Web view10 780. Cr Outstanding deposit. ... ced. 716 400. 6. CURRENT LIABILITIES. operation. ......

Metro East Education District

MARKS: 300

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 penalty for misplaced item). No double penalty applied.2. Penalties for placement or poor presentation (e.g. details/dates) are applied only if the

candidate is earning marks on the figures for that item.3. Full marks for a correct answer. If 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. Where penalties are applied, the marks for that section of the question cannot be a final negative.

8. Where method marks are awarded for operation, the marker must inspect the reasonableness of the answer before awarding the mark.

9. In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect at least in part.

10. Be aware of candidates who provide valid alternatives beyond the marking guideline.

11. Codes: f = foreign item; p = placement/presentation.

This memorandum consists of 18 pages.

Copyright reserved Please turn over

ACCOUNTING

GRADE 12

JUNE 2016MEMORANDUM

Accounting MEMO 2 MEED June 2016



QUESTION 1

1.1.1 Calculate the correct bank balance on 31 May 2016. Show all workings.

6

23 976 - 1300* - 1956* - 2 890* + 1 880* = 19 710 (Dr)*mark with the signOR BANK

23 976 1 300 1 880 1 956

2 890 (Dr balance) = R19 710

1.1.2 Bank Reconciliation Statement on 31 May 2016 = layout Alternative Debit Credit

10

Balance per Bank statement 10 780 10 780Cr Outstanding deposit 12 400 12 400Dr Outstanding cheques: Could use – signs

75 (1 510) 1 510 76 (2 200) 2 200

Incorrect debit order 240 240Balance per Bank account (see 1.1.1) (19 710) 19 710

Foreign items -1 (max -2)23 420 23 420

columns added

1.1.3 State the double entries, with amounts, in the general ledger for the transaction with T. Masha.

DR CR Debtors Control R1 325 (NOT T. Masha) or R1300 and R25 (1 mark)

Bank R1 300 Discount allowed R25

6

Make TWO proposals to the business to eliminate receiving dishonoured cheques from debtors in future.

4

Any two proposals Award part-marks for incomplete answers

For 2 marks: Check that the cheque was completed accurately/date/signature/words and

figures match before accepting it Do not accept cheques as a form of payment, only cash/credit cards Charge penalties on dishonoured cheques Check with the bookkeeper/supervisor whether the debtor is

creditworthy/screen debtors



1.1.4 The bank has no record of the deposit of R12 400 being made and the money cannot be found. Provide TWO measures to be introduced to prevent a loss of this nature in the future.

4

Any TWO measures

Use cash in transit security services Ensure that two people do the depositing/go to the bank Ask customers to use EFTs to reduce cash in the business Change deposit routines/routes

1.2 CREDITORS’ RECONCILIATION

NOCREDITORS CONTROL CREDITORS LISTDebit Credit Debit Credit

1.2.1 (490 + 490)OR 980 (2 marks)

1.2.2 150 150

1.2.3 (90 + 90) OR 180 (2 marks)

1.2.4 180

1.2.5 210

1.2.6 (11 760 – 11 670)90

1.2.7 (251 -215)36

No marks for: incorrect column entries entries in more than one column – no marks.

TOTAL MARKS

40


10


QUESTION 2

GENERAL LEDGER OF ASTRO LTD2.1.1 ASSET DISPOSAL

2015Dec 31 Vehicles

contra+amount

110 000

2015Dec 31

Accumulated depreciation on Vehicles

(33 000 + 16500)

49 500

9

Profit on sale of asset

6 000

(dr - cr)Directors fees

66 500

116 000 116 000 -1 if closed off with a "balance"

