ACCOUNTING PAPER 1 GRADE 12 MEMORANDUM - NSC PAST PAPERS AND MEMOS JUNE 2022

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MARKS: 150

MARKING PRINCIPLES:

  1. Unless otherwise indicated 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 answers. If the answer is 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 marking guidelines 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.
  7. Where penalties are applied, the marks for that section of the question cannot be a final negative.
  8. Where method marks are awarded for operation, the marker must inspect the reasonableness of the answer.
  9. ‘Operation’ means ‘Check operation’. ‘One part correct’ means ‘Operation and one part correct’.
    NOTE: Check operation must be +, –, x or ÷ or as per marking guidelines.
  10. In calculations, do not award marks for workings if numerator and denominator are swapped – this also applies to ratios.
  11. 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 
  12. Be aware of candidates who provide valid alternatives beyond the marking guideline. Note that one comment could contain different aspects.
  13. Codes: f = foreign item; p = placement/presentation.

QUESTION 1
1.1 Statement of Comprehensive Income for the year ended 28 February 2022

Sales 8 085 500 ✓ + 4 500 ✓✓ 8 090 000 ☑*
 Cost of sales Sales x 100/200 4 045 000) ☑
 Gross profit S – COS 4 045 000 ☑
 Other income operation 134 360☑
 Discount received  23 190
 Bad debts recovered 11 760 ✓ + 2 240 ✓  14 000✓
 Provision for bad debts-adjustment 34 120 – 29 660  4 460 ✓✓
 Rent income 85 100 ✓+ 7 610 ✓✓  92 710 ☑*
   
Gross income GP + OI 4 179 360 ☑
Operating expenses GI – OP (2 577 170) ☑
Advertising 404 500
Salaries and wages 956 180
Audit fees 89 970
Depreciation 123 220
Trading stock deficit 18 500
Consumable stores 33 900 ✓ – 5 900 ✓ 28 000 ✓
Bad debts 33 260 ✓ + 2 240 ✓ 35 500 ✓
Insurance 48 750 ✓ – 7 500 ✓✓ 41 250 ☑*
Directors’ fees 825 000 ✓ + 25 000 ✓✓ 850 000☑*
Sundry expenses balancing figure 30 050☑
Operating profit 1 602 190
Interest income 11 090
Profit before interest expense OP + Int inc 1 613 280 ☑
Interest expense 703 800 – 610 320 (93 480)✓☑*
Net profit before income tax Pbie – Int exp 1 519 800 ☑
Income tax NPbt X 30%
Net profit after tax NPbt – Inc tax		 (455 940) ✓✓
1 063 860☑

– 1 foreign items (Max. -2) misplaced: mark workings only
*one part correct


1.2 RETAINED INCOME

 Balance on 1 March 2021 balancing figure 507 140 ☑ 
 Net profit after tax see 2.1  1 063 860 ☑
 Shares repurchased 40 000 x 80c ignore brackets  (32 000) ✓✓
 Ordinary share dividends ignore brackets  (570 000) ✓
 Interim dividends  237 500
 Final dividends OSD – Interim div  332 500 ☑
 Balance on 28 February 2022  969 000


1.3 STATEMENT OF FINANCIAL POSITION ON 28 February 2022 EQUITIES AND LIABILITIES

 SHAREHOLDERS’ EQUITY 9 044 000 ☑ 
 Ordinary share capital 950 000 x 8,50 8 075 000 ✓✓ 
 Retained income  969 000
   
 Non-current liabilities  603 800
 Loan: Allan Bank 703 800 – 100 000  603 800✓☑*
 Current liabilities operation  1 069 500 ☑
 Trade and other payables
562 500 + 25 000 ☑ + 36 000 ✓ 13 500 ✓
                 Dir. Fees       PAYE      Pension fund		  637 000 ☑*
Shareholders for dividends see 2.2 332 500 ☑
Current portion of loan see NCL 100 000☑
   
TOTAL EQUITY AND LIABILITIES SE + NCL + CL 10 717 300 ☑


TOTAL MARKS 60

QUESTION 2
2.1 Calculate the following financial indicators for the financial year ended 30 April 2022:


2.1.1

Debt-equity ratio 
 Workings Answer 
 1 080 000 ✓ : 10 776 400 ✓  0,1 : 1 ☑
One part correct


2.1.2

 Earnings per share (EPS) 
 Workings  Answer
 1 162 000 ✓ x 100
576 000 ✓✓
(144 000 ÷ 25c)		  201,7 cents ☑
accept 202 cents
One part correct


