ACCOUNTING
GRADE 12 
NSC PAST PAPERS AND MEMOS
FEBRUARY/MARCH 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 earn 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: DEBTORS' RECONCILIATION AND VAT (40 marks; 25 minutes)
1.1 DEBTORS' AGE ANALYSIS 
The information below relates to Witbank Hardware. 
REQUIRED: 
1.1.1 Explain why the debtors' age analysis is considered to be an  effective internal control measure. State ONE point. (2) 
1.1.2 Explain TWO different problems highlighted by the debtors' age  analysis. In EACH case, provide the name of a debtor and figure(s). (6) 
INFORMATION: 

1. Debtors are granted 30 days to settle their accounts.
2. Debtors' age analysis on 31 October 2017: 

1.2 DEBTORS' RECONCILIATION 
Information from the records of Amber Traders for November 2017 is  presented. Some errors and omissions were noted. See information B. 
REQUIRED: 
1.2.1 Calculate the correct Debtors' Control Balance on  30 November 2017. Show figures and indicate '+', '–' or 'No change'  at EACH adjustment. (7)
1.2.2 Calculate the correct total of the debtors' list on 30 November 2017. (10) INFORMATION: 
A. Balances on 30 November 2017 before errors and omissions: 

1. Debtors' Control, R25 700
2. Debtors' list:

B. Errors and omissions: 

1. The total of the Debtors' Journal was undercast by R2 700.
2. Interest of R350 must be charged on the overdue account of  S Muller.
3. An amount of R3 100 received from L Nkosi was incorrectly  recorded as R1 300 in the Cash Receipts Journal and posted as  such to the General Ledger and the Debtors' Ledger.
4. Trading stock returned by B Sandleni was posted to the wrong  side of his Debtors' Ledger Account, R1 200.
5. No entry was made for a credit sales invoice issued to  M Welthagen, R1 500. 

1.3 VAT 
The information relates to Aqua Stores for the VAT period ended  31 July 2017. The business is owned by Nomvula Sithole. All goods sold are  subject to 14% VAT. 
REQUIRED: 
1.3.1 Calculate the VAT amount that is either receivable from or payable  to SARS on 31 July 2017. (11) 
1.3.2 Nomvula has ordered goods with a marked price of R35 000 from  Beta Suppliers.  The sales director of Beta Suppliers, Jim Frow, has offered to sell  these goods to Nomvula for R15 000, provided that they do not have  to issue an invoice.  Comment on the offer made by Jim. State TWO points. (4)
INFORMATION: 

1. Amount owed by SARS on 1 July 2017, R27 200.
2. Amounts from the Journals on 31 July 2017: 

C. The following transactions were not taken into account: 

• Stock taken by the owner, cost price R9 000 (excluding VAT).
• VAT on discount received from suppliers. Total discount received  amounted to R33 630. 

QUESTION 2: INVENTORY VALUATION AND INTERNAL CONTROL  (35 marks; 20 minutes)  
2.1 Choose the correct word(s) from those given in brackets. Write only the  word(s) next to the question number (2.1.1–2.1.3) in the ANSWER BOOK. 
2.1.1 Merchandise purchased is recorded as an (asset/expense) to the  business in the perpetual inventory system. (1) 
2.1.2 The (specific identification/weighted-average) stock valuation method  is best suited for unique high-value products. (1) 
2.1.3 Cost of sales is usually calculated at the end of the financial year in  the (periodic/perpetual) inventory system. (1) 

2.2 MONGI TRADERS 
You are provided with information relating to Mongi Traders. The  business sells one type of plastic table. Their financial year ends on  31 December. The business uses the FIFO method to value their stock. They  use the periodic inventory system. 
REQUIRED: 
2.2.1 Calculate the value of the closing stock according to the FIFO  method on 31 December 2017. (6) 
2.2.2 Calculate the following for the year ended 31 December 2017: 

• Cost of sales
• Gross profit (8) 

2.2.3 The owner considers changing the stock valuation method to the weighted-average method. 

• Calculate the value of the closing stock on 31 December 2017  by using the weighted-average method. (6)
• What will be the effect on the gross profit if the owner changes to this valuation method? Provide figures. (3)

INFORMATION: 
A. Inventories:

B. Purchases and returns in 2017: 

C. Sales: 
2 300 units at R600 each = R1 380 000 

2.3 INTERNAL CONTROL 
You are provided with information relating to Leno Furnishers. They sell  tables, chairs and beds for cash only. The owner is concerned that the figures  provided reflect poor internal control and decision-making.  
Identify ONE problem for each product. Quote figures. In EACH case, give  advice on how to solve the problem. (9)
INFORMATION: 
Information from the records for the financial year: 

QUESTION 3: MANUFACTURING (45 marks; 25 minutes)
3.1 GLAMOUR DRESS CREATIONS 
Glamour Dress Creations manufactures one type of ladies' dress. The  financial year ended on 28 February 2017. 
REQUIRED: 
3.1.1 Prepare the Production Cost Statement for the year ended  28 February 2017. (21) 
3.1.2 Calculate the net profit for the year ended 28 February 2017. (7)
INFORMATION: 
A. Stock balances, among others, were taken from the General  Ledger: 

