accounting gr 12 september 2015 memorandum...

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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 foreign item penalty for misplaced item). No double penalty applied.

2. Full marks for correct answer. If the answer is incorrect, mark the workings provided.

3. 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).

4. 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.

5. Where indicated, part-marks may be awarded to differentiate between differing qualities of answers from candidates.

6. Where penalties are applied, the marks for that section of the question cannot be a final negative.

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

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

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

This memorandum consists of 19 pages.

ACCOUNTING Gr 12

SEPTEMBER 2015

MEMORANDUM (Eng)

Accounting MEMO 2 2 MEED September 2015


QUESTION 1

1.1 1. DIRECT MATERIAL COST (Note)

9

Opening Stock of raw materials 12 000

Net purchases (52 000 + 28 000 - 5 000) operation, one

part correct 75 000

Carriage on Purchases 8 000

operation, OS+ P + CoP 95 000

Closing Stock (15 000)

Direct Material Cost operation, minus CS 80 000

PRODUCTION COST STATEMENT

FOR THE MONTH ENDED 31 AUGUST 2015

Direct material cost See Note above 80 000

8

Direct labour cost (30 000 + 40 000) operation,

one part correct 70 000

Prime cost operation, DM + DL 150 000

Factory Overheads 45 000

Total cost of production of finished goods operation,

PC + FOH 195 000

1.2 Calculate the cost of each loaf of bread produced in August 2015.

3

195 000 ÷ 30 000 = R6,50 (see 1.1)

1.3 Give TWO possible reasons for the increase in total raw material cost.

4

Any TWO reasons:

Number of units produced increased from 20 000 to 30 000 (figures not required)

Higher purchasing costs and/or -prices/ Inflation

More wastage

New/Other production methods were introduced



1.4 Calculate the variable cost per loaf of bread (to the nearest cent).

one part correct

see 1.1 (30 000 + 40 000) (4 800) 80 000 + 70 000 + [7 200 - 2 400] 30 000 = 154 800 30 000 = R5,16 Operation, one part correct

6

1.5 Calculate the break-even point for August 2015.

6

(54 000) . (R9 - R5,16) see 1.4

= 54 000 R3,84 = 14 062,5 OR 14 063 Operation, one part correct correctly rounded up

Do you consider the level of production to be satisfactory or not? Explain and quote figures to support your opinion.

4

Satisfactory Explanation Quoting figures (Mark according to BEP calculated above)

Business produced 10 000 (50%) more in August, but the BEP increased only by ± 2 000 (12,5%)

Produced much more than the BEP in August (30 000 vs 14 063)

More products available on which to make a profit, so profit should increase July: 7 500 (20 000 - 12 500); Aug: 15 937 (30 000 - 14 063)]



1.6 James is worried about the overtime payment to factory workers.

Quote TWO figures from the information that will confirm his concern.

R30 000 (R6 000 each) normal time /basic wage R40 000 (R8 000 each) overtime

2

Explain TWO possible reasons that may justify the overtime.

Any TWO reasons in favour of overtime:

Increased demand for bread

Load shedding caused interruptions in productions

Strike/Labour action lead to lower production.

Mechanical breakdowns make it difficult to keep to due dates to deliver orders.

Shortages/Delays in supply of raw materials

High absenteeism of some workers may slow down the whole production process.

4

Suggest TWO internal control measures that James could implement to monitor and reduce overtime.

Any TWO internal control measures for overtime

All overtime should be authorised by senior staff

Set production targets that need to be reached during normal work hours

Offer incentives to individuals that reach/exceed daily targets

Identify slower/weaker individuals, redeploy them or offer training

Monitor absenteeism/Use clock card system

Only buy quality raw materials from reliable suppliers, to ensure that production targets will be met in time

4

Q1: Total Marks

50



QUESTION 2

2.1.1 Calculate the correct Bank balance in the General Ledger of Langa Stores on 31 August 2015.

Consider the sign when allocating marks: (15153 - 15513) 2 marks 13 138 + 10 150 - 360 - 480 + 10 800 - 7 400 + 8 000 = R33 848 (dr) Operation; Any ONE part correct

OR

BANK

Balance b/d 13 138 Stale cheque 10150 fixed dep + int 10 800 rent income 8 000

Cheque 781 360 Bank charges 480 R/D cheque 7 400 Balance o/d 33 848

(Ignore details in the account above)

11

2.1.2 Bank Reconciliation Statement on 31 August 2015

DEBIT CREDIT

Cr balance as per Bank Statement 23 678

11

Cr outstanding deposit 18 600

Dr outstanding cheques: 767 12 630

786 2 340

802 9 000

Correct Cheque 102 (bank error) 15 540

Dr balance as per Bank Account see 2.1.1 33 848

Operation; Totals do not have to agree 57 818 57 818



2.1.3 Refer to the outstanding deposit of R18 600 dated 14 August 2015. Give TWO reasons why the internal auditor should be concerned about this deposit.

