ACCOUNTING Grade 12 Revision WORK BOOK

Directorate: Curriculum FET

ACCOUNTING

Grade 12

Revision

WORK BOOK

Gr 12 Accounting Revision Work book

2

INVENTORY

ACTIVITY 1: Inventory (June 2016) (40 marks; 25 minutes)

1.1 CONCEPTS

1.1.1

1.1.2

1.1.3

1.1.4

4

1.2 LYNN STORES

1.2.1 Calculate the value of the closing stock on 29 February 2016 using the weighted-average method.

8

1.2.2 Calculate the following for the year ended 29 February 2016:

Cost of sales:

Gross profit:

6

1.2.3 Calculate the average stock-holding period (in days) on 29 February 2016.

5


3

1.2.4 Calculate the value of the closing stock by using the FIFO method.

7

1.3.1 Identify ONE problem in Shop 1 and ONE problem in Shop 2. Quote figures. In EACH case, give ONE point of advice.

Branch Problem Advice

Shop 1

Shop 2

6

1.3.2 Explain TWO good decisions that Chad has made in respect of Shop 3. Quote figures.

4

TOTAL MARKS

40


4

ACTIVITY 2: Inventory (Feb/March 2017) (40 marks; 25 minutes) 2.1 CONCEPTS

2.1.1

3

2.1.2

2.1.3

2.2.1 Calculate the unit price of cricket bats on 1 July 2015.

2

2.2.2 Calculate the value of the stock on hand on 30 June 2016 using the weighted-average method.

10

2.2.3 Calculate the gross profit on 30 June 2016.

5


5

2.2.4 Calculate how long (in days) it is expected to sell the closing stock of 465 cricket bats. Use the closing stock in your calculation.

4

2.2.5

Provide a calculation to support André's concern about the control of cricket bats.

7

How can André solve this problem? Explain ONE point.

2.3 Identify ONE problem relating to each branch. Quote figures to support your answer. In each case, offer Bennie advice.

9

BRANCH PROBLEM (with figures) ADVICE

Parys

Pretoria

Pofadder

TOTAL MARKS

40


6

ACTIVITY 3: Inventory (November 2017) (35 marks; 20 minutes) 3.1 CONCEPTS

3.1.1

4

3.1.2

3.1.3

3.1.4

3.2 HOT-WHEELS (PTY) LTD

Motorbikes:

3.2.1 Calculate the value of the closing stock on 30 September 2017 using the specific identification method.

7

3.2.2 Mike requires your advice on the three different models of motorbikes in which he is trading. Explain TWO points of advice.

Point 1: Point 2:

4


7

Helmets:

3.2.3 Calculate the value of the closing stock on 30 September 2017 using the weighted-average method.

9

3.2.4 Is the weighted-average method appropriate to value the helmets? Explain ONE point.

3

3.2.5 Mike suspects that helmets are being stolen from the shop despite security cameras being installed. Provide a calculation to verify his suspicion.

5

What can Mike do to improve the internal control of stock? State THREE points.

Point 1: Point 2: Point 3:

3

TOTAL MARKS

35


8

ACTIVITY 4: Inventory (Feb / March 2018) (35 marks; 20 minutes)

4.1

4.1.1

4.1.2

4.1.3

3

4.2.1 Calculate the value of the closing stock according to the FIFO method on 31 December 2017.

6

4.2.2 Calculate the cost of sales. Calculate the gross profit.

8

4.2.3 Calculate the value of the closing stock on 31 December 2017 by using the weighted-average method.

6

What will be the effect on the gross profit if the owner changes to this valuation method? Provide figures.

3


9

4.3 You are provided with information relating to Leno Furnishers. They sell tables, chairs and beds for cash only. The owner is concerned that the figures provided reflect poor internal control and decision-making. Identify ONE problem for each product. Quote figures. In EACH case, give advice on how to solve the problem.

Product Problem (with figures) Advice

Tables

Chairs

Beds

9

TOTAL MARKS

35


10

ACTIVITY 5: Inventory (June 2018) (40 marks; 25 minutes)

5.1.1

Calculate the value of the closing stock of bicycles on 31 May 2018.

Workings Answer

Tempo

Cruze

Ryder

8

Calculate the cost of sales for the year ended 31 May 2018.

4

Workings Answer

Calculate the gross profit for the year ended 31 May 2018.

