ACCOUNTING
GRADE 12
NOVEMBER 2019
MEMORANDUM
NATIONAL SENIOR CERTIFICATE

MARKING PRINCIPLES:

1. Unless otherwise stated in the marking guidelines, 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) are applied only if the candidate is earning marks on the figures for that item.
3. Full marks for correct answer. If answer 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). Note: if figures are stipulated in memo for components of workings, these do not carry the method mark for final answer as well.
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. This memorandum is not for public distribution, as certain items might imply incorrect treatment. The adjustments made are due to nuances in certain questions.
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.
10. Operation means 'check operation'. 'One part correct' means operation and one part correct. Note: check operation must be +, -, x, ÷, or per memo.
11. In calculations, do not award marks for workings if numerator & denominator are swapped – this also applies to ratios.
12. In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect at least in part. Indicate with a .
13. Be aware of candidates who provide valid alternatives beyond the marking guideline. Note that one comment could contain different aspects.
14. Codes: f = foreign item; p = placement/presentation.

QUESTION 1
1.1
1.1.1 False ✓
1.1.2 True ✓
1.1.3 True ✓
1.2 DESKS FACTORY
1.2.1

1.2.2 Calculate the total cost of production of finished goods.
Workings
9 000 x 160 two or no marks
3 060 000 + 1 440 000 + 1 080 000
✓✓✓✓ see 1.2.1
OR: units DMC/u DLC/u FOHC/u
620 three marks three marks
9 000 x (340 + 160 + 120) (see 1..2.1 ÷ 9 000) + 500
one mark one mark one mark one method mark
Answer
R5 580 000
one part correct
1.2.3 Sihle wants to produce an additional 1 500 desks. Calculate the additional profit he can expect.
Workings
Extra units x Contribution per unit
750 one mark – 580 one mark [340+160+80]
1 500 ✓ x 170✓✓
Answer
Correct operation
& one part correct
R255 000
TOTAL MARKS:40

1.3 CHAIRS FACTORY
1.3.1 Provide a calculation to confirm the break-even point for 2019.
16 000 x 96 or 1 536 000 two marks
1 216 000 ✓ + 320 000 ✓
 390 ✓ – 305 ✓
85 two marks
OR:  Sales         VC               FC
7 047 690 – 5 511 655 – 1 536 000 = 35 or 0 one mark each
1.3.2 Comment on the break-even point and the production level achieved. Quote figures. If differences are shown for figures, this carries two marks
Comment on BEP✓ Figures✓ Comment on production✓ Figures✓
Reponses for four marks:

• Produced 16 000 units but BEP is 18 071(or see 1.3.1) units so they will make a loss
• Produced 2 071 less than BEP so they will make a loss.
• Production increased from 15 000 to 16 000 units (by 1 000) and BEP increased from 12 400 to 18 071 units (by 5 671).
• In 2018 they made a profit on 2 600 units.

1.3.3 Sihle feels that wood raw material was not well controlled. Provide a calculation.
METRES
Actual issue: 22 000m ✓ Budget: 16 000✓ x 1,2 ✓ = 19 200m ✓
OR: Wastage = 2 800m four marks Choose one line
OR: UNITS
Expected: 22 000 one mark /1,2 one mark =18 334 one mark Actual: 16 000 one mark
OR 2 334 fewer chairs made four marks Choose one line
OR: TOTAL COSTS
22 000 one mark x 120 16 000 one mark x 1,2 one mark x 120 one mark
Expected: = R2 640 000 Actual = R2 304 000
OR Extra cost = R336 000 four marks Choose one line
OR: UNIT COSTS
Expected: 1,2 one mark x R120 one mark = R144 one mark Actual= R165 one mark
OR Extra unit cost = R21 per unit extra four marks Choose one line
OR: % PROD
DMC increased by 33% (R165 –R124; 41÷124) two marks
Units produced increased by 7% (1 000 ÷ 15 000) two marks

Identify TWO possible causes of this problem. Provide a solution for EACH.

TWO valid & different causes with solutions
1.3.4 Give TWO reasons for the increase in direct labour cost. Provide a solution for EACH.

