Explain why the debtors' age analysis is considered to be an effective  internal control measure. State ONE point. 
Valid explanation ✔✔ part-mark for unclear / incomplete answer 

• Helps identify slow or defaulting debtors (not abiding to the credit terms)  so that action can be taken.
• Highlights debtors in good standing so their credit ratings can be reviewed.
• It can expose the problem of allowing debtors to exceed their credit limits.
• It can assist with planning/corrective measures such as sending  reminders, writing off debtors etc.

PROBLEM  
✔ ✔

DEBTOR AND FIGURE(S) 
Debtor ✔ ✔ Figure ✔ ✔

Debtors exceeding credit limits 

P. Botha (by R700) 
Or: balance of 4 200 is above his limit of 3 500

Overdue accounts/not complying with  credit terms/slow payers

S. Walker (R8 500 overdue) 
O. Klein (R1 100 overdue);  
M. Valley (R950 overdue)

Poor control of granting credit /  Continue selling to debtors whose  accounts are overdue

M. Valley (R950) 
S. Walker (R8 500) 
O. Klein (R1 100) 

Balance before errors and omissions 

25 700

(i) 

+2 700 ✔

(ii) 

+350 ✔

(iii) no part-marks 

– 1 800 ✔✔

(iv) 

No change ✔

(v) 

+1 500 ✔

Correct Debtors' Control balance
 one part correct

28 450 ?

L Nkosi (5 700 – 1 800 ✔) 

3 900 ✔

S Muller (11 100 + 350 ✔) 

11 450 ✔

M Welthagen (– 1 900 + 1 500✔) 

(400) ✔

B Sandleni (15 900 – 1 200 ✔ – 1 200 ✔) 
2 400 two marks must be < 15 900 

13 500 ?

Correct total of Debtors' List
operation one part correct 

28 450 ?

MARK ONE LINE ONLY (DO NOT MIX LINES) 
27 200 ✔ – 69 300 ✔ + 22 260 ✔ + 2 100 ✔ + 4 200 ✔✔ – 1 260 ✔✔ – 4 130 ✔✔ = – 18 930 ? 

One part correct

OR 

                          –67 200 two marks +21 000 two marks
27 200 – 69 300 + 2 100 + 22 260 – 1 260 + 4 200  – 4 130 = – 18 930 

OR

                         +67 200 two marks –21 000 two marks
– 27 200 + 69 300 – 2 100 – 22 260 + 1 260 – 4 200  + 4 130 = 18 930 

* Sales less returns  
69 300 – 2 100 = 67 200 two marks 

# Purchases less drawings 
22 260 – 1 260 = 21 000 two marks 

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. 
TWO valid points ✔✔ ✔✔ part-mark for unclear / incomplete answer 

• Tax evasion / buying stolen goods is illegal / unethical
• The issuing of documents is important for internal control purposes / It is  fraudulent not to issue an invoice
• Unethical/illegal activity will tarnish the image of the business. 
• Discount limits must be formalised by management (otherwise fraudulent)

2.1.1 

Asset ✔

2.1.2 

Specific identification ✔

2.1.3 

Periodic ✔

Calculate the value of the closing stock according to the FIFO method  on 31 December 2017. 
300 x R430 = R129 000 ✔✔
140? x R375 ✔ = R52 500 ✔ one part correct 
(440–300) (350+25) = R181 500 ✔ one part correct 

Calculate the cost of sales. 
                          (840 500 + 58 100) both for one mark 
189 000✔ + 898 600 ✔– 19 000✔– 181 500 ✔= 887 100 ?  
                                                                 see 2.2.1          one part correct  

OR: 

Using units sold:  

Calculate the gross profit. 
1 380 000 ✔ – 887 100 ✔ = 492 900 ✔ one part correct 
                         see above

Calculate the value of the closing stock on 31 December 2017 by using  the weighted-average method. 

     1 068 600 ✔? one part correct  
 189 000 + 898 600 – 19 000 x 440 ✔ = 171 600 ? one part correct (must be x 440) 
            540 + 2 250 – 50  
                      2 740 ✔? one part correct 
 390 (WA) four marks

What will be the effect on the gross profit if the owner changes to this  valuation method? Provide figures. 

 If candidate indicates increase then inspect workings above 
 Award accuracy mark if workings indicate increase 

Gross profit will decrease / be less ✔ * by 9 900 ?? (181 500 – 171 600)

see 2.2.1  see 2.2.3                                                               
OR                                                                               
492 900 – 483 000                                                                
 FIFO            WA                                                                  

Product 

Problem ✔✔✔
Figures ✔✔✔
Comparison figures not necessary but may  enhance identification of problemIf figures correct award marks even if  explanation wrong

Advice  
✔✔✔

Tables 

• Stolen tables: 30 which  leads to loss of income of  R45 000

• Improve physical security
• Regular stock counts
• Check at doors.