Any TWO reasons:

Deposit is long overdue (from the 14th) and should have been reflected within a day.

It appears to be missing and will affect cash flow/liquidity as R18 600 is a large amount

It could indicate that the deposit was not made and that the person responsible for depositing this R18 600 is rolling cash/committing fraud.

It could be the result of a bank error where the deposit was not reflected on the bank statement/bank entered it incorrectly

6

Suggest TWO internal control measures that will monitor cash deposits more effectively.

Any TWO internal control measures for cash

Division of duties so that one person serves as a check on the other

Check cash and documents to and from bank regularly

Request notifications (SMS) from bank for deposits

Two people should go to the bank when depositing (security)

Encourage direct electronic transfers instead of handling cash

Introduce a policy for regular, daily depositing of cash

2.1.4 Refer to the dishonoured cheque, R7 400, received from the debtor. Explain TWO measures to prevent dishonoured cheques in future.

Any TWO internal control measures to prevent dishonoured cheques:

Check that receipt of cheques are authorised/by a person other than the cashier

Check that cheques are completed accurately and signed before taking receipt of it.

Institute a policy in the business which sets out procedure when accepting cheques from customers

Refuse to accept any cheques as form of payment

Check debtors' credit records when they apply for credit to ensure they will be able to pay their debt

Encourage electronic transfers/payments from debtors/customers

4



2.2 CREDITORS RECONCILIATION

ACCOUNT OF DH SUPPLIERS IN THE CREDITORS' LEDGER

OF PC TRADERS

STATEMENT RECEIVED FROM DH SUPPLIERS

8

Balance R14 905 R15 120

2.2.1 - 415

2.2.2 + 720

2.2.3 - 460

(or - 920 ) - 460

14 705 14 705

1 mark for the sign + 1 mark for the mount -1 foreign/incorrect entry per line (max - 3)

Q2: Total Marks

40



QUESTION 3 3.1 Write only the GAAP principle next to the question number (3.1.1-3.1.4)

3.1 3.1.1 Historical cost

4

3.1.2 Matching

3.1.3 Prudence

3.1.4 Materiality

3.2.1 Refer to Information E and calculate the profit or loss on the trade in of the delivery vehicle. Clearly indicate whether a 'profit' or 'loss' was made.

8

Depreciation up to 1 May 2015: 125 000 x 20% x 9/12 = 18 750 see depreciation above 125 000 - (75 000 + 18 750) - 42 000 93 750 (3 marks)

OR OR (75 000 + 18 750) + 42 000 - 125 000 = R10 750 operation, one aspect correct Profit (based on calculations) (indication of 'profit /loss' must be clear)

Asset Disposal

125 000 profit 10 750

93 750 42 000

3.2.2 See Income Statement on the next page

3.2.3 NOTE to the BALANCE SHEET as at 31 July 2015

INVENTORIES

Trading Stock 283 000

6

Consumable Stores on hand (45 300 - 44 200 + 3 500) operation; one aspect

4 600

operation 287 600

-1 (max) foreign items; Ignore the order



3.2.2 METRO SUPERMARKET LTD

INCOME STATEMENT FOR THE YEAR ENDED 31 JULY 2015

Sales ([935 500 x1.6] 1 496 800 - 23 300) operation;

one part correct * 1473 500

13

Cost of Sales brackets (935 500)

Gross Profit operation / inspection 538 000

Other Income (operation) 29 550

Bad debts Recovered 2 500

Commission Income (14 800 + 1 500) * 16 300

Profit on sale of asset (see 3.2.1) 10 750

Gross operating Income A 567 550

Operating Expenses ('A' - 'B') (397 000)