2.1.3

Dividend pay-out rate (%)  
 Workings Answer 
 (45+25)
70 cents ✓ x 100
201,7 cents ☑ see 3.1.2		  34,7% ☑
One part correct


2.1.4

 % return on average shareholders’ equity (ROSHE) 
 Workings  Answer
 1 162 000 ✓ x 100
½ ✓ (10 776 400 ✓ + 8 893 800 ✓)
19 670 200 two marks
9 835 100 three marks		  11,8% ☑
One part correct


2.2

Cash effects of changes in working capital operation   (764 100) ☑
 CA–TOR-CCE CA–TOR-CCE
Change in inventory 714 600 ✓ – 485 700 ✓		  (228 900) ☑*
 Change in receivables
(448 000 + 28 400)
476 400 ✓– 323 800 ✓		  (152 600) ☑*
 Change in payables 814 600 – 432 000  (382 600) ✓☑*

*One part correct and must indicate correct operation and correct use of brackets;
If no brackets, assume answer is an inflow of cash – award marks for workings only;
If a working amount is shown as a final answer, award the mark, ignore the bracket;
If the correct amount is provided without the brackets, and without workings, award all marks award all marks allocated for workings only.

2.3.1

 Taxation paid 
 WORKINGS ANSWER 
 1 660 000 – 1162 000
- 28 700 ✓ + 498 000 ✓✓ + 5 400 ✓
Accept alternative arrangements for calculations such as signs reversed, brackets and/or ledger accounts		  474 700 ☑
One part correct


2.3.2

 Proceeds from sale of fixed assets 
 WORKINGS  ANSWER
 11 434 000✓+ 280 800✓ – 1 632 000 ✓– 9 984 400 ✓
Accept alternative arrangements for calculations such as signs reversed, brackets and/or ledger accounts		  98 400 ☑
One part correct

 

2.3.3

 Funds used for the repurchase of shares 
 WORKINGS  ANSWER
 2
25 000 x 1,1
25 000 x 1,1 OR 25 000 + 2 500		  27 500 ✓☑
One part correct



2.4

NET CHANGE IN CASH AND CASH EQUIVALENTS
operation 		 (325 800) ☑* 
 Balance on 1 May 2021  67 800 ✓
 Balance on 30 April 2022 (6 000 – 264 000)  (258 000) ✓✓

*One part correct

TOTAL MARKS 40

QUESTION 3
3.1

3.1.1  B ✓ 
3.1.2 C ✓
3.1.3 A ✓ 


3.2.1

The directors are satisfied with the improvement in the liquidity of the company. Quote and explain THREE financial indicators with figures and trends that show an improvement of the liquidity position.

Financial indicators ✓ ✓ ✓ Explanation (figures with trends) ✓ ✓ ✓

  • Current ratio decreased from 2.9 : 1 to 2.1 :1
  • Acid test ratio increased from 1 : 1 to 1.4 : 1
  • Stock turnover rate increased from 9.1 times to 10.2 times. 

6

3.2.2

Explain why the shareholders should be satisfied with their return on investment in the company. Quote figures and trends in your explanation.

Financial indicators ✓ Figures and trend ✓ Comparison with interest rate ✓✓

% Return on shareholders improved from 10,4% to 15,3% / by 47,1%/
This is more than the interest rate on alternative investments (fixed deposits) of ±7% 

4

3.2.3

One of the directors feels that the company should pay back the loan as soon as possible. Explain why you disagree with him. Quote TWO financial indicators with figures and trends.

Two financial indicators (with figures) ✓✓ ✓✓

  • Debt/equity ratio was maintained at 0,3 : 1
  • ROTCE is now 17,2% / increased from 12,1% to 17,2% / by 42,1%

Explanation: both risk and gearing should be mentioned ✓ ✓
part marks for partial / incomplete / unclear responses

  • The company is lowly geared
  • The company experiencing positive gearing (ROTCE is higher than interest rate of 14%) 

6

3.2.4 One of the shareholders wants to sell her shares at R6 each.

 Provide ONE reason why you would agree with her to sell her shares. Quote a financial indicator with figures and trends. 4
Financial indicators ✓ Figures and trends ✓
Any ONE response:

  • Market price has dropped from 640c to 600c / by 40 cents.
  • Market price of 600 cents is lower than NAV of 650 cent

 

 

Provide ONE reason why you disagree with her to sell her shares. Quote a financial indicator with figures and trends.
Financial indicators ✓ Figures and trends ✓
Any ONE response:

  • EPS increased from 75 cents to 104 cents per share / by 29 cents.
  • NAV increased from 625c to 650c / by 25 cents.
  • Return on shareholders’ equity increased from 10,4% to 15,3% / by 47,1%
  • Dividend pay-out-rate increased from 73,3% to 76,9% / by 4.9% 



3.2.5

The shareholders should be happy with the earnings per share (EPS), because it is better than the previous year. Explain why you agree with them. Quote figures and calculations.

