ACCOUNTING PAPER 2
GRADE 12
SEPTEMBER 2020
NATIONAL SENIOR CERTIFICATE EXAMINATIONS

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. A FORMULA SHEET with financial indicators is attached to this question paper. You may use it if necessary
4. Show ALL workings to earn part-marks.
5. You may use a non-programmable calculator.
6. You may use a dark pencil or blue/black ink to answer the questions.
7. Where applicable, show ALL calculations to ONE decimal point.
8. Write neatly and legibly.
9. Use the information in the table below as a guide when answering the question paper. Try NOT to deviate from it.

QUESTION 1: RECONCILIATION AND DEBTORS’ AGE ANALYSIS

1.1 BANK RECONCILIATION

The accountant of Mercure Limited received the Bank Statement on 31 July 2020 and compared it with the Cash Journals for July 2020.

REQUIRED:

Use the necessary information to prepare the Bank Reconciliation Statement on 31July 2020 and determine the correct balance as per Bank Account in the General Ledger. A Bank Account is not required. (8)

INFORMATION:

1. On 31 July 2020 the Bank Statement showed a favourable balance of  R3 600.
2. Item on the Bank Statement for July 2020 that does NOT appear in the Cash Journals:
   A deposit of R3 800. It was discovered that the account of Mercure Limited was credited in error. The bank will correct it in August 2020.
3. Items in the Cash Receipts and Cash Payments Journals that do NOT appear on the Bank Statement:
   • Deposit on 29 July 2020, R15 200
   • Cheques:
     No. 231 R2 020 (dated 26 July 2020)
     No. 235 R1 570 (dated 31 August 2020)
4. Unmarked item in the Bank Reconciliation Statement for June 2020:
   Cheque no. 156, R2 860 (dated 5 January 2020)

1.2 DEBTORS’ AGE ANALYSIS

You are provided with the age analysis of debtors on 31 May 2020.

Terms allowed to debtors:

• All accounts to be paid in 30 days and 2% discount will be granted.
• If any account is not paid in 60 days, 5% interest will be charged.
• If any account is not paid in 90 days, the account is handed over.

1.2.1 How does the preparation of the Debtors’ Age Analysis assist in the control of debtors? (3)
1.2.2 How much is owed by the debtors on 31 May 2020? (2)
1.2.3 Which debtor would you gladly give a credit reference? (2)
1.2.4 Which debtor would be ‘handed over’ and what does this mean? (3)

1.3 CREDITORS’ RECONCILIATION

Dolphins Diving Equipment has had a large turnover of staff in the accounting department which resulted in both the Creditors’ Control Account and the Creditors’ List being prepared by inexperienced bookkeepers. You have been asked to assist.

1.3.1 What is the purpose of reconciling the balance on the Creditors’ Control Account with the total of the Creditors’ List from the Creditors’ Ledger? State TWO points. (4)
1.3.2 Calculate the correct balance of the Creditors’ Control Account and the correct total of the Creditors’ List. Preliminary balance for Creditors’ Control Account is R74 715 and total for Creditors’ List is R32 595.

QUESTION 2: VAT AND INVENTORY VALUATION

2.1 VAT CONCEPTS

Change the underlined parts in the following sentences to make the statements TRUE. Write the answer next to the question numbers (2.1.1–2.1.2) in the ANSWER BOOK.

2.1.1 VAT is payable to the South African Reserve Bank. (1)
2.1.2 VAT is charged at 14% on fruit and vegetables. (1)

2.2 VAT CALCULATIONS

Peter Traders is a VAT registered business. The standard rate of VAT is 15%.

REQUIRED:

Calculate the correct amount of VAT the business has to pay.
Show ALL workings. (12)

INFORMATION:

The bookkeeper, John, prepared the VAT Control Account for the tax period ended 31 May 2020 and arrived at a VAT payable amount of R43 820.
However, the internal auditor has identified the following errors and omissions which must still be brought into account to calculate the correct VAT payable amount.

2.3 INVENTORY VALUATION

Joker Stores sells ladies’ and men’s watches.

• Ladies’ watches are imported from Germany.
• Men’s watches are manufactured locally.

The financial year ends on 31 August 2020.