3

Workings Answer

5.1.2 Calculate the selling price of a Ryder bicycle.

3

Workings Answer

Calculate the average number of Ryder bicycles sold per month.

3

Workings Answer

Indicate how long it will take Fred to sell the closing stock of the Ryder bicycles. Show calculations.

3

Workings Answer


11

Give ONE possible reason for the slow sales of Ryder bicycles.

Give advice (ONE point) to Fred in this regard.

4

5.2.1 Explain why it was NOT a good idea to change to a cheaper supplier of

T-shirts. State TWO points.

Point 1:

Point 2:

4

5.2.2 Celia decided to change the supplier in 2018 and to change the mark-up %. How has this decision affected the business? State TWO points. Point 1: Point 2:

4

5.2.3 Make TWO separate suggestions to Celia to improve the profit on pants in 2019. Point 1: Point 2:

4

TOTAL MARKS

40


12

RECONCILIATIONS

ACTIVITY 1: Creditors' reconciliation (June 2016) (18 marks, 15 minutes)

1.1.1 CREDITORS' LEDGER

CREDITORS' RECONCILIATION STATEMENT

Balance 110 170 111 600

(a)

(b)

(c)

(d)

(e)

(f)

(g)

14

(h)

1.1.2 State TWO internal control measures that the business can use to prevent similar incidents from happening in future.

4

TOTAL MARKS

18


13

ACTIVITY 2: Bank reconciliation (Mar 2017) (16 marks; 15 minutes)

2.1.1 Calculate the correct balance of the Bank Account in the General Ledger on 31 July 2016.

Provisional Bank balance R16 785

Correct Bank balance

Favourable/Unfavourable: ________________

8

2.1.2 Bank Reconciliation Statement as at 31 July 2016

6


14

2.1.3 Explain ONE internal control measure that the business should implement to ensure that this will not happen in the future.

2

TOTAL MARKS

16


15

ACTIVITY 3: Debtors' reconciliation and Age analysis (June 2017) (30 marks, 20 minutes

3.1 TRUE OR FALSE

3.1.1

3.1.2

3.1.3

3

3.2 MIZZY BOUTIQUE

Use the table provided to indicate corrections that must be made to the Debtors' Control Account and the debtors' list. Provide figures and a plus (+) or minus (–) sign for each correction.

Debtors' Control Account

Debtors' List

Balance/Total on 28 February 2017

R37 710 R39 490

(a)

(b)

(c)

(d)

(e)

(f)

Balance/Total on 28 February 2017

13

3.3 GLENDALE TRADERS

3.3.1

Explain how a debtors' age analysis can assist with internal control over debtors.

2


16

3.3.2 Calculate the percentage of total debts exceeding the credit terms.

4

3.3.3

Explain ONE problem (with figures) relating to EACH of the following debtors:

DEBTOR PROBLEM WITH FIGURES

D Pillay

4

W Patel

3.3.4 Explain TWO problems (with figures) relating to debtor D Gouws.

4

TOTAL MARKS

30


17

ACTIVITY 4: Bank Reconciliation And Internal Control (Nov 2017)

(30 marks; 20 minutes)

4.1

4.1.1

4.1.2

4.1.3

3

4.2.1

Calculation of CRJ total Calculation of CPJ total

90 500 85 920

Bank account balance:

14


18

4.2.2 Bank Reconciliation Statement on 30 June 2017

9

4.2.3 Explain the problem relating to deposits. Quote evidence.

Explain TWO strategies to prevent this in future.

Strategy 1:

Strategy 2:

4

TOTAL MARKS

30


19

ACTIVITY 5: Debtors' Reconciliation (March 2018) (25 marks; 20 minutes)

5.1.1 Explain why the debtors' age analysis is considered to be an effective internal control measure. State ONE point.

2

5.1.2 Explain TWO different problems highlighted by the debtors' age analysis. In EACH case, provide the name of a debtor and figure(s).