TWO valid & different reasons with solutions

QUESTION 2
2.1.1 State THREE advantages of EFTs.
THREE different & valid advantages

• Less fraud
• Convenient or easy to use
• Can be done from business; not restricted to business hours / time-saving
• Payment/receipts are instant / account is updated immediately / no long queues to deal with
• Cheaper bank charges

2.1.2 Janet, the bookkeeper, has been assigned the duty of processing and controlling all EFTs.
Explain TWO reasons why the internal auditor was concerned about this.
Part marks for unclear answer.
TWO different & valid reasons

• Too many related job functions / No division of duties (no checks and balances) / Possible fraud.
• She may be negligent in performing her duties.
• Lack of supervision can result in abuse / payments not made on time
• If Janet is absent, there may not be any continuity.

2.2 Show the changes in the Cash Journals for June 2019.

-1 foreign or superfluous items max -1 e.g. 9 500
2.3 Calculate: Bank Account balance
Workings
9 200 + 36 000 – 34 900
✓✓✓
see 2.2 see 2.2
Answer
one part correct
10 300✓
2.4

If DEBIT/CREDIT columns not indicated, assume first column Debit
Brackets not acceptable for two column method

• Foreign items (if marks scored elsewhere for the amount) -1 max
• 1 max Presentation (if no / incorrect details)

OR:
VERTICAL METHODS (choose one):

TOTAL MARKS:30

QUESTION 3
CABINETS
3.1 Calculate the value of closing stock using FIFO.
Workings
If 280 – units in first part
(230 ✓ x 1 100 ✓) + (50 ✓✓ x 990 ✓)
253 000 49 500
one part correct
Answer
R302 500 ✓
3.2.1 Calculate the % mark-up achieved in 2019.
Workings
3 480 000 – 2 170 500
1 309 500 ✓✓ x 100
2 170 500 ✓
Answer
one part correct
60,3% ✓
3.2.2 Provide TWO points (with figures) to prove that this decision achieved its aims.
TWO different & valid points
Figures

• Sales increased to R3 480 000 (from R3 375 000) / by R105 000 / by 3,1%
• Number of customers increased to 37 (from 26) / by 11 / by 42%

3.2.3 The CEO feels that this decision also negatively affected the company. Provide TWO points (with figures) to support his opinion. Do not accept Mark-up % here
TWO different & valid points
Figures

• Gross profit decreased to R1 309 500 (from R1 425 000) / by R115 500 / by 8,1% / Cost of sales increased to R2 170 500 (from 1 950 000) / by R220 500 / by 11,30%
• Average units per customer dropped to 63 (from 96) (2 500/26) (2 320/37) / by 33 / by 34%
• Units sold dropped by from 2 500 to 2 320 / by 180 / by 7,2%

Give the directors advice to solve this problem. Explain TWO points.
TWO different & valid points

• Restrict (be selective with) trade discounts to good customers only
• Find a cheaper supplier (to compensate for keeping selling prices low)
• Increase marketing / advertising in areas outside the current areas targeted
• Provide other incentives such as after-sales services, maintenance or free deliveries

LAMPS
3.3 Calculate the stockholding period for lamps (use closing stock).
Workings
  59 625  ✓ x 365
 930 375 ✓     1
OR
  265   one mark x 365 
3 675  one mark     1
Answer
one part correct one method mark
23,4 days ✓ OR 0,8 months
OR 26,3 days OR 0,9 months
3.4 Calculate the number of missing lamps.
Workings
Op.stock Purchases Clos.stock Sales
600 + 3 800 – 265 – 3 675
Answer
one part correct
460 ✓

Give TWO suggestions to solve this problem.
TWO valid & different suggestions part-marks for partial or incomplete answers

• Divide duties / delegate to different employees
• Threaten strong disciplinary action (in future) / recover cost from culprit
• Increase supervision at regular intervals / random physical inspection of stock
• Change to the perpetual inventory system to record stock
• CCTV as an internal control measure
• Insist on proper documents for all stock supplied

