ACCOUNTING: PAPER I. 4. It is in your own interest to write legibly and present your work neatly.

Transcription

1 NATIONAL SENIOR CERTIFICATE EXAMINATION NOVEMBER 2013 ACCOUNTING: PAPER I EXAMINATION NUMBER Time: 2 hours 200 marks PLEASE READ THE FOLLOWING INSTRUCTIONS CAREFULLY 1. This question paper consists of 12 pages and an Information Booklet of 8 (i to viii) pages with a Ratio Sheet on page i. Please check that your question paper is complete. 2. Read the questions carefully. 3. Answer the questions in the space provided. 4. It is in your own interest to write legibly and present your work neatly. 5. You may not use red or green ink. You may use a pencil, but please use a soft, dark pencil. 6. All calculations should be rounded off to two decimal places. 7. It is essential that all working details be shown in order to earn part marks. 8. The allocation of marks and appropriate time to be taken for each question are as follows: Possible marks Actual marks Marker signature Moderator signature Question 1: Asset Management (27 minutes) 45 Question 2: Manufacturing (31 minutes) 50 Question 3: Cash Flow Statements (26 minutes) 43 Question 4: Company Financials (36 minutes) 62 TOTAL 200 Checker PLEASE TURN OVER

2 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I Page 2 of 12 QUESTION 1 ASSET MANAGEMENT (45 marks; 27 minutes) Refer to the Information Booklet for information relating to Netlogic. Refer to Information A to answer Questions Calculate the weighted average value per unit for stock of computers for the year ended 31 December Prepare the Trading Account as it would appear in the final accounts of the General Ledger. General Ledger of Netlogic (3) Final Accounts Section Trading Account (9) 1.3 Other than the Christmas period, provide a reason why the selling price of the laptops was decreased in December. (2) 1.4 Prepare the VAT Control account, clearly showing the amount due to/by SARS for the year ending 31 December General Ledger of Netlogic VAT Control Account (10)

3 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I Page 3 of The General Manager of Netlogic has instructed the purchasing manager to double the purchase of laptops in January 2013 as the supplier is a friend of his and has offered a 10% discount for the bulk purchase of 2012 model laptops. The purchasing manager is unhappy to do this. Why do you think the purchasing manager is reluctant to carry out this instruction? Justify your answer by providing a reason. 1.6 The accountant is concerned about the number of laptops on hand at the end of the year, and has decided to donate 30 laptops to underprivileged schools in the area. The manager has said that this decision was 'a good business decision'. Give 2 reasons why this might be a good business decision. Reason 1 (2) Reason 2 Refer to Information B to answer Questions Determine the method of depreciation on the Volkswagen Caddy used by Netlogic, and explain why this method could be seen/justified as the best method of depreciation for the business. Method Justification (4) 1.8 Calculate the rate of depreciation on the Volkswagen Caddy. (3) (2) PLEASE TURN OVER

4 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I Page 4 of On what date was the Volkswagen Caddy traded in? 1.10 Calculate the trade-in price that Netlogic received on the Volkswagen Caddy. (4) 1.11 Do you think the business made the right decision to trade in the old Volkswagen Caddy and purchase a new delivery vehicle? Substantiate your answer. (3) (3) Working for Question 2 45

5 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I Page 5 of 12 QUESTION 2 MANUFACTURING (50 marks, 31 minutes) Refer to the Information Booklet for information relating to Ingivela iafrika. 2.1 Calculate the value of the closing stock of raw materials. 2.2 Prepare the following notes to the Production Cost Statement for the year ended 30 September Raw materials cost (3) Direct labour cost (4) (6) PLEASE TURN OVER

6 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I Page 6 of Complete the production cost statement for the year ended 30 September Prime costs Direct materials cost 1 Direct labour cost 2 Factory overheads cost 3 Total manufacturing costs Work in progress at the beginning of the year 0 Work in progress at the end of the year 0 Cost of production of finished goods 6 (8) 2.4 Calculate the unit cost of production per tablecloth. (3) 2.5 The business uses 1,25 metres of material to make one tablecloth. The accountant has a suspicion that material is going missing from the factory. Prove that he is correct by calculating the amount of material missing. (4)