(110 000 – 77 000) (110 000 x 20% x 9/12) 33 000 + 16 500

2.1.2 ACCUMULATED DEPRECIATION ON VEHICLES2015Dec 31

(see 2.1.1) Asset disposal

49 500

2015Apr 1 Balance b/

d

100 000

11

2016Mar 31

(Cr – Dr)Balance c/

o

145 000

OR 167 0002015Dec 31

(see in 2.1.1)Depreciation

16 500

2016Mar 31 Depreciation

78 000

OR 100 000

194 500216 500

both totals 194 500216 500

2016Apr 1

(correctly b/d)Balance b/

d 145 000

OR 167 000-1 (Max) for incorrect/no dates

(500 000 – 110 000) 390 000 x 20% = R78 000

OR (Alternative interpretation of Information C)500 000 x 20% x 1 = R100 000



2.2 FIXED ASSET NOTE ON 31 MARCH 2016Mark only ONE alternative for Vehicles per column

VEHICLESVehicles(Alternative

interpretation)EQUIPMENT

(operations)Carrying value – 1 April 2015 400 000 510 000 30 000

Cost 500 000 610 000(150 000 – 50 000)

100 000

Accumulated depreciation (100 000) (100 000) (70 000)MovementsAdditions at cost 50 000

Disposals at carrying value(see 2.1.1)(110 000-49 500) (60 500) (60 500)

V:(see 2.1.2)Depreciation E: see below

(16 500+78 000) (94 500) (116 500) (4 500)

16

(operations)Carrying value – 31 March 2016 245 000 333 000

75 500

(V: 500 000 – 110 000)1

Cost (E: 100 000 + 50 000) (operations) 390 0001 500 000 150 000

Accumulated depreciation (see 2.1.2)

(145 000) (167 000)(70 000+ 4 500)

(74 500)

Equipment: Old: (100 000 – 70000) x 15% = 4 500 (2 marks)(No depreciation on new equipment – bought end of year)

2.3 Astro Ltd has no insurance on the vehicles. The CEO believes that the money he saves on insurance premiums can be used to buy more stock and make more profit. Explain why you think that having no insurance on vehicles is not good business practice. Mention TWO points.

4

Any TWO points

They would lose more if a vehicle is a total write off in an accident. Vehicle may be hijacked or get stolen – loss of total cost that has to be

replaced Loss due to damages arising from third parties because of negligence on the

part of the driver Losses due to an accident may be more than the saving on insurance in one

financial year

TOTAL MARKS

40



QUESTION 3

3.1 Overbay LtdIncome Statement for the year ended 28 February 2016Award full marks to figures in final column if correct – ignore workings in this case

Sales (3 800 640 - 1500) If amount subtracted 3 799 140

6Cost of Sales (2 375 400 - 1 200) [1500 x 100/125] ( 2 374 200)Gross Profit Check operation 1 424 940Other Income Check operation 34 600

10

Commission income (26 000 +3 000) One part correct 29 000Profit on sale of asset 4 000Bad debts recovered (1 200 x 0.40) 480Provision for bad debts adjustment (3 800 – 2 680)

Check operation 1 120Gross Income 1 459 540Operating Expenses Check operation (1 159 290)

22

Audit fees 21 000Bank charges 6 210Packing material (16 400 - 3 400) 13 000Bad debts 3 530 [50% x (350 000 / 3,5)]Directors fees (350 000 – 50 000) One part correct 300 000 (12 500 + 1 250 + 900)Salaries and wages (720 000 + 14 650) One part correct 734 650Employers’ contribution (7 750 + 1 250) One part correct 9 000Rent expense (38 500 + 3 500) 42 000Trading stock deficit (180 000– 173 600+1 200 - 1 200)

Check operation 6 400Depreciation 23 500

Operating profit Check operation 300 250

9

47

Interest Income 2 200Profit before interest expense Check operation 302 450

Interest Expense (275 500 + 80 400 - 320 900) One part correct (35 000)Profit before Tax Check operation 267 450Income Tax Ignore bracket (144 000)

Net profit after Tax Check operation 123 450Foreign items -1 (Max -2)

3.2.1 TRADE AND OTHER RECEIVABLES



Trade Debtors (125 000 – 1 500) One part correct 123 500

11

Provision for bad debts (2 680)Net Trade Debtors Check operation 120 820Accrued/Receivable Income (Commission) 3 000Prepaid expenses (Directors fees) see I/S 50 000SARS (income tax) (160 000 – 144 000)

Operation/One part correct 16 000

Check operation 189 820

3.2.2 TRADE AND OTHER PAYABLESTrade Creditors (23 200 – 1 200) One part correct 22 000

11

Accrued Expenses/Payables (Rent Exp) (see IS) 3 500Creditors for Salaries 12 500SARS (PAYE) (8 000 + 900) One part correct 8 900Pension fund (9 500 + 1 250 + 1 250) One part correct 12 000

Check operation 58 900

3.3.1 Calculate the profit margin of the business, BEFORE any adjustments.

Gross profit (3 800 640 – 2375 400) = R1 425 240

% Profit margin = 1 425 240 x 100 2375 400

= 60% One part correct

3.3.2 Give ONE possible reason why the 25% profit margin made on the goods returned by M. Mgoki, differs from your answer in 3.3.1 above.

