ACCOUNTING
GRADE 12 
SCE PAST PAPERS AND MEMOS
JUNE 2018

INSTRUCTIONS AND INFORMATION
Read the following instructions carefully and follow them precisely.

1. Answer ALL the questions.
2. A special ANSWER BOOK is provided in which to answer ALL the questions.
3. Show ALL workings to achieve part-marks.
4. You may use a non-programmable calculator.
5. You may use a dark pencil or blue/black ink to answer the questions.
6. Where applicable, show ALL calculations to ONE decimal point.
7. Write neatly and legibly.
8. Use the information in the table below as a guide when answering the question paper. Try NOT to deviate from it.

QUESTIONS

QUESTION 1:  BANK RECONCILIATION AND CONTROL     (35 marks; 20 minutes)
The following information relates to Hartfield Suppliers for April 2018.
REQUIRED:
1.1 Bank reconciliation:
1.1.1 Show the entries that must be recorded in the Cash Journals by completing the table in the ANSWER BOOK.    (14)
1.1.2 Calculate  the  Bank  Account  balance  in  the  Ledger  of  Hartfield Suppliers on 30 April 2018.  (3)
1.1.3 Prepare the Bank Reconciliation Statement on 30 April 2018.  (8)
1.2 The internal auditor is concerned about the management of cash.
1.2.1 Explain TWO different problems to justify her concern. Quote figures.   (4)
1.2.2 Give advice (TWO points) on how such problems can be avoided in future.  (2)
1.3  Explain TWO benefits of using the electronic funds transfer (EFT) system rather than cheques for direct payments to suppliers.(4)
INFORMATION:
A. Extract from the Bank Reconciliation Statement on 31 March 2018:

NOTE:

• The outstanding deposit of R12 675 appeared on the Bank Statement on 28 April 2018.
• The outstanding deposit of R25 000 did not appear on the Bank Statement for April 2018. An investigation revealed that this money was never been deposited. The cashier employed in March has left the country and cannot be traced.
• Cheque 614, R6 950, was presented for payment.

B. Provisional totals in the Cash Journals on 30 April 2018 before receiving the Bank Statement:

• Cash Receipts Journal, R510 607
• Cash Payments Journal, R488 260

C. Entry in the April 2018 Cash Receipts Journal, not in the April 2018 Bank Statement:

D. Entries in the April 2018 Cash Payment Journal, not in the April 2018 Bank Statement:

*EFT: electronic funds transfer/direct payment
E.   Information on the April 2018 Bank Statement, which did not appear in the April 2018 Cash Journals:

NOTE:

• The unpaid cheque was received from debtor A Apple to settle his account of R250.
• The debit order for the monthly insurance appeared on the Bank Statement twice. The bank will rectify this on the Bank Statement for next month.

F.  Information in the April 2018 Bank Statement that does not agree with the Cash Payments Journal for April 2018:

G. The Bank Statement on 30 April 2018 reflected a balance of R?.

QUESTION 2:  MANUFACTURING                                              (45 marks; 30 minutes)
2.1 Choose ONE cost account for each of the following descriptions. Write only the  cost  accounts  next  to  the  question  numbers (2.1.1  to    2.1.4)  in the ANSWER BOOK.

2.1.1 Bad debts written off during the financial year
2.1.2 Pension  fund  contributions  paid  on  behalf  of  the  workers  in  the production process
2.1.3 Transport costs paid for raw materials purchased
2.1.4 Depreciation on office equipment   (4 x 1)   (4)

2.2  TIGHT-FIT MANUFACTURERS
The   information   relates   to   Tight-Fit   Manufacturers,   a   business   that manufactures denim jeans, for the financial year ended 31 March 2018.
REQUIRED:
2.2.1   Calculate:

• The value of the closing stock of raw materials of fabric using the weighted-average method  (4)
• The value of direct/raw materials issued for production (3)
• The correct factory overhead costs (6)