B. Information extracted from the financial records on  28 February 2017: 

C. The following information has not been taken into account: 

• A problem was identified regarding the valuation of the closing stock  of raw materials: 5 000 metres of material on hand, with a unit cost of  R2,75 per metre, were erroneously recorded as R3,80 per metre. 
  This must be corrected.
• Rent expense was omitted from the figures above. Total rent paid for  the financial year amounted to R87 100. The rent for March 2017 has  been paid in advance. The rent was increased by R650 on  1 December 2016. 80% of this expense must be allocated to the  factory and the balance must be regarded as an office expense.
• The employer contributes 1% to UIF on behalf of the employees.  

D. The business uses a mark-up percentage of 75% on cost. During the  financial year special discounts of R85 000 were offered to cash  customers who bought in bulk.
3.2 LIGHTING SOLUTIONS 
George Mkize is the owner of Lighting Solutions, a manufacturing business  that produces one type of energy-saving light bulb. The financial year ended  on 31 December 2017. 
NOTE: 

• Production is based on orders received; therefore there are no balances  for work-in-process.
• The current inflation rate is 8%.  

REQUIRED: 
3.2.1 Calculate the factory overhead cost per unit for the year ended  31 December 2017. (2) 
3.2.2 Explain why George would not be concerned about the 28,1%  increase in total variable cost from R936 000 to R1 200 000. (3) 
3.2.3 Give TWO reasons for the increase in the selling and distribution  cost per unit. (2) 
3.2.4 George wants to know if the production level for this financial year is satisfactory. 

• Calculate the break-even point for the year ended  31 December 2017. (4)
• Comment on the production level for 2017. State TWO points.  Quote figures. (4) 

3.2.5 Lighting Solutions are considering importing raw materials because it is cheaper and of a higher quality. Name TWO aspects that they  must consider before finalising their decision. (2)
INFORMATION: 
Information from the records of Lighting Solutions on 31 December: 

QUESTION 4: BALANCE SHEET AND AUDIT REPORT (65 marks; 40 minutes) 
4.1 Choose a description from COLUMN B that matches the term in  COLUMN A. Write only the letter (A–E) next to the question number  (4.1.1–4.1.5) in the ANSWER BOOK.  

(5 x 1) (5) 
4.2 ORBIT LTD 
Refer to the information from the records of Orbit Ltd for the financial year  ended 30 June 2017. 
REQUIRED: 
4.2.1 Prepare the following notes to the Balance Sheet: 

1. Ordinary share capital (8)
2. Retained income (11) 

4.2.2 Complete the Balance Sheet on 30 June 2017. Where notes are not  required, show ALL workings in brackets. (28) 
4.2.3 The CFO (chief financial officer), Barry Wright, has convinced the  company to buy back a further 400 000 shares from his close  relative during the next financial year. Barry currently owns  1 904 400 shares in this company, which is 46% of the issued  shares. 
As a shareholder, explain your concern regarding the proposed  buy-back of shares. Provide calculations to support your concern. (6)
INFORMATION: 
A. Extract from the books on 30 June 2017: 

B. Share capital: 

• The business has an authorised share capital of 6 000 000 shares.
• 70% of the shares were in issue on 1 July 2016.
• 60 000 ordinary shares were repurchased from a disgruntled  shareholder on 1 December 2016. The company paid R3,50 per  share. This was paid and recorded on 1 December 2016.  

C. A final dividend of 22 cents per share was declared on 30 June 2017. Only shares in the share register qualify for final dividends. 
D. The following adjustments have not been taken into account yet:  

• Provision for bad debts is set at 5% of the outstanding debtors.
• Insurance included an annual premium of R31 800, paid for the  period 1 October 2016 to 30 September 2017. 

E. The loan statement from Helping Bank reflected the following: 

R40 000 of the loan will be paid back in the next financial year. 
F. Income tax for the year amounted to R408 800. This was calculated at  28% of the corrected net profit. 
4.3 AUDIT REPORT: DF ENTERPRISES LTD 
REQUIRED:  
4.3.1 Choose the correct word(s) from those given in brackets. Write only  the word(s) next to the question number (4.3.1(a)–4.3.1(b)) in the  ANSWER BOOK. 