Chairs 

• Missing money
  Total sales: R1 920 000 but  only R1 800 000 banked (R120 000)

• Division of duties (banking)
• Documentation
• Request bank notification for  transactions (sms).

Beds 

• Too much stock on hand  200 whilst sales is only 480  for the year.
• 200/480 = 5 months; slow  moving goods
• only 70% of available stock  sold i.e. 480/680

• Reduce the selling price to  increase sales
• More effective advertising Consider discontinuing the  product
• Purchase these goods  according to order.

Direct labour cost ( 810 000 three marks ) 
(753 300 ✔ + 48 600 ✔ + 8 100 ✔ + 8 100 ?)

OR:

Solve for Y
y = 753 300 + 48 600 + (0,01y) 
y = 810 000 DLC = 810 000 + 8 100 

OR

753 300+48 600+801 900 = 99% DLC = 101% 801 900 x 101/99 

Factory overhead cost (227 240 ✔ + 63 96o✔✔✔✔) 

[(87 100 one mark – 7 150 two marks) x 80% one mark]  
79 950 three marks 

Cost of production of finished goods 
(1 860 000 + 190 000 – 110 000)

Calculate the net profit for the year ended 28 February 2017. 

                                                                                 79 950 X 20% 
 Gross Profit = 1 310 000 (3 marks) 79 950 – adjustment in FOHC (3.1.1)
3 170 000 ✔✔ – 1 860 000 ✔ – 410 000 ✔ – (259 010 ✔ + 15 990 ✔)  
                                                                              or – 259 010 – 15 990 
                                                                              275 000 two marks 

 = 625 000 ✔ one part correct 

Calculate the factory overhead cost per unit for the year ended  31 December 2017. 

• 395 000 /50 000 = R7,90 ✔✔  

Explain why George would not be concerned about the 28,1% increase in total variable cost from R936 600 to R1 200 000.
Any valid comment ✔✔ compared to inflation rate ✔ figures not necessary 

• The variable cost per unit increased up by 7,6% ✔✔ which is less than inflation  rate ✔ 
  An additional 8 000 units were produced (19% increase in production)
  There was an increase in units produced and therefore greater profits.

Give TWO reasons for the increase in the selling and distribution cost  per unit.
TWO valid reasons ✔ ✔ 

• Advertising costs may have increased
• Increase in fuel price
• Commission to sales staff increased 
• Due to inflation 

Do not accept increased sales / increased delivery expenses 

Calculate the break-even point for the year ended 31 December 2017. 

   575 000   ✔ 
   45 – 24 
       21 two marks 
= 27 381 units one part correct (accept 27 380,9)

Comment on the production level for 2017. State TWO points. Quote  figures. 

 Comparison figures not necessary but may enhance answer 
Explanation ✔ ✔ must compare BEP with level of production figures ✔ ✔ see 3.2.3 

• The business produced and sold 50 000 units. This is 8 000 units more  than the production achieved in the previous financial year (42 000 units).
• The business produced 22 619 (50 000 – 27 381) units more than the BEP.
• There is an increase of (22 619 – 19 687) 2 932 units over the BEP when  compared to the previous financial year.

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. 

Any TWO relevant aspects ✔ ✔  

• Fluctuation in exchange rates (impact on cost/selling price)
• Additional / increasing import costs (transportation and custom duties) ∙ Time delays (availability and/or delivery)
• Support for local suppliers (impact on the local economy)
• Not easy to return damaged goods 

4.1.1 

C ✔

4.1.2 

E ✔

4.1.3 

D ✔

4.1.4 

A ✔

4.1.5 

B  ✔

(60 000) ✔

Ignore brackets 

*(45 000) 

Ignore brackets✔* 

Net profit after income tax (408 800 ✔ x 72/28 ✔)     
                                    OR: 1 460 000 – 408 800

**(165 000) 
Ignore brackets✔*

Balance on 30 June 2017

*one part correct & repurchase and OSD must be subtracted

Trade and other receivables  
317 000 ✔– 15 850✔✔ + 7 950✔✔ one part correct

Loan: Helping Bank  
      (360 000 ✔ ✔ – 40 000✔ ) one part correct
302 400 one mark + 57 600 one mark – 40 000 one mark  

SARS: Income tax (408 800 – 390 000) 
 one part correct

As a shareholder, explain your concern regarding the proposed  buy-back of shares. Provide calculations to support your concern. 
Explanation ✔✔ part-mark for unclear / incomplete answer 
Barry wants to increase his % shareholding (without investing in more shares) He will become the majority shareholder which will enable him to influence all  decisions taken. 
% shareholding of Barry after the share buyback: 
1 904 400 ✔/ 3 740 000 ✔✔ x 100 = 50,9%.✔ one part correct; accept 51% 
                (4 140 000 – 400 000)