Auditors' fees (balancing figure) (397 000 - 319 600) (operation) 77 400

28

Advertising (8 000 - 960) * 7 040

Bad Debts (2 100 + 1 400) * 3 500

Directors' fees (75 000 + 15 000) * 90 000

Insurance 5 110

Packing material 44 200

Salaries and Wages (102 000 + 12 000 + 5 000) * 119 000

Employers' contribution 3 000

**Depreciation (18 750 + 10 500 + 12 000) * 41 250

*Loss due to fire 4 000

#Trading stock deficit(289 000 - 283 000 - 4 000) *[ALT: 'Loss due to fire' may be added here: = 6 000] 5 marks

* 2 000

#Provision for Bad debts adjustment (2 880 - 2 380) [48 000 x 6%]

* 500

6

Operating profit B 170 550

Interest Income (5 400 + 1 800) * 7 200

Net profit before tax (53 325 x 100/30) 177 750

Income tax (53 325)

Net profit after tax (53 325 x 70/30); or (operation: (NP - tax))

124 425

** Depreciation: Vehicle sold: 18 750 (see 3.2.1) New Vehicle: 210 000 x 20% x 3/12 = 10 500 Equipment: (230 000 - 110 000) x 10% = 12 000

47

* = one aspect correct Q3: Total Marks

- 2 (max) foreign items # ‘T/stock’ + ‘PBD’ not to be penalised as "foreign items" as marks are allocated for correct terms

65



QUESTION 4

4.1 Explain the difference between a Balance Sheet and a Cash Flow Statement.

2

Balance Sheet:

ANY explanation: It reflects the net worth/financial position of a company on a particular date.

It shows the real value of assets, equity and liabilities on a certain date. Cash Flow Statement: ANY explanation:

It reflects the cash flow in and out for the past financial year. It shows the cash results of operating, financing and investing activities.

4.2 Calculate the following amounts as it would appear in the Cash Flow Statement on 28 February 2015.

Dividends paid: (1 500 000 x 0,50) 480 000 - 870 000 + 750 000 480 000 + 1 620 000 – 870 000 OR – 480 000 – 1620 000 + 870 000 1 mark 2 marks 1 mark

= R1 230 000 operation, one aspect correct

5

CASH FLOW FROM FINANCING ACTIVITIES operation 2 325 000

10

Layout marks; ignore order

Proceeds from issue of shares (300 000 x R8) no brackets 2 400 000

Repurchase of shares (50 000 x 9,50) brackets (475 000)

Additional long-term loan (908 000 - 508 000) no brackets 400 000

NET CHANGE IN CASH AND CASH EQUIVALENTS operation (2 989 500)

4

Cash and cash equivalents: beginning of year 2 488 000

operation; one part correct Cash and cash equivalents: end of year (- 515 000 + 13 500)

(501 500)

Foreign entries -1 (max - 2) Presentation / Placement / Incorrect or incomplete details -1 (max - 2)



4.3 At the AGM a shareholder stated that she is unhappy about the bank overdraft on 28 February 2015. She feels that the directors made some poor decisions that resulted in this situation. Explain TWO decisions with relevant figures, to support her opinion.

Any TWO valid answers: Explanation Figures (3 + 3)

Dividends paid of R1 230 000 (see 4.2) caused a large outflow of cash.

Fixed assets bought are very high (R4 381 000 [= 4 051 000 + 330 000]) (see info E)

The buy-back of shares (R475 000) (see 4.2) reduced cash resources / reduced the capital base of the company.

The vehicle was sold at book value (R106 400) (see info E) although it was only 1½ years old.

The directors allowed a large bank overdraft of R515 000 or R501 500 as a result of high payments for dividends/fixed assets.

6

4.4.1 Calculate the acid test ratio.

(3 337 300 - 818 200) : 2 063 700 OR (2 377 600 + 128 000 + 13 500) : 2 063 700

2 519 100 : 2 063 700 1,22 : 1 operation

5

4.4.2 Calculate the net asset value per share.

8 839 000 x 100 1 450 000 1 = 610 cents one part correct; R or c or 609,6 cents or R6,10

3

4.4.3 Calculate the debt-equity ratio.

908 000 : 8 839 000 = 0,1 : 1 one part correct; must be shown as ' x:1'

3



4.5 The directors wanted to expand business operations and therefore chose to increase loans during the current financial year, instead of issuing more shares. Explain and quote TWO financial indicators (actual figures/ratios/percentages) that are relevant to their choice. Explain whether this was a good choice or not.