1. The audit report is completed by the (internal/external) auditor. (1)
2. The (directors/shareholders/auditors) are responsible for the  preparation of the financial statements. (1) 

4.3.2 Refer to the audit report below. 

1. The audit report below indicates a/an (qualified/unqualified)  opinion. (1)
2. Explain why the shareholders should be concerned about this  audit report. State TWO points. (4) 

INFORMATION: 

QUESTION 5: FIXED ASSETS, CASH FLOW AND INTERPRETATION  (70 marks; 45 minutes) 
MAFOKO LTD 
The given information relates to Mafoko Ltd for the financial year ended  28 February 2017. 
REQUIRED: 
5.1 Refer to Information A and Information B. 
Calculate the missing amounts denoted by (a) to (c) on the Fixed Asset Note. (15)
5.2 Calculate the following amounts for the Cash Flow Statement: 
5.2.1 Income tax paid (5)
5.2.2 Dividends paid (3)
5.2.3 Net change in cash and cash equivalents (4) 
5.3 Complete the Cash Effects of Financing Activities section of the Cash Flow  Statement. (10) 
5.4 Calculate the following financial indicators on 28 February 2017:
5.4.1 Debt-equity ratio (3)
5.4.2 Earnings per share (in cents) (3)
5.4.3 Return on average shareholders' equity (ROSHE) (5) 
5.5 Explain why the directors felt that the 630 cents offered on the shares  repurchased was a fair price. Quote TWO financial indicators with figures. (4) 
5.6 The directors revised the dividend pay-out policy for the current financial year. 
5.6.1 Calculate the percentage of earnings distributed as dividends for  each year to show this change. (4) 
5.6.2 Give ONE reason why the directors took this decision. (2) 
5.6.3 Explain why the shareholders may not be satisfied with the return  they earned. Quote a financial indicator or figure(s). (3) 
5.7 The Cash Flow Statement reflects some important decisions taken by the  directors. 
Apart from the dividends, identify THREE good decisions. Explain the effect of  each decision on the company. Quote figures. (9)
INFORMATION: 
A. Information from the financial statements on 28 February: 

B. Fixed Asset Note: 
Fixed assets comprise only Buildings and Equipment. 

• Additional equipment was purchased on 1 June 2016. 
• Extensions to the building were completed on 31 August 2016.
• Old equipment was sold at carrying value on 28 February 2017.
• Equipment is depreciated at 20% p.a. using the diminishing-balance  method.

C. Share capital and dividends 

• The company is registered with an authorised share capital of  1 000 000 ordinary shares.
• On 1 March 2016 there were 500 000 shares in issue. A further  200 000 shares were issued on this date. 
• An interim dividend of R70 000 was paid on 31 August 2016. 
• On 28 February 2017, 25 000 ordinary shares were repurchased  from the estate of a deceased shareholder at R6,30 per share. The average issue price was R6,10 at this point. 
• A final dividend was declared on 28 February 2017. 

D. Financial indicators on 28 February: 

QUESTION 6: PROJECTED INCOME STATEMENT (45 marks; 25 minutes) 
You are provided with information relating to Mabuso's Auto Repairs for the period  1 March 2018 to 30 April 2018. The business is owned by Vusi Mabuso.  

• All transactions are strictly cash. 
• The financial year ends on 30 April each year.
• The business repairs vehicles for which they charge service fees. 
• If the repairs require new spare parts, these are charged to each customer's account separately.
• Consumable stores are used for repairing the vehicles. There is no charge for these  items. 

REQUIRED: 
6.1 Calculate the: 
6.1.1 Mark-up percentage on spare parts used in the Projected Income  Statement for March 2018 (3) 
6.1.2 % decrease in service fee income expected in April 2018 (3) 
6.1.3 Additional space (in square metres) the business will rent from  April 2018 (4) 
6.1.4 Interest rate on the fixed deposit (5) 
6.2 Comment on the control of stock and explain how Vusi intends to correct this.  Quote figures. (4) 
6.3 Vusi is considering changes to the fixed assets owned by the business. 
6.3.1 Vusi is thinking of purchasing the business premises rather than  renting it. State ONE advantage and ONE disadvantage of this option. (4) 
6.3.2 Vusi offers a free delivery service of spare parts to customers, but  plans to discontinue this service on 31 March 2018.  State TWO points to support this decision. (4) 
6.3.3 Calculate the cost of the new vehicle that he plans to purchase on  1 April 2018. (4) 
6.4 Refer to information E. You are provided with the projected and actual figures for February 2018.  Quote figures in your explanation in EACH case below. 
6.4.1 Explain whether Water and electricity has been well controlled, or not. (3) 
6.4.2 Explain whether you agree with Vusi's decision not to use the full  budget for Advertising. (3) 
6.4.3 Explain whether Consumable stores have been well controlled, or not. (4) 
6.4.4 Explain how Vusi's decision about the mark-up percentage on spare  parts has affected the business. (4)
INFORMATION: 
A. Extract from the Projected Income Statement for the period 1 March 2018  to 30 April 2018: 

B. Rent expense is calculated on a fixed amount per square metre. The business  will rent 75 square metres in March 2018. On 1 April 2018 additional floor space  will be rented at the same rate due to expansion. 
C. A fixed deposit of R450 000 will mature on 31 March 2018. 
D. Vehicles: 

The delivery vehicle will be sold on 31 March 2018. The Audi Q7 vehicle will be purchased on 1 April 2018 and used by the owner.
E. Figures provided for February 2018: 

*NOTE: The water and electricity tariff unexpectedly increased by 15% from 1 February 2018. 

TOTAL: 300