REQUIRED:

2.3.1 Calculate the following in respect of the ladies’ watches on 31 August 2020:

Related Items

1. Value of closing stock   (5)
2. Cost of sales   (5)
3. Stock-holding period (in days), using average stock  (4)

2.3.2 Calculate the following in respect of the men’s watches on 31 August 2020:

1. Value of closing stock  (7)
2. Sales   (3)

2.3.3 Explain why the business uses different methods to value each type of
watch. State ONE valid point. (2)

INFORMATION

1.  
   • The business uses the following methods to value the stock of watches:
     
     • Ladies’ watches – specific identification
     • Men’s watches – weighted average
   • No watches were stolen or lost during the financial year.
2. Information related to ladies’ watches
   

   	UNITS	UNIT PRICE	TOTAL AMOUNT	UNITS SOLD	TOTAL SALES
   Opening stock	12	R6 500	R78 000	11	R 125 125
   Purchases	35		R 252 000
   September 2019	15	R6 800	R 102 000	10	R119 000
   January 2020	12	R7 300	R87 600	10	R 127 750
   April 2020	8	R7 800	R62 400	5	R 68 250
   	47		R330 000	36	R440 125

   • The cost price of ladies’ watches includes transport costs and customs duties
   • These watches are sold at a mark-up of 75% on cost.
3. Information related to men’s watches:
   

   	UNITS	UNIT PRICE	TOTAL AMOUNT
   Opening stock	95	R340	R32 300
   Purchases:	675		R 259 900
   September 2019	320	R375	R 120 000
   January 2020	210	R390	R81 900
   April 2020	145	R400	R58 000

1. • Men’s watches are sold at a fixed selling price of R520 each.
   • Cost to transport the men’s watches from local suppliers amounted to R11 950 for the financial year and is not included in the figures above.
   • There were 92 men’s watches in stock on 31 August 2020.
     

     40

QUESTION 3: MANUFACTURING AND COST ACCOUNTING

3.1 CONCEPTS

Indicate whether the following statements are TRUE or FALSE. Write only ‘true’ or ‘false’ next to the question numbers (3.1.1–3.1.2) in the ANSWER BOOK.

3.1.1 Carriage on raw materials purchased increases the cost of raw materials issued for production. (1)
3.1.2 Commission on sales will be classified as an administration cost. (1)

3.2 PRODUCTION COST STATEMENT

The following information was extracted from the accounting records at the end of the 2020 financial year.

REQUIRED:

3.2.1 Complete the Note for Direct Material Costs. (7)
3.2.2 Complete the Production Cost Statement on 29 February 2020. (15)
3.2.3 Complete the Income Statement for the year ended 29 February 2020. (11)

INFORMATION:

1. Railage on raw materials purchased, R180 000.
2. Salaries and wages amounted to R724 160 for the financial year. 50% of this amount can be attributed to wages of the employees who work directly on the products. The rest is shared equally between factory overheads and administration cost..
3. 96 000 finished units were manufactured during the financial year. The cost price of the finished units was R20 each.
4. Sales for the year amounted to R3 804 000. Goods are sold at a markup of 100% on cost.
5. Selling and distribution costs amounted to R594 860.
6. Administration costs are R 571 100. These do not include salaries and wages.

3.3 COST ACCOUNTING

You are provided with information from the records of Healthy Living, the producers of a type of breakfast cereal. The financial year ends on 31 August 2020.

3.3.1 Calculate the break-even point for the year ended 31 August 2020. (4)
3.3.2 Should the business be satisfied with the number of units that they have produced and sold during the current financial year? Explain. Quote figures. (3)
3.3.3 Give TWO possible reasons for the increase in the direct material cost per unit in the current financial year. (4)
3.3.4 Tyler, the owner, suggests that in order to improve financial results in the new financial year, the quantity of cereal per box should be reduced by 10% but the selling price must remain the same. Give TWO valid reasons why he should not do this. (4)

INFORMATION:

The following information was taken from the accounting records:

QUESTION 4: FINANCIAL AND INTERNAL CONTROL

4.1 CONCEPTS

Choose a description in COLUMN B that matches the concept in COLUMN A.
Write only the letters (A–E) next to the question numbers (4.1.1–4.1.4) in the ANSWER BOOK.

4.2 ASSET MANAGEMENT CONTROL

You are provided with information from the records of Sharks Ltd.

INFORMATION:

1.  
   

   Extract information from the Balance Sheet	31 August 2020	31 August 2019
   Land and buildings	2 587 750	4 050 250
   Equipment at cost	1 500 000	1 200 000
   Accumulated depreciation on equipment	?	540 000

2. All the equipment, which had been bought on 31 August 2016, was traded in on 29 February 2020, for R600 000. New equipment was purchased on this date. Equipment is depreciated at 15% p.a. on cost.
3. No new land and buildings were bought during this year.

REQUIRED:

4.2.1 Prepare the Asset Disposal Account in the General Ledger. (10)
4.2.2 Complete the Note to the Financial Statements on 31 August 2020, for fixed assets. (12)

TOTAL: 150