2

Any ONE reason Poor quality goods were sold at a reduced price Shop soiled goods sold cheaper than normal price Old stock were sold at a lower price/sale/special promotion Trade discount given to customer (Mgoki)

TOTAL MARKS

75



QUESTION 4

4.1.1 Calculate the Net profit before tax for the year ended 30 June 2015

3

604 800 x (100/72)

= R 840 000 operation; one part correct

4.1.2 Calculate the Income tax for the year ended 30 June 2015

3

(See above) 840 000 x 28%= R235 200 one part correct

OR 840 000 – 604 800 = R235 200

OR 604 800 x 28/72

= R235 200

4.2.1 APPROPRIATION2015Jun 30

see 4.1.2Income tax

235 200

2015Jun 30

see 4.1.1Profit and Loss

840 000

11

Dividends on # ord. shares

393 800

Retained (cr - dr) Income

211 000

840 000 840 000 Closed off with a "balance" : -1

# Dividends: Interim: 300 000 x 0,44 = 132 000 (1 mark)

(300 000 +120 000 - 46 000) Final: 374 000 x 0,70 = 261 800 (2 marks) Tot = 393 800 (1 mark) operation; one part correct



4.2.2 RETAINED INCOME

2015May 31

(2,35 x 46 000)Bank

operation

108 1002014Jul 1 Balance b/

d 670 000

8

2015Jun 30

(cr – dr)Balance c/

d

772 900

2015Jun 30

(see above)Appropriation

211 000

881 000 881 0002015Jul 1

(correctly b/d)Balance b/

d

772 900

-1 (Max) for incorrect/no dates

Ave share price: 1 701 000 /420 000 = R4,05 (1 mark)Diff from retained income: R6,40 – R4,05 = R2,35 (1 mark) 46 000 x 2,35 = 108 100 (1 mark, operation)

4.3 ORDINARY SHARE CAPITAL

AUTHORISED500 000 ordinary shares

ISSUED

300 000 ordinary shares in issue on 1 July 2014 1 185 000

8

120 000 ordinary shares issued on 1 Jan 2015 @ R4.30 516 000

(46 000) shares bought back on 31 May 2015 @ R4,05 see 4.2 (186 300)

374 000 ordinary shares in issue on 30 June 2015(374 000 x R4,05) operation 1 514 700



4.4 MOYA LTDBALANCE SHEET AS AT 30 JUNE 2015EQUITY AND LIABILITIESORDINARY SHAREHOLDERS’ EQUITY operation 2 287 600

Ordinary Share Capital see 4.3 1 514 700Retained Income see 4.2.2 772 900 4

NON-CURRENT LIABILITIES 716 400

Mortgage Loan: RC Bank operation; one part correct(800 000 + 102 000 - 135 600 - 50 000) Check that Loan is reduced 716 400 6

CURRENT LIABILITIES operation 504 800 10

Bank overdraft 12 000Trade and other payables (158 000 + 23 000** + 261 800* ) *may be shown separately as ‘Shareholders for Dividends’ One aspect correct 442 800

20

Current portion of loan (may be included in payables)Check that loan has been reduced by this 50 000

TOTAL EQUITY AND LIABILITIES operation 3 508 800Foreign entries -1 (max -2)Presentation / Placement / Incorrect or incomplete details -1 (max -2)

** SARS (income tax) = 235 200 – 212 200

4.5 Calculate the Net Asset Value (NAV) per share on 30 June 2015.

3

(see 4.4) 2 287 600 x 100 = 611,7 cents operation; one aspect correct 374 000 1 Accept R6,12 (NOT 6,12 with no R or c)



4.6On 30 June 2015 the price of Moya Ltd shares on the JSE was R5,20. Should the existing shareholders be satisfied with the aspects below? Explain and quote figures from the question to support your answers.