Explain TWO indicators Figures quoted with each ROTCE

This is 18,8% and increased from 16,4% (more profits)

DEBT/EQUITY RATIO

This is 0,1 : 1 (see 4.4.3); it is the same as in 2014 (risk the same with higher loans)

Explanation: Depends on calculation above in 4.4.2 en 4.4.3

Positively geared, as ROTCE (18,8%) is higher than interest rate (12,5%)

Low financial risk / Not making much use of loans (relies more on funds from internal sources) / They are able to repay loans (0,1: 1)

This is therefore a good choice. (one mark only)

8

4.6 The directors are of the opinion that the liquidity has deteriorated. Explain and quote THREE financial indicators (with figures) to support their opinion.

Any THREE valid financial indicators:

Name of financial indicator Figure and trend

Current ratio: 3,6 : 1 to 1,6 : 1 / decreased to 1,6 : 1

Acid test ratio: 3,1 : 1 to 1,2 : 1 / decreased to 1,2 : 1

Stock turnover rate: 5,1 to 6,8 times p.a./ increased to 6,8 times

Debtors' collection period: 35 to 40 days / increased to 40 days

General comment: For 3 marks Not in agreement with directors' opinion, i.e.:

The liquidity has generally improved. The current ratio and acid-test ratio were too high in 2014. They are much more efficient in 2015. Stock is now being sold more quickly which will generate greater profit. However the debtors are paying slightly more slowly – this trend must be rectified next year. OR: In agreement with directors' opinion, i.e.: Liquidity has deteriorated, as current and acid test ratio's has decreased and debtors are taking longer to pay - less cash available, despite faster turnover rate of stock. One valid point per indicator OR 3 marks for overall comment:

Excellent answer = 3 marks; Good = 2; Poor =1; Incorrect =0 Increases/decreases are not comments but trends; Comment would be on improvement or not / efficiency

Expected responses for 1 mark each:

The current ratio improved / was possibly too high in 2014 / cash was too high/ current assets do not earn any return / they may be more efficient in 2015.

The acid test ratio improved / is more efficient in 2015 / cash is lower

The stock turnover rate has improved / stock increased but is being sold more quickly/ assists liquidity and is appropriate for a hardware store.

The debtors are paying more slowly / this trend must be rectified / brought in line with normal credit terms of 30 days.

9



4.7 The Nel family owns 740 000 shares in this company. Explain the effect that the repurchase of shares on 31 December 2014 had on their control of the company. Give a calculation(s) to support your answer.

Before the repurchase the family's shareholding was: Both figures 740 000 x 100 = 49,3% 1 500 000 1 After the repurchase the family's shareholding is: Both figures 740 000 x 100 = 51,0% 1 450 000 1 (Note: Shareholding increased by 1,7%; this is correct for 4 marks)

The family is now the majority shareholder. For 3 marks:

They owned less than half the shares in issue before the repurchase (1 mark)

but now own more than half the shares in issue (1 mark). The family is now the majority shareholder (1 mark). OR For 3 marks:

They owned 740 000 of 1,5million shares before the repurchase (1 mark), and they owned 740 000 of 1,45million shares after the repurchase (1 mark). The family is now the majority shareholder (1 mark).

5

A relevant calculation without an explanation = max 2 Q4: Total Marks

60



QUESTION 5

5.1

NO

Amount in the Cash Budget for July 2015

Amount in the Projected Income Statement for July 2015

12

RECEIPT PAYMENT INCOME EXPENSE

Example R3 000 R3 000 5.1.1 25 000

5.1.2 45 000 45 000

OR: 24 000 21 000

5.1.3 1 200

5.1.4

18 000 = amount

= placement

900

5.1.5 50 000 50 000

5.1.6 2 800

(33 600/12)

Only 5.1.1 + 5.1.3: No mark if amount is shown in more than 1 column = amount = placement

5.2.1 DEBTORS COLLECTION SCHEDULE

CREDIT SALES NOVEMBER

6

August 42 000

September 49 200 8% 3 936

October (108 000 x 40%)

43 200 30 240 Check 70% of credit sales

November 33 600 20% 6 720

40 896 One part correct

5.2.2 NO. CALCULATIONS AMOUNT

12

(i) 56 000 (one mark)

(84 000 x 100 ÷ 150) x 25% 14 000

One part correct

(ii) 61 500 (one mark)

(82 000 x 75%) x 95% 58 425 One part correct

(iii) 32 000 x 103% 32 960

(iv) 2 904 x 100 ÷ 110 2 640

(v) - 22 600 - 10 200 (32 800) bracket/neg amount



5.2.3.1 Chase decided to offer special discounts to customers during October. They will be reminded weekly by telephone or SMS about this offer. In your opinion, has this benefitted the business? Provide figures to support your answer.