TELEVISION SETS
3.5 Calculate the value of the closing stock of TV sets on 30 September 2019 using the specific identification method.
Workings
LYN: 7 800 000 ✓ – 2 580 000 ✓✓ = R5 220 000
(4 800 000 + 3 000 000) (430 x 6 000) three marks
[(800 + 500) x 6 000]
OR 870 two marks x R6 000 one mark
(1 300 – 430)
KYA: 10 440 000 ✓ – 3 888 000 ✓✓ = R6 552 000
(6 840 000 + 3 600 000) (540 x 7 200) three marks
(1 450 x R7 200)
OR 910 two marks x R7 200 one mark
(1 450 – 540)
Answer
one part correct
R11 772 000 ✓
3.6 Explain THREE different concerns George would have about this problem.
THREE different & valid concerns
part-marks for partial or incomplete answers

• Directors engaging in fraud and corruption / bribes / conflict of interests
• Unethical behaviour of CFO places the company placing at risk
• Image of the company negatively affected / will affect the share price and further investments from potential investors
• High stock value is tied up in stock / Obsolete / Affects liquidity
• Shareholders may want to sell their shares
• It will negatively affect the audit report
• Business will lose goodwill as it is unethical

TOTAL MARKS:45

QUESTION 4
4.1
4.1.1 C ✓
4.1.2 E ✓
4.1.3 D ✓
4.1.4 A ✓
4.1.5 B ✓
4.2 VISIV LTD
4.2.1 Calculate:

1. Depreciation for the current year
   Workings
   225 000 ✓ x 25% x 8/12 ✓
   Answer
   one part correct
   R37 500 ✓
2. Carrying value of vehicle sold
   Workings
   Answer
   ✓✓
   225 000 – 37 500 see (i) above
   100 000 + 75 000 + 37 500
   OR: 400 000 – 212 500
   Answer
   Two marks
   R187 500
   If wrong, mark workings
   Cannot get full marks if superfluous workings

Calculate: Profit/Loss on sale of asset
Workings
195 000 – 187 500 see (ii) above
Answer
Two marks
R7 500
If wrong, mark workings
Cannot get full marks if superfluous workings

Calculate: Fixed assets carrying value on 28 February 2019
Workings
see (i) above ✓ see (ii) above
10 190 000 – 37 500 – 187 500
225 000 two method marks
OR: 10 190 000 – (400 000 – 212 500 + 37 500)
one mark one method mark one method mark
Also accept ledger account format

Answer
one part correct
R9 965 000✓
4.2.2 Calculate the correct net profit after tax for the year ended 28 February 2019. Indicate (+) for increase and (–) for decrease.

4.2.3 RETAINED INCOME NOTE:

4.2.4

* One part correct
-1 for presentation in each case (i.e. max -2)
Foreign items –1 max –1
4.3 AUDIT REPORT
4.3.1 What type of audit report did the company receive?
Disclaimer
Accept ‘withheld’ or a valid description.
4.3.2 Give TWO examples of audit evidence that the auditors would require.

4.3.3 Apart from the current ratio, identify and calculate ONE other financial indicator that the auditors would have used in deciding on this opinion.
Acid test ratio ✓
2 320 000 –1102 000 / or T&OR + C&CE
see 4.2.4
1 218 000 ✓ : 2 900 000  = 0,4 : 1 ✓ one part correct; must be x:1
Explain what the directors could have done to prevent this comment by the auditors. Provide TWO points.
TWO valid & different explanations

• Cash in the investments
• Postpone repurchase of shares (to another time when liquidity improves)
• Ensure that the auditors and directors comply with the latest Companies Act
• Try to convince auditors that solvency ratio is good
• Issue more shares to the public or existing shareholders
• Offer rights issue to shareholders rather (than pay more dividends)
• Company offers higher dividends to shareholders rather than repurchasing of shares
• Reduce the dividends paid to improve liquidity
• Re-negotiate loan repayments / credit terms
• Promote more cash sales / off-load stock

TOTAL MARKS: 70

QUESTION 5
5.1
5.1.1 B ✓
5.1.2 A ✓
5.1.3 C or A ✓
5.1.4 B ✓
5.2 SUNSET LTD
5.2.1 Calculate: Income tax paid
Workings
477 900 – 63 000 – 18 000
✓✓✓
– 477 900 + 63 000 + 18 000 mark one line / accept brackets
one mark one mark one mark
Answer
✓ one part correct
R396 900