(a) 

External ✔

(b) 

Directors ✔ 

Qualified ✔  

(b) Explain why the shareholders should be concerned about this audit report. State TWO points.
TWO valid points ✔✔ ✔✔ part-mark for unclear / incomplete answer 

• There is possible fraud/mismanagement occurring in the business.
• There is a lack of internal control processes (poor recording)
• The qualified audit report could affect the price of shares / reputation of the  company
• Unaccounted expenditure impacted on their return/profits
• Dividends could have been negatively affected by this problem

Additions to buildings   
4 934 450 ✔ – 1 058 520 ✔ – 2 866 990 ✔ 

OR                                      (b) below (c) below 
[3 993 390 + 300 000 – 270 280 – 97 600] – 4 934 450 
                    two marks                                         one mark

OR 

4 934 450 – 300 000 + 97 600 + 270 280 – 3 993 390  

Total depreciation on equipment 

Old: 1 126 400 ✔ x 20% = 225 280 ? one part correct 
New: 300 000 ✔ x 20% x 9/12 ✔ = 45 000 ?  one part correct

Calculate the Income tax paid. Accept reversed signs 
          (422 500 – 295 750) two or nothing 
3 390 ✔ + 126 750 ✔✔ – 5 200 ✔ 

Calculate the dividends paid. Accept reversed signs
50 000 ✔ + 70 000 ✔ 

OR: 50 000 + 168 000 – 98 000 

Calculate the net change in cash and cash equivalents.
            – 25 000✔✔ – 245 000✔
(2 500 – 27 500)

Signs are important here 

Proceeds from shares issued 
4 117 500 ✔ + 152 500 ✔✔ – 3 000 000 ✔ 
                 25 000 x R6,10 

Funds used to repurchase shares

25 000 x R6,30
Final figure must be correct to get 1 or 2 marks 

(157 500)✔✔

157 500 with no  brackets award 1 mark

Change in loan

1 300 000 – 750 000
Final figure must be correct to get 1 or 2 marks

(550 000)✔✔

550 000 with no  brackets award 1 mark

Calculate the earnings per share (in cents). 
295 750 ✔/ 700 000 ✔ x 100 = 42,3 cents ? one part correct (accept 42 cents) 
Note: Cannot accept 675 000 shares (as 25 000 shares repurchased on last day of fin year)

Calculate the return on average shareholders' equity (ROSHE). 
                                                          one part correct; must be shown as % 
                    295 750 ✔                  x 100 = 7,9% ? one part correct (Accept 7,88%)
½ ✔ (3 135 000 ✔ + 4 375 250 ✔) 
         7 510 250 two marks  
 3 755 125 three marks

Explain why the directors felt that the 630 cents offered on the shares  repurchased was a fair price. Quote TWO financial indicators with  figures. 

Comparison to market price ✔ Figures ✔
Comparison to NAV ✔ Figures ✔

• The price offered benefits the company as it is less than the market price of  640 cents (by 10 cents)
• Less than the Net Asset Value of 648 cents (by 18 cents)

The directors revised the dividend pay-out policy for the current  financial year. 
Calculate the percentage of earnings distributed as dividends for each  year to show this change. 

• 2016: 20/23 x 100 = 87% ✔✔
• 2017: 24/42,3 x 100 = 56,7% ?? (refer 5.4.2)

Give ONE reason why the directors took this decision. 
Any ONE valid explanation ✔✔ part-mark for unclear / incomplete answer 

• They decided to retain funds for future developments in the business
• They wanted to minimise their cash flow problems / They foresaw that the  company bank balance is going into an overdraft.

Explain why the shareholders may not be satisfied with the return they  earned. Quote a financial indicator or figure(s). 
part-mark for unclear / incomplete answer 
Explanation ✔✔                       Figure/financial indicator ✔  
ROSHE is 7,9% (see 5.4.3) is less than what she would receive on an alternative  investment. (Fixed deposits offer 8% in 2016 and 9% in 2017).

GOOD DECISION ✔ ✔ ✔ 
(with figures✔ ✔ ✔)

EFFECT ON COMPANY ✔ ✔ ✔ 
Figures not required

Reducing or paying a large portion  of the loan by R550 000 

OR:  

Decreased loan from R1 300 000 to  R750 000

Reduced financial risk / Improved the debt  equity ratio from 0,4 :1 to 0,2 : 1  see 5.4.1 

OR 

The ROTCE improved from 6,4% to 11,4%;  closer to the interest rate of 12% (still  negatively geared).