2.2.2   Complete the Production Cost Statement on 31 March 2018.  (12)
2.2.3   The business purchases raw materials from an overseas supplier,although there are numerous local suppliers. Give TWO reasons why the business should support local suppliers.   (2)
INFORMATION:
A.Stock balances on 31 March:

B.  Raw materials (fabric):
Raw  materials,  consisting  of  metres  of  fabric,  are  issued  by  the storeroom to the factory.
Storeroom stock records:

C. Figures provided by the bookkeeper on 31 March 2018:

D.  Adjustments must be made to factory overhead cost in respect of the following:

• Insurance of factory plant and equipment paid was R69 600 and incorrectly debited to the Administration Cost Account. Included in  this is a new annual premium of R17 400 paid on 1 January 2018.
• Rent is  allocated  according  to  the  floor  space.  However,  the bookkeeper correctly allocated only R14 820 to the administration section.

E. Details from the Income Statement for the year ended 31 March 2018:

2.3  BREAK-TIME MANUFACTURERS
Break-Time Manufacturers is a manufacturing business that produces lunch boxes for school children.
REQUIRED:
2.3.1   Calculate the following for the year ended 30 April 2018:

• Direct labour cost (2)
• Break-even point (4)

2.3.2   Explain why the owner should be concerned about the break-even point. Quote figures.    (3)
2.3.3   The owner is concerned about the direct labour cost.

• Explain why the owner would NOT be satisfied with the direct labour cost per unit. Quote figures.   (3)
  Give ONE solution to this problem. (2)

INFORMATION ON 30 APRIL:

QUESTION 3:  INVENTORY VALUATION                                                   (40 marks; 25 minutes)
3.1SPEEDY CYCLES
You are provided with information for the year ended 31 May 2018. The owner is Fred Fakude. The business sells different models of bicycles. Fred uses the periodic inventory system and the specific identification method to value stock.
REQUIRED:
3.1.1   Calculate:

• Value of the closing stock of bicycles on 31 May 2018 (8)
• Cost of sales for the year ended 31 May 2018 (4)
• Gross profit for the year ended 31 May 2018 (3)

3.1.2   Fred is satisfied that he is selling approximately 18 Cruze bicycles per month. However, he is concerned that the new Ryder model, despite its lower selling price, is not selling as quickly as the Cruze model.

• Calculate the selling price of a Ryder bicycle. (3)
• Calculate the average number of Ryder bicycles sold per month. (3)
• Indicate how long it will take Fred to sell the closing stock of the Ryder bicycles. Show calculations.    (3)
• Give ONE possible reason for the slow sales of Ryder bicycles, and give advice (ONE point) to Fred in this regard.     (4)

INFORMATION:
A. Three  different  models  of  bicycles  were  sold  during  the 2018 financial year.

B.   Opening stock:

C.  Purchases and returns:

3.2 MANAGEMENT OF INVENTORIES: CELIA'S CLOTHING
Celia Mtolo owns a small clothing business. You are provided with information for the year ended 28 February 2018. The business sells T-shirts, jackets and pants.
Celia took certain decisions at the beginning of the 2018 financial year.
REQUIRED:
Quote relevant figures for ALL the questions below.
3.2.1   T-shirts:
Explain why it was NOT a good idea to change to a cheaper supplier of T-shirts. State TWO points.    (4)
3.2.2   Jackets:
Celia decided to change the supplier in         2018 and to change the mark-up %. How has this decision affected the business? State TWO points.    (4)
3.2.3   Pants:
Celia  reduced  the  selling  price  of  pants  significantly  in  the  2018 financial year in response to a new competitor who sells similar pants at R990.
Based on the information below, make TWO separate suggestions to Celia to improve the profit on pants in 2019.    (4)
INFORMATION:

QUESTION 4:   BALANCE SHEET AND AUDIT REPORT      (70 marks;  40 minutes)
4.1  CONCEPTS
Indicate whether the following statements are TRUE or FALSE. Write only 'true' or 'false' next to the question numbers (4.1.1 to 4.1.5) in the ANSWER BOOK
4.1.1 A fixed deposit maturing within the next 12 months will be shown as  cash and cash equivalent in the Balance Sheet.
4.1.2 Earnings per share are calculated using the net profit before tax.
4.1.3 Net current assets are also referred to as net working capital.
4.1.4 Provision for bad debts is a liability.
4.1.5 Total capital employed consists only of ordinary shareholders' capital and retained income.   (5 x 1)  (5)
4.2  MODISE LTD
The information below relates to Modise Ltd. The financial year ended on 28 February 2018.
REQUIRED:
4.2.1   Prepare  the  Retained  Income  Note  to  the  Balance  Sheet  on 28 February 2018.     (12)
4.2.2   Complete  the  Balance  Sheet  on  28 February   2018.  Show  ALL workings.    (38)
4.2.3   The directors want to give R500 000 to a local   school. Give TWO reasons why companies take such decisions.  (4)
INFORMATION:
A.  Extract of balances on 28 February 2018:

B Share capital:

• The authorised share capital of Modise Ltd is 6 500 000 ordinary shares.
• On 20  February    2018,   250 000  shares  were  repurchased  at 25 cents above the average share price. This has been recorded. 
• On 28  February    2018,  the  ordinary  share  capital  comprised 4 550 000 ordinary shares.

C.  Dividends:

• Interim dividends of R672 000 were paid on 28 August 2017. 
• A final   dividend   of      36 cents   per   share   was   declared   on 28 February 2018. All shares (including the shares repurchased on 20 February 2018) qualify for final dividends.

D. Net profit before tax:

• After taking all relevant information into account, the net profit before tax was accurately calculated to be R3 400 000. 
• Income tax at 27% of the net profit must be taken into account.

E. Fixed deposit:

• The interest on the fixed deposit was R48 000. The fixed deposit was invested on 1 May 2017 at 8% p.a.

F. Loan from director:

• The interest-free loan was received on 1 September 2015.
• This loan  is  to  be  repaid  over  six  years  in  equal  monthly instalments. The first repayment was made on 30 September 2015. All payments have been made to date.

G. Provision for bad debts:

• The provision for bad debts must be adjusted to 6% of the outstanding debtors.

H.  The current ratio calculated after all adjustments was 1,5 : 1.
4.3 AUDIT REPORT
You are provided with an extract from the audit report of the independent auditors of Denga Limited.
REQUIRED:
4.3.1   Briefly explain the role of an independent auditor. (2)
4.3.2   Did Denga Limited receive a qualified/unqualified/disclaimer of opinion audit report? Briefly explain your choice. (3)
4.3.3   State THREE possible consequences for the independent auditor if he had NOT mentioned the advertising expense in his report.   (6)
INFORMATION:

QUESTION 5: FIXED ASSETS, CASH FLOW AND INTERPRETATION     (70 marks; 40 minutes)
5.1 Choose  a  description  in  COLUMN  B  that  matches  the  user  of  financial statements in COLUMN A. Write only the letters (A to D) next to the question numbers (5.1.1 to 5.1.4) in the ANSWER BOOK.

5.2  MALOTRA LTD
You are provided with information relating to Malotra Ltd for the financial year ended 28 February 2018. The company is registered with an authorised share capital of 1 200 000 ordinary shares.
REQUIRED:
5.2.1 Refer to Information A.
Calculate the missing amounts denoted by (a) to (d) on the Fixed Asset Note.     (16)
5.2.2 Calculate the net profit after income tax on 28 February 2018.    (3)
5.2.3 Calculate the following for the Cash Flow Statement:

• Dividends paid (4)
• Funds used to repurchase shares (5)
• Proceeds from shares issued (5)

5.2.4 Complete the section for Cash and Cash Equivalents in the Cash Flow Statement.    (4)
5.2.5   Calculate the following financial indicators on 28 February 2018:

• Acid-test ratio (4)
• Debt-equity ratio (3)
• Return on average shareholders' equity (5)