Compare EPS to Value of share (MP / NAV) for 2022 with figures ✓✓

part marks for partial / incomplete / unclear responses

Compare EPS to Value of share (MP / NAV) for 2021 with figures ✓✓

part marks for partial / incomplete / unclear responses

Expected responses for 4 marks (two marks per financial year)

  • EPS to NAV is 16% in 2022 and 12% in 2021 / EPS to NAV is 25% more than 2021 (previous year).
  • EPS to MP is 17.3% in 2022 and 11,7% in 2021
  • Earnings in 2022 is 104c on a share valued at 650c/600c while in 2021 it is 75c on a share value at 625c/640 

4

3.3.1

Explain what effect this consideration will have on the % shareholding of Alton Flan in EACH company. Quote figures and trends.
Explanation on % shareholding ✓ ✓ Figures and trend ✓✓ ✓✓

Socker Ltd:

  • He will become the majority shareholder
  • His shareholding will increase from 46% to % 51%

Boll Ltd:

  • His shareholding will drop from 55% to 50,9% / 51%
  • He will remain the majority shareholder



3.3.2

Calculate the number of shares Alton Flan could buy in Boll Ltd.
 WORKINGS  ANSWER
 110 200 x 5
551 000 ÷ 4		  137 750 ✓ ☑
One part correct



QUESTION 4

4.1

Explain the role of the remunerations committee and give a reason why there is a need for this committee.
EXPLANATION: ✓
Any ONE valid response

  • Review all salaries, bonuses and other earnings
  • Prevent directors from paying themselves too much / protect shareholder’s investment.
  • They must approve and give advice on the proposals regarding fees, bonuses etc.
    REASON: ✓✓ part mark for unclear/incomplete/partial responses
    Any ONE valid response
  • To ensure fairness / Transparency in the payment of fees / salaries
  • To prevent fraud / corruption / wastage
  • To detect mismanagement or fraudulent activities
  • To compare the remuneration / earnings against financial information of other companies in the industry / fairness to workers

3

4.2

Explain why the auditor referred to pages 7 to 22 in this report.
Any ONE valid response ✓✓ part mark for unclear/incomplete/partial responses

  • Auditors are responsible only for reports presented on these pages of the annual report.
  • They are not accountable for the other information in the annual reports.
  • Financial statements on pages 7–22 were subjected to auditing.
    The audited financial reports / statements are found on these pages of the full report presented to the shareholders at the AGM.

2

4.3

Identify the type of audit report that the company received and give a reason for your answer.
ONE valid response ✓✓ part marks for partial / incomplete / unclear responses
To get full marks, Qualified report must be mentioned
The company received a Qualified report because…

  • The financial statements were fairly presented except for an issue with the increase in directors’ fees OR
  • A specific item (increase in directors’ fees) could not be verified OR
  • There was no evidence / documents to verify the increase in directors’ fees OR
  • Proper procedures were not followed with regards to the increase in directors fees 

2

4.4

Explain the effect of this type of report for the image of the company.
Provide TWO points.
TWO valid responses ✓✓ ✓✓ part marks for partial / incomplete / unclear responses

  • There is a weakness in internal controls; possible negligence or colluding / fraud
  • This will impact on share price (demand) / returns earned / dividends earned by shareholders
  • Potential investors would not be interested to buy shares / existing shareholders may want to sell their shares
  • Directors appointed are not reliable – lose confidence/trust in them
  • Significant information is not being openly discussed (transparency) 

4

4.5

State TWO possible consequences for the independent auditor if he had NOT referred to the increase in directors’ fees.
TWO valid responses ✓✓ ✓✓ part marks for partial / incomplete / unclear responses

  • He could face a disciplinary hearing by the professional body.
  • He may not be reappointed as an external auditor.
  • He may be charged/fined/lose his license to practice. 

4

TOTAL MARKS 15
TOTAL: 150

Last modified on Wednesday, 14 December 2022 09:09
Published in Grade 12 June 2022 NSC Past Exam Papers and Memos
More in this category: « ACCOUNTING PAPER 1 GRADE 12 QUESTIONS - NSC PAST PAPERS AND MEMOS JUNE 2022 ACCOUNTING PAPER 2 GRADE 12 QUESTIONS - NSC PAST PAPERS AND MEMOS JUNE 2022 »
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