PROBLEM DEBTOR AND FIGURE(S)

6

5.2 DEBTORS' RECONCILIATION 5.2.1 CORRECTIONS TO THE DEBTORS' CONTROL ACCOUNT ON

30 NOVEMBER 2017

Balance before errors and omissions 25 700

(i)

(ii)

(iii)

(iv)

(v)

Correct Debtors' Control balance

7


20

5.2.2 DEBTORS' LIST ON 30 NOVEMBER 2017

L Nkosi (5 700

S Muller (11 100

M Welthagen ( –1 900

B Sandleni (15 900

Correct total of Debtors' List

10

TOTAL MARKS

25


21

ACTIVITY 6: Reconciliation And Age Analysis (FS, Sep 2017) (35 marks; 20 minutes)

6.1 CONCEPTS

6.1.1

6.1.2

6.1.3

6.2.1 Calculate the correct Bank Account balance on 30 June 2017.

6.2.2 Bank Reconciliation Statement on 30 June 2017


22

6.3 Creditors' Reconciliation

Creditors' Control Creditors’ List

Balance/total 184 870 170 490

A

B

C

D

Balance/total

6.4

Identify TWO problems regarding the control over debtors. Provide relevant

names and/or figures. In each case provide ONE point of advice to the

owner.

PROBLEM ADVICE

TOTAL MARKS

35


23

MANUFACTURING ACTIVITY 1: Manufacturing (Nov 2016) (45 marks; 25 minutes)

1.1

1.1.1

1.1.2

1.1.3

1.1.4

4

1.2.1 Calculate direct labour cost.

8

Calculate direct material cost.

6

1.2.2 Production Cost Statement for the year ended 29 February 2016:

Prime cost

Cost of production of finished goods

8


24

1.2.3 Calculate the break-even point for 2016.

5

Explain whether the owner should be concerned or not. Provide figures.

3

1.2.4 The owner is not satisfied with the internal control of the raw material (fabric).

STOREROOM:

Raw material stolen

FACTORY:

Raw material wasted

CALCULATION:

metres of fabric

STRATEGY

11

TOTAL MARKS

45


25

ACTIVITY 2: Manufacturing (June 2016) (50 marks; 30 minutes)

2.1 ABE ACCESSORIES

2.1.1 Factory Overhead Cost Note

15

2.1.2 Production Cost Statement for the year ended 29 February 2016

Direct material 350 000

Direct labour cost

Prime cost/Direct cost

Factory overhead cost

Total cost of production


8


26

2.2 NEW FASHION MANUFACTURERS

2.2.1 Gloria is concerned about the wastage of direct materials. Calculate the number of metres of fabric that was wasted.

5

Gloria feels that the wastage is significant. Provide a calculation to support her opinion.

3

2.2.2 Give TWO possible reasons for this wastage and, in EACH case, give advice to prevent this from happening in future.

Reason Advice

1.

2.

4

2.2.3 Calculate the break-even point for the year ended 29 February 2016.

4

Explain why the business should be satisfied with the number of units made during the current financial year. State TWO points.

4


27

2.2.4 What effect will it have on the production cost of a dress? Provide a calculation to support your answer.

3

State TWO other consequences of importing the direct material.

4

TOTAL MARKS

50


28

ACTIVITY 3: Manufacturing (Nov 2017) (55 marks; 30 minutes) 3.1 GEVEN MANUFACTURERS

3.1.1 PRODUCTION COST STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2017

Direct material cost

Direct labour cost

Prime cost

Factory overhead cost

Total cost of production

14

3.1.2 ABRIDGED INCOME STATEMENT FOR YEAR ENDED 28 FEBRUARY 2017

Sales

Cost of sales

Gross profit

Administration cost

Selling and distribution cost

Net profit

14


29

3.2 GYMWEAR MANUFACTURERS 3.2.1 Shirts:

Calculate the break-even point for shirts.

4

Identify ONE variable cost (with figures) that has not been well controlled. Give TWO possible reasons for this problem.

ONE VARIABLE COST WITH FIGURES

REASONS

Reason 1:

Reason 2:

4

Explain why Jan might be concerned about the large decreases in the other TWO variable costs.

4

Jan does not understand why the unit cost of production has increased when neither his fixed costs nor the variable costs have increased. Explain why this is so. State ONE point (with figures).

4


30

3.2.2 Shoes:

Calculate the % increase in the selling price of shoes.

3

Jan decided to improve the quality of the shoes and to export them. Explain how the direct material costs and the selling and distribution costs were affected by this decision. Provide figures.