5.2.6 The directors decided to increase the loan during the current financial  year. Explain whether this was a good decision or not. Quote TWO financial indicators (with figures).   (6)
5.2.7 Comment   on   the   price   paid   for   the   shares   repurchased   on 1 January 2018. Quote TWO financial indicators (with figures).  (5)
5.2.8   Thandi Nene owns 416 000 shares in the company. When the directors  decided to issue a further 200 000 shares during October 2017, she decided not to buy more shares and rather spend her funds on an  overseas holiday. 
Explain why you feel Thandi has made the wrong decision. Quote relevant figures or calculations to support your opinion.   (6)
INFORMATION:
A.  Incomplete Fixed Asset Note:

• An extension to the storeroom and improvements to the buildings were completed during the financial year.
• A new vehicle was purchased on 1 June 2017.
• Old equipment was scrapped at carrying value on 28 February 2018.
• Depreciation policy: Vehicles: 15% on cost
                                   Equipment:    20% on carrying value

B. Income tax:

• Income tax at 30% of the net income amounts to R286 200.

C.  Dividends:

• Interim dividends were paid on 31 August 2017.
• Final dividends were declared on 28 February 2018.
• Only shareholders in the share register qualified for dividends.
• Dividends paid and declared for the current financial year: R332 000

D.  Ordinary Share Capital:

NOTE: Shares were repurchased at     60 cents above the average share price.
E.  Information   extracted   from   the          Financial     Statements   on 28 February:

F. Financial indicators on 28 February:

*NOTE:  This value was unchanged over the past three months.
QUESTION 6:  BUDGETING                                                           (40 marks; 25 minutes)
You are provided with information relating to Magic Traders. The business is owned by Tony Salotte.
REQUIRED:
6.1 Complete the following statements:
6.1.1 The main purpose of a Cash Budget is to …   (2)
6.1.2 The main purpose of a Projected Income Statement is to …  (2)
6.2 Debtors' Collection Schedule and Projected Income Statement:
6.2.1 Complete the Debtors' Collection Schedule for June 2018. (7)
6.2.2 Determine the following amounts that will appear in the Projected Income Statement:

• Discount allowed for May 2018 (3)
• Bad debts written off in June 2018 (3)

6.3 Calculate the following:

• Cash sales for May 2018 (2)
• Payment to creditors in June 2018 (4)
• Salaries for May 2018 (5)

6.4 Tony compared the budgeted figures to the actual figures for April 2018.

6.4.1 Tony is not concerned about the overspending in advertising. Explain why this is so. Quote figures to support your answer.   (4)
6.4.2   State ONE consequence of not paying the amount due to creditors in April 2018.   (2)
6.4.3   Refer to the figures above and to Information F. State TWO points in favour of appointing Gentex Cleaning Services. Also explain ONE point that Tony should consider before making this decision. (6)
INFORMATION:
A. Total sales:

B. Cash sales amount to 40% of the total sales.
C. Debtors are expected to pay as follows:

• 30% in the month of sales. They receive a 5% settlement discount.
• 60% in the month following the sales month
• 9% in two months after the sales month
• 1% is written off as bad debts in the third month after sales

D.Purchases and payment to creditors:

• The business maintains a fixed-stock base level.
• Goods are sold at a mark-up of 50% on cost.
• 80% of all merchandise purchased is on credit.
• Creditors are paid in full in the month following the purchase month.

E. Salaries:

• Total salaries are R101 500 for April 2018.
• There are 7 employees who earn the same monthly salary.
• 1 employee will resign and leave on 30 April 2018.
• 4 employees will each receive a bonus of 80% of their salaries in May 2018.

F.  The business pays wages to two cleaners, one of whom has been on sick leave in April and a substitute had to be employed. Tony is concerned that too much money is wasted on cleaning. He thinks that he should contract Gentex Cleaning Services to take over the cleaning process entirely. They will charge R8 000 per month.

TOTAL: 300