Calculate: Dividends paid
Workings
195 000 + 420 000 1200 000 x 0,35
✓✓✓
OR: 195 000 + 792 000 – 372 000
– 195 000 – 792 000 + 372 000 mark one line / accept brackets
one mark one mark one mark
AnswerAnswer
✓ one part correct
R615 000

Calculate: Proceeds of shares issued
Workings
300 000 one mark x R6,20 two marks
9 300 000 – 1 860 000 – 7 724 000

✓ one part correct
R284 000

Calculate: Fixed assets purchased
Workings
✓✓✓✓ Choose one line only
10 658 000 – 490 000 – 408 000 – 11 835 100
OR 11 835 100 + 490 000 + 408 000 – 10 658 000

Answer
one part correct
R2 075 100 ✓
5.2.2 Calculate financial indicators for the year ended 28 February 2019:
% operating profit on sales
Workings
2 033 900 ✓ x 100 check operation; one part correct
8 725 000✓
Answer
23,3% ✓✓
Accept 23%

Net asset value per share
Workings
8 625 000 ✓ x 100 check operation; one part correct
1 240 000✓
Answer
695,6 cents✓✓
Accept 696 cents
or R6,96

Debt-equity ratio
Workings
check operation; one part correct
3 500 000 : 8 625 000 must be x: 1
Answer
0,4 : 1 ✓✓
5.3 HORIZON LTD and OPTIMA LTD
5.3.1 Explain why directors should be interested in the price of their companies' shares on the JSE.
Any ONE valid comment✓✓ one mark for partial or incomplete answer
Responses for 2 marks:

• It shows public confidence in the company.
• It can be compared to other companies / an external indicator.
• Shareholders will want to have capital growth on their investment.
• Directors will be judged on the performance of the shares as this reflects the performance of the company.

Calculate the number of additional shares in Horizon Ltd that Mike was able to buy on the JSE in 2019.
Workings
R420 000 ÷ R8,40
Answer
✓ one part correct
50 000 shares
Comment on the price that Mike paid for these shares and provide TWO reasons why he might have been satisfied to pay this price.
Compare price paid to NAV✓ Figures✓ Reasons ✓✓✓✓
HORIZON Ltd: JSE Price exceeds NAV by 90 cents (R8,40 – R7,50)
Valid reasons for HORIZON:

• He wants to be the majority shareholder
• More influence over decisions by board of directors
• JSE price reflects public demand for the shares
• Potential for high returns in future

5.3.2 Explain your opinion on which company has the better dividend pay-out policy. Quote figures.
Choice of company: Either Horizon Ltd OR Optima Ltd ✓
Reason: Either retaining funds OR rewarding shareholders ✓
Figures: Horizon Ltd pays out 67% (65c of 97c earned) ✓✓ quote two figures or %
While Optima Ltd pays out 96% (80c of 83c earned) ✓✓ quote two figures or %
Be aware of alternative ways of explanation and calculation e.g. amount or % retained

Compare and comment on the % return on equity earned by EACH company. Quote figures.
Horizon Ltd earns 6,2%✓ Award two marks for the difference 12%
Optima earns 18,2%✓
Comparison (may be implied) ✓
Compare to interest rate (6,5%) ✓

Mike feels that the earnings per share (EPS) of Optima Ltd is much better than that of Horizon Ltd. Explain why he feels this way. Quote figures or calculations.
Quote EPS of Horizon Ltd 97 cents ✓
Quote EPS of Optima Ltd 83 cents ✓
Compare EPS of both companies to:
Share value OR to number of shares owned OR % ROSHE OR Net Profit ✓
Identify figures for any one comparison below ✓✓

5.3.3 Explain TWO decisions taken by the directors of Horizon Ltd in response to the state of the economy, and how these decisions will affect the company in future.
Decisions: TWO valid decisions ✓✓ Figures✓✓

• Sold fixed assets R1 800 000 / No new fixed assets bought (R0)
• Investments reduced R900 000
• Loan repaid R1 600 000

Effect on Horizon Ltd in future:
Any one valid comment: ✓✓ one mark for partial or incomplete answer

• The infrastructure / size of the company is decreasing which will affect future profit
• The reduced infrastructure / size of the company could lead to cost savings (or increased profit)

Response for 1 mark:

• Saving on interest / less risk

Explain TWO decisions taken by the directors of Optima Ltd that affect risk and gearing. Quote and comment on TWO financial indicators.
Decisions: Two valid decisions ✓✓Figures ✓✓

• Loan increased R3 800 000
• Shares issued R200 000

Quote and comment on TWO financial indicators that affect risk and gearing.
Quote indicators with figures: Debt-equity ratio: 0,7 : 1; ROTCE 15,1%;
Comments on: increased risk / positive gearing (ROTCE exceeds interest rate)
TOTAL MARKS : 75

QUESTION 6
6.1 Foreign entries
-1 max -2

6.2 Calculate the % of debtors who settle their accounts in the 2nd month following the credit sales transaction month
Workings
67 500 ✓ or 75 000 or 90 000 x 100
90 000 ✓    100 000   120 000     1
Answer
One part correct
75%✓

Calculate the % of debtors written off as bad debts at the end of the 3rd month following the credit sales transaction month.
Workings
90 000 – 67 500 – 19 800
(2 700 ✓✓ ÷ 90 000 ✓) x 100
OR: 100 000 – 75 000 – 22 000
(3 000 ÷ 100 000) x 100
two marks one mark
see above 19 800/90 000 or 22 000/100 000
OR: 100% – 75% – 22% –97% two marks
one mark one m.mark one mark
Answer
One part correct
3%✓
6.3.1 The office workers are unhappy with the increase that Thembi gave them on 1 October 2019. Explain what she should say to them. Provide TWO points. Quote figures or a calculation. Only one figure required per point.
part-marks for partial or incomplete answers
✓✓✓✓ Any two valid and different points
✓✓ Figures/Calculations

• They received a (large) increase of 20% (unbudgeted; which is more than inflation) (1 840 / 9 200 = 20%)
  ‘Large’ need not be mentioned if 20% is provided.
• Sales target (under by R110 000) / GP target (under by R32 000) not reached but increase in wages (20%) granted
• The director took a R10 000 drop in pay / reduced from R50 000 to R40 000 / by 20%
• They received training costing R40 000 (R25 000 over budget) which will benefit them in future

6.3.2 Thembi pays her son, Jacob, on a part-time basis to deliver and install carpets for customers. She budgets R2,80 per metre for this. Comment on the control of this expense. Quote figures or a calculation.
Comment on poor control / ethics in September ✓ Figure/s ✓
Comment on good control in October ✓ Figure/s ✓
Expected responses for September:
He was overpaid in September (even though he did not meet target)
Figures: R14 000 / R10 640 / R3 360
Expected responses for October:
He was paid correctly (although it was over-budget; due to improved sales)
Figures: R 16 800 / R14 000 / R2 800
Workings: September:
Budget: 5 000 x 2,80 =R14 000
Actual should be 3 800 x 2.80 = R10 640 but spent R14 000
Workings: October:
Budget = R14 000
Actual should be : 6 000 x 2.80 = R16 800
6.3.3 A new competitor commenced trading in the area on 1 September 2019.
Provide figures to illustrate the impact on sales in September.
Comment✓ Figure/s✓
Compare budgeted Sales to actual Sales
Sales budget was R490 000 and the actual was R380 000 / R110 000 under the budgeted amount / 22,4% drop from expected
OR: Compare expected metres to actual metres Two marks
Sales dropped from 5 000m² budgeted to 3 800m2 actual / 1 200m² under budget / 24% less than expected.
Explain THREE decisions that Thembi took in October in response to the new competitor. Quote figures or a calculation.
Explanation (with figures)
Any THREE valid and different decisions
Figures

• Promoted credit sales R296 000 above budget (R326 000 increase in actual) with incentives as opposed to cash sales (e.g. discount or extended payment period)
• Reduced the selling price per m to R88 per m (from R100) / Reduced mark up from 67% to 47%
• Spent R40 000 on training but budgeted only R15 000 / Training increased to R40 000 in October (over-budget by R25 000)
• Changed the salary structure of the salesman from a fixed salary of R20 000 pm to a commission of R52 800/10% of sales

6.3.4 Calculate the amount she will actually have to pay the creditors in November 2019.
Workings
528 000 x 60/88
360 000 x 50% x 95%
Oct COS
Answer
R171 000✓
one part correct
TOTAL MARKS: 40