4

Jan was concerned that the increase in price would have a negative impact on the business. Explain whether his concern was justified. State TWO points. Point 1: Point 2:

4

TOTAL MARKS

55


31

ACTIVITY 4: Manufacturing (March 2018) (45 marks; 25 minutes)

4.1 GLAMOUR DRESS CREATIONS 4.1.1 PRODUCTION COST STATEMENT FOR THE YEAR ENDED

28 FEBRUARY 2017.

21

Prime cost

Total manufacturing cost

Work-in-process (1 March 2016) 76 000

Production cost of finished goods

4.1.2 Calculate the net profit for the year ended 28 February 2017.

7

4.2 LIGHTING SOLUTIONS

4.2.1 Calculate the factory overhead cost per unit for the year ended 31 December 2017.

2

4.2.2 Explain why George would not be concerned about the 28,1% increase in total variable cost from R936 000 to R1 200 000.

3


32

4.2.3 Give TWO reasons for the increase in the selling and distribution cost per unit.

2

4.2.4 Calculate the break-even point for the year ended 31 December 2017.

4

Comment on the production level for 2017. State TWO points. Quote figures.

4

4.2.5 Lighting Solutions are considering importing raw materials because it is cheaper and of a higher quality. Name TWO aspects that they must consider before finalising their decision.

2

TOTAL MARKS

45


33

ACTIVITY 5: Manufacturing (Mar 2017) (45 marks; 25 minutes)

5.1 MOSES MANUFACTURERS

5.1.1 PRODUCTION COST STATEMENT ON 30 APRIL 2016

Direct labour cost 716 960

Prime cost

Total manufacturing cost

16

Work in process at beginning of year 142 000


5.1.2 Complete the abridged (shortened) Income Statement to calculate the net profit for the year ended 30 April 2016.

Gross profit 1 250 000

Net profit

8


34

5.2 UNIT COSTS AND BREAK-EVEN ANALYSIS

5.2.1 Explain the difference between fixed cost and variable cost.

2

5.2.2 Calculate the break-even point for 2017.

5

5.2.3 Comment on the break-even point and the level of production for 2016 and 2017. Explain why the owner should be satisfied or not.

6

5.2.4 Identify the variable cost that should be of great concern to the owner. Explain and provide a calculation to support your answer.

4

5.2.5 Despite the fact that there was a decrease in the fixed costs per unit, the owner is still not satisfied with his control over the fixed costs. Explain and provide calculation(s) to support his opinion.

4

TOTAL MARKS

45


35

BUDGETS

ACTIVITY 1: BUDGETING (June 2016) (40 marks; 25 minutes)

1.1 (a)

Operating profit

12

(b) Cost of sales

(c) Wages

(d) Rent income

1.2.1 Calculate the monthly salary due to the sales manager in June 2016.

4

1.2.2 Calculate the total credit sales expected in July 2016.

4


36

1.2.3 Calculate the cost price of the new vehicle purchased on 1 May 2016.

4

1.3 Comment on the control of telephone and water and electricity. What advice would you offer Susan? State ONE point. Comment: Advice:

4

1.4 Susan wants to reduce the maintenance budget to R500 per month and then use this saving for staff training. What should she consider before making this change? State TWO points.

4


37

1.5 Explain how Susan responded to this threat. State THREE points. Provide figures/calculations to support your answer.

6

Explain whether Susan's response was successful or not. Provide figures.

2

TOTAL MARKS

40


38

ACTIVITY 2: Budgeting (November 2016) (40 marks; 25 minutes)

2.1.1 TWO items recorded incorrectly in the Cash Budget:

2

2.1.2 TWO items in the Cash Budget that would NOT appear in a Projected Income Statement:

2

2.2 DEBTORS' COLLECTION SCHEDULE

MONTHS CREDIT SALES SEPTEMBER OCTOBER

July 120 000 8 400

9

August 151 200 60 480

September 172 800 86 400

October

155 280

2.3 AMOUNTS FOR THE CASH BUDGET

WORKINGS AMOUNT

(a) Cash sales for September

(b) Payments to creditors for October

18

(c) Directors' fees for October

(d) Interest on loan for October


39

2.4.1 The directors changed the method of payment to the salespersons.

Explain how this has benefitted the salespersons. Quote figures. Explain how this has benefitted the business. Quote figures.

4

2.4.2 The directors are not concerned about the overspending on packing material. Explain why this is so. Quote figures or calculations.