4

Opinion + ONE reason with figures No

Actual sales were R84 000 compared to budget of R108 000

Sales decreased by R24 000 (22%), but telephone costs increased by R2 500 (50%)

Profit margin was budgeted for 50%, but only 40% realised.

5.2.3.2 Explain what you would say to Chase about the control of the following:

ITEM COMMENT WITH FIGURES

Two marks each ADVICE

One mark each

6

Delivery Costs

Sales were less than budgeted, so actual delivery expenses should decrease to R8 400. (10% of sales)

Investigate possible fraud or inefficiency/ Change to another delivery firm/ Charge customers for deliveries.

Telephone costs

Overspent by R2 500 (R5 000 to R7 500)/ This extra costs did not result in an increase in sales.

Investigate the use of telephone / SMS list Update contact list of customers/ Send e-mails/flyers/etc. Investigate other methods of contact with customers.



5.2.4.1 Calculate the purchase price of the new vehicle

(R6 250 x 36) x 100/90 = R250 000 One part correct

brackets not required

4

5.2.4.2 Apart from the deposit and the monthly instalment of R6 250, explain how the next Cash Budget will be affected. State THREE points.

6

Any 3 valid points, e.g.

Delivery expenses paid to QIK Deliveries will be avoided.

Fuel costs must be included.

Salary of a driver must be provided for.

Insurance must be included.

Q5: Total Marks

50



QUESTION 6

6.1 6.1.1 B

3

6.1.2 D

6.1.3 E

6.2.1 Calculate the value of the closing stock of 145 microwave ovens on 30 June 2015 using the FIFO method.

(4750 +125) R411 750 + (55 x R4 875) = R679 875 Operation; one part correct

6

6.2.2 Calculate the cost of sales.

6

(see 6.2.1) 385 000 + 1 765 500 - 14 625 - R679 875 (3 x 4 875)

= R1 456 000 one part correct

Calculate the average mark-up % achieved for the year.

4

Gross profit: 2 303 800 - 1 456 000 = R847 800 (see CoS above)

% Mark-up: 847 800 x 100

1 456 000 (see above)

= 58.2% one part correct



6.2.3 Refer to information D. Provide a calculation to prove whether the information given by the storeroom supervisor is accurate or not.

Should be in stock: 70 + 360 - 3 - 276 = 151 Counted on hand: = 145 Missing: (151- 145) = 6

6

6.2.4 Jane is concerned that the final stock of 145 microwave ovens is not appropriate for the business. Provide a calculation or figures to support her opinion, and explain.

Calculation / Figures: Any valid figures:

145 x 365 = 192 days OR (6 months+) 276 1

OR

679 875 x 365 = 170 days (5,7 months) 1 456 000 1

OR

½ (385 000 + 679 875) x 365 = 133 days (± 4 months) 1 456 000 1 OR

Compare stock on hand (145 units) to total sales (276 units) Explanation:

Not appropriate, as stock will last at least 4 - 6 months. (too much stock on hand)

Microwaves have a long shelf life, but some models may become obsolete due to new technology being available.

3


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6.2.5 Jane has adjusted the selling prices during the year to attract new customers. Comment on whether or not this strategy has benefitted the business. Provide figures to support your answer.

Excellent/Good answer = 3 marks; Average = 2; Poor = 1; Incorrect = 0

Expected response with figures:

The strategy was successful in April, as sales increased to 150 units when selling price was R7 500 per oven.

When the selling price increased significantly in May from R7 500 to R9 800 and sales dropped to 16 units.

She has not reduced selling prices when cost prices decreased in Dec and Apr.

Her competitors will probably decrease prices when possible to increase their market share.

3

6.2.6 Provide TWO points to assist Jane in improving internal control of inventory in the business.

Any TWO points Possible responses:

Regular stock counts to check that no stock goes missing.

Division of duties to check that all sales are recorded properly

Check that stock is properly secured. (security measures are in place)

Reconsider pricing policy to reduce stock to acceptable levels.

4

Q6: Total Marks

35

TOTAL: 300

accounting gr 12 september 2015 memorandum...

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