referring to when he expressed his concern about this matter?

• (Business) entity principle 🗸🗸

4.3.2 Give TWO consequences for the company should the CEO ignore the internal auditors’ advice.
Any TWO responses 🗸🗸 🗸🗸

• The external auditor could classify the audit report as a qualified report
• The extra expense would lead to a smaller profit and this could result in smaller dividends for shareholders
• Suspicions could be cast over the ethics of the CEO and the company
• Lack of confidence in the CEO and the company

4.3.3 At the annual general meeting (AGM), the directors suggested that the company should sponsor a childcare facility in the local community. Give TWO reasons why companies would get involved in these kinds of activities.
Any TWO responses 🗸🗸 🗸🗸

• Investing in the community from which it gains profits
• Corporate social responsibility
• Investment in the community to enhance goodwill
• Create a good/positive image of the company
• BEE points for development
• Tax deductible 

QUESTION 4: TOTAL MARKS 18
TOTAL: 150