5

TOTAL MARKS

40


40

ACTIVITY 3: Budgeting (March 2017) (40 marks; 25 minutes)

3.1 Calculate the expected monthly percentage of goods sold on credit.

4

3.2

Debtors Collection Schedule for March 2017

MONTH CREDIT SALES FEBRUARY MARCH

December 2016 74 000 16 280

January 2017 68 000 27 200 *

February 2017 70 000 24 010 *

March 2017 64 000 *

Cash from debtors 67 490 *

5

3.3.1 Explain why the owner is concerned. Give TWO reasons with supporting figures.

4

3.3.2 Suggest ONE solution for this problem.

2

WORKINGS ANSWER

3.4.1

(a) Payment to creditors

6

(b) Salaries of sales assistants

5


41

3.4.2 Calculate the percentage increase in rent on 1 March 2017.

4

3.4.3 Calculate the amount of the interest on investment expected to be received in March 2017.

4

3.5

Identify TWO payments that you consider to be poorly managed in February 2017. In EACH case, give a suggestion to improve the internal control of the items identified.

PAYMENT ADVICE

6

TOTAL MARKS

40


42

ACTIVITY 4: BUDGETING (June 2017) (45 marks; 25 minutes)

4.1 Comment on the control of EACH item and give ONE point of advice in each case.

COMMENT ADVICE

Telephone

Staff training

4

4.2 Identify TWO items incorrectly entered in the Cash Budget.

2

4.3 CREDITORS' PAYMENT SCHEDULE

MONTH CREDIT

PURCHASES MAY JUNE

March R64 000 6 400

April R72 000 10 800

May 57 000

June R96 000

74 200

9


43

4.4

CALCULATION AMOUNT

(i)

Cash sales

(ii)

Cash purchases of stock

(iii)

Delivery expenses

(iv)

Salaries and wages

(v)

Repayment of loan

(vi)

Cash at end of month

(vii)

Cash deficit for the month

21


44

4.5 Piet wants to save on costs by not offering a free delivery service. Is this a good idea? Explain.

3

4.6 Explain ONE advantage and ONE disadvantage of each option.

OPTION ADVANTAGE DISADVANTAGE

Raise a new loan

Hire (lease) the assets from Computer Solutions

Ask a friend to become equal partner

6

TOTAL MARKS

45


45

ACTIVITY 5

5.1 Explain the main purpose of a Cash Budget. Explain the main purpose of a Projected Income Statement.

2

5.2.1 Larry expects debtors to settle accounts by the end of the month following the sales transaction month. Use the November figures to calculate the % of debtors that are expected to comply with the credit terms. Use the November figures to calculate the % of bad debts expected.

9

5.2.2 Larry does not believe that his debtors' control clerk, Shirley, deserves a bonus on 31 October 2017. Provide evidence to support his opinion. Offer Larry advice to improve debtors' collections (TWO points). Point 1: Point 2:

4


46

5.3.1 Calculate the fixed % of sales used by Larry to budget for delivery expenses. Calculate the amount of the loan to be repaid on 31 December 2017.

6

5.3.2 Refer to variances in Information D. Explain why Larry would feel that all these variances are problems for his business.

COMMENT ON VARIANCES

Sales

Advertising

Packing materials

Delivery expenses

9

TOTAL MARKS

30


47

ACTIVITY 6

6.1.1 Calculate the mark-up percentage on spare parts used in the Projected Income Statement for March 2018.

3

6.1.2 Calculate the % decrease in service fee income expected in April 2018.

3

6.1.3 Calculate the additional space (in square metres) the business will rent from April 2018.

4

6.1.4 Calculate the interest rate on the fixed deposit.

5

6.2 Comment on the control of stock and explain how Vusi intends to correct this. Quote figures.

4


48

6.3.1 Vusi is thinking of purchasing the business premises rather than renting it. State ONE advantage and ONE disadvantage of this option.

Advantage: Disadvantage:

4

6.3.2 Vusi offers a free delivery service of spare parts to customers, but plans to discontinue this service on 31 March 2018. State TWO points to support this decision.

4

6.3.3 Calculate the cost of the new vehicle that he plans to purchase on 1 April 2018.

4


49

6.4.1 Explain whether Water and electricity has been well controlled, or not.

3

6.4.2 Explain whether you agree with Vusi's decision not to use the full budget for Advertising.

3

6.4.3 Explain whether Consumable stores have been well controlled, or not.

4

6.4.4 Explain how Vusi's decision about the mark-up percentage on spare parts has affected the business.

4

TOTAL MARKS

45


50

VAT

ACTIVITY 1: VAT (March 2016) (15 marks; 9 minutes) VAT CONCEPTS

1.1.1

3

1.1.2

1.1.3

1.2 VAT CALCULATIONS

Calculate the correct amount of VAT the business has to pay. Show ALL workings.