Issue new shares; R1 270 000* 

• Lightened the cash flow burden
• Used to reduce the loan

Purchase of fixed assets;  

R1 308 930 (1 008 940 + 300 000)  see 5.1(a)

• Leads to capital growth (future productivity) More assets in the company

*Also: 
Spent R157 500 to repurchase shares (not so significant but would show an improvement to  certain financial indicators).

Calculate the mark-up percentage on spare parts used in the Projected  Income Statement for March 2018. 

22 875✔  / 30 500✔  x 100 = 75%✔  one part correct 

Calculate % decrease in service fee income expected in April 2018.
 13 500 ✔/ 150 000✔ x 100 = 9% ✔ one part correct 
 (150 000 – 136 500) one mark

Calculate the additional space (in square metres) the business will rent  from April 2018. 

6 000 / 75 = R80 ✔✔
9 200 / R80 = 115 sqm ✔
Additional space = 115 – 75 = 40 square metres ✔ one part correct 

OR 

3 200 one mark  
  (9 200 – 6000) = 40 sqm one method mark 
            80    two marks 

Calculate the interest rate on the fixed deposit. 
 5 700 – 2 700 
 3 000 ✔✔  x 12 ✔ x 100 = 8% ? one part correct 
         450 000 ✔

Comment on the control of stock and explain how Vusi intends to  correct this. Quote figures. 
Each item✔✔ Figures ✔✔ Comparison figures not essential 

• Trading stock deficit reduced to R2 000 (was high at R14 000)
• Increase in security expenses by R4 200 / from R5 000 to R9 200 / by 84%.

Vusi is thinking of purchasing the business premises rather than renting  it. State ONE advantage and ONE disadvantage of this option. 

Advantage ✔✔  part-mark for unclear / incomplete answer 

• Will not have to pay rent in future.
• Business will acquire a fixed asset. This increases the value of the  business. 
• Extra space can be rented out to receive additional income. 

Disadvantage ✔✔ part-mark for unclear / incomplete answer 

• Rates on property must be paid.
• Additional maintenance costs will be incurred.
• Large initial cash outlay or an additional monthly instalment, including  interest. 
• Not easy to relocate quickly
• Costs and time involved in selling a building.

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. 
Any TWO relevant points: ✔✔✔✔ part-marks for unclear / incomplete answer 

• Customers will be forced to have the spare parts fitted as part of the  service offered by the business.
• The business will be saving on the running cost of the delivery vehicle
• The main line of business is the repairing of vehicles – the sale of spare  parts supports this
• The profit on sale of spare parts is considerably lower than the fee income  for the repair service.

Calculate the cost of the new vehicle that he plans to purchase on  1 April 2018. 

 9 000 ✔ x 12 ✔ = R720 000 ? one part correct 
        0,15 ✔ or 15%  

Explain whether Water and electricity has been well controlled, or not. 
Comment on control ✔✔                                                       Figures ✔
Part-mark for unclear / incomplete answer    Comparison figures not necessary but may enhance explanation 

• This expense has been well-controlled. If the projected amount of R4 500  considered the increase, it would have been R5 175. Only R5 000 was spent  (R175 less than the adjusted projected amount. 

OR 

• The projected amount (R4 500) has not taken in account the tariff increase of  15% affected on 1 February 2018, which would have led to an adjusted  projected amount of R5 175. 

Explain whether you agree with Vusi's decision not to use the full  budget for Advertising.  
Comment on control ✔✔                                                       Figures ✔
Part-mark for unclear / incomplete answer    Comparison figures not necessary but may enhance explanation 

• The actual amount spent is R2 900 less than the budgeted/projected. / The  amount spent (R1 800) is lower than the projected amount (R4 700). This was  a poor decision and the full amount should have been used (considering that  that mark-up on cost was also adjusted from the projected 65% to 80%).
• This had a negative effect on fee income (R22 500 less than projected) and sales of spares (R31 500 less than projected) 

Explain whether Consumable stores have been well controlled, or not. 
Comparison of fee income and consumable stores ✔✔                  Figures ✔✔
Part-mark for unclear / incomplete answer              Comparison figures not necessary but may enhance explanation 

• Fee income was less than budgeted by R22 500 (15%) whilst servicing  expenses was over the budget by R6 450 (21,5%). An actual decrease in fee  income should see a proportional decrease in consumable stores used. This  indicates a lack of control.

Explain how Vusi's decision about the mark-up percentage on spare  parts has affected the business. 
Comparison of mark-up% and sales ✔✔                              Figures ✔✔ 
Part-mark for unclear / incomplete answer             Comparison figures not necessary but may enhance explanation 

• The increase in the mark-up percentage (65% to 80%) negatively  impacted in spare-part sales. 
• Sales was less than projected by R31 500 (R128 700 to R97 200). 
• Profit on sales was less than projected by R7 500 (R50 700 to R43 200).