Opinion Any valid explanation with quoted figures

No/Existing shareholder should not be satisfied (1)

Market price: Market/JSE price of R5,20 is lower as NAV. Price is undervalued as the NAV of R6,12 is higher. (see 4.5) R6,12 (NAV) is the value shown in the Balance sheet/Equity, which is more

than the market value.

(2)

Price at which new shares were issued on 1 January 2015:

No/Existing shareholders should not be satisfied (1)

New shareholders paid a good price at R4,30, which is lower than NAV (R6,12)

R4,30 is also lower than the market price of R5,20 which new shareholders would have paid on the open market.

(2)

9

Price paid for the repurchase of shares on 31 May 2015:

No/Existing shareholders should not be satisfied (1)

R6,40 is higher than market price (R5,20), so the unhappy shareholder is compensated from profits retained in the past.

R6,40 is higher than the NAV (R6,12) so retained income is reduced which will disadvantage existing shareholders in future.

(2)

TOTAL MARKS

65



QUESTION 5

5.1 CASH GENERATED FROM OPERATIONS

Net profit before income tax (892 800 + 347 200) 1 240 000

10

Depreciation 92 840Interest Expense 52 000Operating profit before changes in working capital 1 384 840Cash effects of changes in working capital operation 138 700

Change in inventories (552 000 – 334 600) no brackets 217 400Change in receivables (218 000 – 256 000) brackets (38 000)

Change in payables (325 200 – 284 500) brackets (40 700)

operation 1 523 540-1 max for foreign items

5.2 PRINS LTDCASH FLOW STATEMENT FOR YEAR ENDED 28 FEBRUARY 2016

CASH FLOWS FROM FINANCING ACTIVITIES operation 412 000 Check brackets

Proceeds from shares issued (300 000 x R5) 1 500 000

8Repurchase of shares (40 000 x (R4,70* )) operation (188 000)#

Repayment of long-term loans (1 900 000 – 1 000 000) (900 000)#

* Ave share price: R6 300 000/1 500 000 = R4,20 + 0,50 = R4,70# Do not award full marks, if brackets are not correctly shown.



5.3.1 Calculate the current ratio.

650 880 : 406 800

= 1,6 : 1 one part correct

3

5.3.2 Calculate the debt-equity ratio.

1 000 000 : 6 680 000

= 0,2 : 1 one part correct

Accept 0,15 : 13

5.3.3 Calculate the return on average shareholders’ equity.

892 800 x 100 ½ (6 680 000 + 4 945 000) (5 812 500 = 3 marks)

= 15,4% one part correct Accept 15,36%

5



5.4 The directors are not satisfied with the liquidity position. Comment on the liquidity position. Quote and explain THREE relevant financial indicators (with figures) to support their view.

Ratio + Trend and figures

Any THREE:

Current ratio decreased from 2,1 : 1 in 2015 to 1,6 : 1(see 5.3.1) in 2016 Debtors’ collection period increased from 28 days to 40 days, which indicates

a slacking in control of debtors/they are allowed to repay debt after 30 days. (Do not accept creditors payment period, which declined but 80 days were too long in 2015 and 68 days is still longer than average)

Stock turnover rate declined from 5 times in 2015 to 3 times in 2016, which means that it takes longer to turn stock into cash and it may result in cash flow problems.

% net profit after tax on sales decreased from 35% to 30% in 2016. Less profit and/or less sales could impact negatively on liquidity.

Also accept, IF put in negative context: Acid test ratio slightly decreased from 0,8 : 1 in 2015 to 0,77 : 1 in 2016

so too much stock on hand( OR Acid test remained similar at 0,8 : 1 (rounded off) in both years)

6

5.5 The directors decided to pay back a large portion of the long term loans. Explain why this was not a wise business decision. Quote and explain TWO financial indicators (with figures) in your answer.

Quoting indicators + figures

Debt-equity decreased from 0,4 : 1 in 2015 to 0,2 : 1 (see 5.3.2) in 2016 ROTCE declined from 14,1% to 13%.