12

TOTAL MARKS

15


51

ACTIVITY 2: VAT (June 2016) (17 marks, 10 minutes)

2.1

2.1.1

2.1.2

2.1.3

3

2.2.1 Calculate the VAT amount that is either payable to or receivable from SARS.

12

2.2.2 What comment would you offer Nelson concerning this practice? State ONE point.

2

ACTIVITY 3: VAT (Nov 2016) (10 marks; 6 minutes)

Calculate the amount receivable from or payable to SARS for VAT on 31 August 2016.

10

Receivable/Payable:


52

Activity 4: VAT (March 2017) (14 marks; 9 minutes) 4.1 CONCEPTS

4.1.1

4.1.2

4.1.3

3

4.2 VALUE-ADDED TAX (VAT)

4.2.1 Calculate the amount of VAT either receivable from or payable to SARS on 31 July 2016. Receivable/Payable: __________________

9

4.2.2 The owner wants to change the VAT amount on bad debts from R840 to R4 200. Give ONE reason why you would disagree with him.

2


53

Activity 5: VAT (March 2018) (15 marks; 9 minutes)

5.1 Calculate the VAT amount that is either receivable from or payable to SARS on 31 July 2017.

11

5.2 Nomvula has ordered goods with a marked price of R35 000 from Beta Suppliers.

The sales director of Beta Suppliers, Jim Frow, has offered to sell these goods to Nomvula for R15 000, provided that they do not have to issue an invoice.

Comment on the offer made by Jim. State TWO points.

4


54

ACTIVITY 6: VAT (MCED, June 2018) (30 marks; 18 minutes) 6.1 Choose the correct one between brackets:

6.2 Explain the THREE different types of VAT and give an example of each?

6.3 Explain the difference between VAT INPUT and VAT OUTPUT.

VAT INPUT VAT OUTPUT

6.1.1

6.1.2

6.1.3

3

6

4


55

6.4 Use these entries to calculate the correct amount owing to SARS/ or owed by SARS.

Show your workings.

TOTALMARKS

30

17


56

ASSETS / COMPANIES

ACTIVITY 1: Concepts, Balance Sheet And Audit Report (June 2016) (65 marks; 40 minutes)

1.1 CONCEPTS

1.1.1

1.1.2

1.1.3

1.1.4

4

1.2 PARADISE LIMITED 1.2.1 Ordinary share capital

6

Retained income

Balance at beginning of year 1 634 000

10

Ordinary share dividends

Balance at end of year


57

1.2.2 BALANCE SHEET (STATEMENT OF FINANCIAL POSITION) ON

29 FEBRUARY 2016

ASSETS

35

NON-CURRENT ASSETS

Fixed deposit: Sandton Bank

CURRENT ASSETS 3 538 600

TOTAL ASSETS

EQUITY AND LIABILITIES

ORDINARY SHAREHOLDERS' EQUITY

Ordinary share capital

NON-CURRENT LIABILITIES

CURRENT LIABILITIES

Trade and other payables

TOTAL EQUITY AND LIABILITIES


58

1.3 AUDIT REPORT

1.3.1 What type of audit report did Topstar Ltd receive? Choose from the following: unqualified, qualified, disclaimer.

Reason:

3

1.3.2 To whom is an audit report addressed?

Reason:

3

1.3.3 Explain why the auditor mentioned IFRS in the audit report.

2

Explain why the auditor mentioned the Companies Act (Act 61 of 1973) in the audit report.

2

TOTAL MARKS

65


59

ACTIVITY 2: Audit Report and Income Statement (Nov 2016) (70 marks; 40 minutes)

2.1 2.1.1

2.1.2

2.1.3

2.1.4

4

2.2 AUDIT REPORT

2.2.1 To whom is the audit report addressed?

1

2.2.2 Who has to ensure that the financial statements are prepared and presented at the annual general meeting?

1

2.2.3 Fralezi Ltd received a/an (qualified/unqualified/disclaimer of opinion) audit report. Explain your choice.

2

2.2.4 Explain why the independent auditors referred to pages 11–29 in the

report.

2


60

2.3 FRALEZI LTD INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2016

Sales

Cost of sales

Gross profit

Other income

Operating expenses

Directors' fees

Salaries and wages

Sundry expenses

Operating profit

Interest income

Profit before interest expense

Interest expense

Net profit before tax

Income tax for the year

Net profit after tax 504 000

TOTAL MARKS

70

60


61

ACTIVITY 3: Company Financial Statements and Interpretation (March 2017)

(75 marks; 45 minutes) 3.1 GANDHI LTD

INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2017

Sales

Cost of sales

Gross profit 3 150 000

Other income

Commission income 12 000

Gross income

Operating expenses

Salaries and wages 824 000

Depreciation 216 500

Sundry expenses

Operating profit

33

Interest income

Net profit before interest expense

Interest expense


Income tax (396 800)

Net profit after tax


62

3.2.1 ORDINARY SHARE CAPITAL

AUTHORISED SHARE CAPITAL

1 200 000 ordinary shares

ISSUED SHARE CAPITAL

Ordinary shares on 1 March 2016 3 084 000

10

3.2.2 RETAINED INCOME

Balance on 1 March 2016 674 500

10


Balance on 28 February 2017

3.3 EQUITY AND LIABILITIES SECTION OF THE BALANCE SHEET

SHAREHOLDERS' EQUITY


CURRENT LIABILITIES

16

TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES


63

3.4.1 Calculate B Sly's percentage shareholding in the company before and after the share buy-back.

Before the buy-back: After the buy-back:

4

3.4.2 Explain why the other shareholders will be concerned about this transaction.

2

TOTAL MARKS

75


64

ACTIVITY 4: Income Statement and Fixed Assets (June 2017) (70 marks; 40 minutes)

4.1

4.1.1

4.1.2

4.1.3

4.1.4

4

4.2 MTOMBENI LTD

4.2.1 Calculate: Carrying value of the vehicle sold on 30 November 2016

5

Calculate: Total depreciation on equipment on 28 February 2017

7


65

4.2.2 MTOMBENI LTD

Income Statement (Statement of Comprehensive Income) for the year ended 28 February 2017:

Sales (5 500 000

Cost of sales (3 150 000

Operating expenses

Directors' fees 380 000

Audit fees 54 000

Operating profit

Interest income

Net profit after interest income


Income tax

Net profit after tax 864 000

54

TOTAL MARKS

70


66

Activity 5: FIXED ASSETS, BALANCE SHEET AND AUDIT REPORT (Nov 2017)

(65 marks; 40 minutes)

5.1

(a) Calculate the carrying value of Land and Buildings on 1 March 2016.

2

(b) Calculate the total depreciation on Vehicles on 28 February 2017.

6

(c) Calculate the carrying value of Vehicles on 28 February 2017.

4

(d) Calculate the carrying value of Equipment sold on 31 December 2016.

6

(e) Calculate the total carrying value of Fixed Assets on 28 February 2017.

4


67

5.2 BALANCE SHEET OF ODETTE LTD ON 28 FEBRUARY 2017

ASSETS

NON-CURRENT ASSETS

CURRENT ASSETS

Inventory 408 880

Trade and other receivables

Cash and cash equivalents

TOTAL ASSETS




Retained income 520 000


37

CURRENT LIABILITIES



68

5.3 AUDIT REPORT

As a shareholder, what concerns would you have regarding this audit report? Explain THREE points.

Point 1: Point 2: Point 3:

6

TOTAL MARKS

65


69

ACTIVITY 6: Balance Sheet and Audit Report (March 2018) (65 marks; 40 minutes)

6.1

6.1.1

6.1.2

6.1.3

6.1.4

6.1.5

5

6.2 ORBIT LTD 6.2.1

(a) ORDINARY SHARE CAPITAL

Authorised

6 000 000 shares

Issued

8

(b) RETAINED INCOME

Balance on 1 July 2016 874 000

11


Balance on 30 June 2017


70

6.2.2 ORBIT LTD

BALANCE SHEET ON 30 JUNE 2017

ASSETS

NON-CURRENT ASSETS

Fixed/Tangible Assets

Fixed deposit 380 000

CURRENT ASSETS

Inventory 478 000

TOTAL ASSETS




Retained income


28

Loan: Helping Bank

CURRENT LIABILITIES

Trade and other payables



71

6.2.3 As a shareholder, explain your concern regarding the proposed buy-back of shares. Provide calculations to support your concern.