Explanation: + Risk is low, so they can make use of loans/did not have to pay back large

portion of the loan (0,4:1 before the payback was low risk as well) ROTCE was higher (14,1%) than interest rates (13%) on loans in 2015

[positively geared], but has now dropped to lower (13%) than interest rates (15%) in 2016 [negatively geared].

Financing are not optimally utilised in the business as return (ROTCE) does not out-perform interest rates.

8



5.6.1 Choose the correct word from those listed in brackets. Write down the word and briefly explain your choice.

Prins Ltd received a/an (unqualified/qualified/adverse/disclaimer) auditor's report.

Qualified

Briefly explain your choice

Explanation The auditors found one item to be unsatisfactory. It will alert users/readers of financial statements that there is a problem Unauthorised purchase of property/fixed assets/a flat Proper procedure was not followed

For 1 mark: The incident is mentioned because it is significant/may happen again in future. 3

5.6.2 Explain the consequences of this auditor's report for the chief executive officer (CEO) and/or the company. State TWO points.

Any TWO valid explanations: The CEO has ignored procedures and must be accountable. This report will influence the appointment of directors by shareholders. Negative ‘news’ could affect share prices/demand for shares negatively. Potential investors will be cautious Shareholders may want to replace CEO, which affects continuity, but may

improve future prospects.For 1 mark: Effect on share values/proceeds of shares in future Effect share prices / image of company 4

TOTAL MARKS

50



QUESTION 6

6.1 VAT CONCEPTS

6.1.1 D

36.1.2 E 6.1.3 A

6.2 VAT CALCULATIONSCalculate the correct amount of VAT the business has to pay. Show all workings.

A: 10 146 x 14/114 = 1 246; B: R342; C: 14 000 x 14% = 1 960

VAT payable: 28 430 + (1 246 + 342 + 342) - 1 960 28 430 + 1 930 - 1 960= R28 400 operation; one part correct

OR 28 430 + 1 246 + 684 – 1 960OR - 28 430 - 1 246 - 684 + 1 960

OR VAT CONTROL

6

1 960 28 43028 400 1 246

342 +34230 360 30 360



6.3 INVENTORY VALUATION

6.3.1 (a) Calculate the closing stock (rand value) of the guitars on 30 April 2016.

5

(1 x 5 400) + (3 x 5 900) + (2 x 6 400) + (4 x 7 800) 5 400 + 17 700 + 12 800 + 31 200

= R67 100 One part correct

(b) Calculate the cost of sales (rand value) of the guitars on 30 April 2016.

4

R235 500 (2 marks) (see above) 43 200 + 192 300 - 67 100

= R168 400 One part correct

OR 37 800 (7 x 5 400) 35 400 (6 x 5 900) (1 mark) 64 000 (10 x 6 400) (1 mark) 31 200 (4 x 7 800) (1 mark)R168 400

OR

294 700 x 100/175

= 168 400

(c) Calculate the average stock holding period (in days) of the guitars on 30 April 2016.

55 150 (2 marks) see 6.3.1(a) ½ (43 200 + 67 100 ) x 365 168 400 see 6.3.1(b)

= 119,5 days One part correct

OR 120 days

4



6.3.2 Calculate closing stock (rand value) of the CDs on 30 April 2016.

7

233 275 (2 marks) 42 000 + 191 275 + 7 370 300 + 1015 1 315 (2 marks) = R183

183 x 135 = R24 705 One part correct

6.3.3 Explain why the business uses the specific identification method for guitars, but not for the CDs.

1

One valid point

Guitars are high value items, so small quantities are purchased/held in stock. Each item can be monitored individually. The value/cost of guitars is continuously changing. CDs are low value items, so large quantities are purchased/held in stock Cost per CD does not vary a lot on short term.

TOTAL MARKS

30

TOTAL: 300

Copyright reserved

Web view10 780. Cr Outstanding deposit. ... ced. 716 400. 6. CURRENT LIABILITIES. operation. ......

Documents

Transcript of Web view10 780. Cr Outstanding deposit. ... ced. 716 400. 6. CURRENT LIABILITIES. operation. ......