6

6.3 AUDIT REPORT: DF ENTERPRISES LTD

6.3.1 (a)

(b)

2

6.3.2 (a) The audit report below indicates a/an (qualified/unqualified) opinion.

1

(b) Explain why the shareholders should be concerned about this audit report. State TWO points.

4

TOTAL MARKS

65


72

ACTIVITY 7: Cash Flow and Interpretation (Nov 2017) (85 marks, 50 minutes)

7.1 7.1.1

7.1.2

7.1.3

7.1.4

4

7.2 SO-FINE LTD 7.2.1 ORDINARY SHARE CAPITAL AUTHORISED SHARE CAPITAL

1 200 000 ordinary shares

ISSUED SHARE CAPITAL

900 000 Ordinary shares on 1 September 2016

7

Ordinary shares on 31 August 2017 5 292 000

RETAINED INCOME

Balance on 1 September 2016 147 370

Net profit after income tax 438 130

9


`

Balance on 31 August 2017


73

7.2.2 SO-FINE LTD

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 AUGUST 2017

CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations

Interest paid

Dividends paid

Income tax paid ?

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of fixed assets ?

? ?

Change in investments

CASH FLOWS FROM FINANCING ACTIVITIES

? ?

? ?

Change in non-current liabilities

19

Net change in cash and cash equivalents ?

Cash and cash equivalents – opening balance ?

Cash and cash equivalents – closing balance ?

7.2.3 Calculate the percentage operating profit on sales.

3

Calculate the debt-equity ratio.

4

7.2.4 Calculate the dividends per share (DPS) of a shareholder who owned the same number of shares for the entire financial period.

4


74

7.3 CASTRO LTD

7.3.1 Comment on the price of R9,10 charged by Castro Ltd for the new shares issued.

3

7.3.2 Explain how the issue of new shares has affected the financial gearing and risk of Castro Ltd. Quote TWO financial indicators.

6

7.3.3 If Henry wanted to retain his 60% shareholding in the company, how many shares would he have had to buy?

3

How much would he have had to pay?

2

Henry decided NOT to buy these shares. Apart from the % shareholding, explain TWO reasons why he has made a mistake by not taking up this option.

Reason 1: Reason 2:

6


75

RONKI LTD

7.3.4 Comment on the liquidity of Ronki Ltd. Quote TWO financial indicators.

6

7.3.5 Comment on the price paid by Ronki Ltd for the repurchase (buy-back) of shares.

3

7.3.6 Explain THREE ways in which Henry has benefited from the repurchase of the shares by Ronki Ltd. Point 1: Point 2: Point 3:

6

TOTAL MARKS

85


76

ACTIVITY 8: Fixed Assets, Cash Flow and Interpretation (Mar 2018) (70 marks; 45 minutes)

8.1 NO. WORKINGS AMOUNT

(a) Additions to buildings

15

(b) Total depreciation on equipment

(c) Disposal of equipment at carrying value

8.2.1 WORKINGS ANSWER

Calculate the income tax paid.

5

8.2.2 Calculate the dividends paid.

3

8.2.3 Calculate the net change in cash and cash equivalents.

4

8.3 CASH EFFECTS OF FINANCING ACTIVITIES

10


77

8.4.1 Calculate the debt-equity ratio.

3

8.4.2 Calculate the earnings per share (in cents).

3

8.4.3 Calculate the return on average shareholders' equity (ROSHE).

5

8.5 Explain why the directors felt that the 630 cents offered on the shares repurchased was a fair price. Quote TWO financial indicators with figures.

4

8.6.1 The directors revised the dividend pay-out policy for the current financial year. Calculate the percentage of earnings distributed as dividends for each year to show this change.

4


78

8.6.2 Give ONE reason why the directors took this decision.

2

8.6.3 Explain why the shareholders may not be satisfied with the return they earn. Quote a financial indicator or figure(s).

3

8.7 Apart from the dividends, identify THREE good decisions. Explain the effect of each decision on the company. Quote figures.

GOOD DECISIONS (with figures)

EFFECT ON COMPANY

Decision 1:

Decision 2:

Decision 3:

9

TOTAL MARKS

70

ACCOUNTING Grade 12 Revision WORK BOOK

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