7 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I Page 7 of Upon further investigation, it was discovered that the factory supervisor, Mrs Cope, who has been employed by the business for the past 20 years, was responsible for the material that had gone missing. When questioned she admitted that she had taken the material in order to sew tablecloths for the local children's orphanage to sell at their annual craft market. What disciplinary action do you think should be meted out to Mrs Cope? Motivate this action with a reason. 2.7 Complete the Income Statement of Ingivela iafika for the year ended 30 September Show any necessary calculations in brackets. (4) Sales Cost of Sales ( Gross Profit for the year Other operating costs R Net profit for the year (10) 2.8 Calculate the total variable cost per unit. (4) PLEASE TURN OVER

8 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I Page 8 of Although production has increased, the owner Carmen Pillay, is concerned about the control of certain costs. Identify and analyse one cost that you think may be a problem, and provide a possible cause of this problem. Identification: Analysis: Possible cause: (4) 50

9 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I Page 9 of 12 QUESTION 3 CASH FLOW STATEMENTS (43 marks, 26 minutes) Refer to the Information Booklet for information relating to Investicon LTD. NOTE: Some figures have been filled in for you, these are correct. Any workings must be shown in the brackets provided. 3.1 Complete the note showing the reconciliation of profit before taxation and cash generated from operations. Adjustment in respect of: ( ) Depreciation ( ) Interest expense Operating profit before changes in working capital Changes in working capital Increase/Decrease in inventory ( ) Cash generated from operations 3.2 Complete the cash flow statement for the year ended 28 February (21) Cash flows from operating activities Cash generated from operations Taxations paid ( ) Dividends paid ( ) Cash flows from investing activities ( ) Purchase of tangible assets Proceeds of the disposal of tangible assets (60 000) Cash flows from financing activities Proceeds from long term loans ( ) Repayment of long term loans Net change in cash and cash equivalents Cash and cash equivalents at the beginning of the year (56 800) Cash and cash equivalents at the end of the year (16) PLEASE TURN OVER

10 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I Page 10 of Calculate the interim dividend paid to shareholders by Investicon LTD on 1 June All shares qualified for this dividend. 3.4 The purchase of the new building was financed mainly by the issue of new shares rather than extending the loan. With reference to return and gearing, do you think that this was a good business decision? (3) (3) 43

11 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I Page 11 of 12 QUESTION 4 COMPANY FINANCIALS (62 marks, 36 minutes) Refer to the Information Booklet for information relating to Westek Limited. 4.1 Complete the retained income note as it would appear in the financial statements of Westek Limited as at 30 June Retained income Westek Limited Notes to the financial statement as at 30 June 2013 Balance as at 1 July 2012 Net income after tax Dividends Paid Declared Balance as at 30 June 2013 (8) PLEASE TURN OVER

12 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I Page 12 of Complete the Balance Sheet of Westek Limited as at 30 June It is essential to show all calculations in brackets. ASSETS Non-current assets Tangible/Fixed assets ( Financial assets Non-current assets Inventories ( Trade and other receivables ( Westek Limited Balance Sheet as at 30 June 2013 Cash and cash equivalents 0 TOTAL ASSETS EQUITY AND LIABILITIES Shareholders' equity Non-current liabilities Current liabilities Trade and other payables ( TOTAL EQUITY AND LIABILITIES (54) 62 Total: 200 marks

13 NATIONAL SENIOR CERTIFICATE EXAMINATION NOVEMBER 2013 ACCOUNTING: PAPER I Time: 2 hours 200 marks INFORMATION BOOKLET Gross Profit 100 Sales 1 Operating expenses 100 Sales 1 Gross Profit 100 Cost of sales 1 Operating profit 100 Sales 1 Net Profit 100 Sales 1 Operating profit 100 Cost of sales 1 Net profit after tax 100 Average shareholders' equity 1 Net profit before tax + interest expense 100 Average capital employed 1 Current assets : Current liabilities (Current assets inventories) : Current liabilities Average debtors 365 or 12 Credit sales 1 Average creditors 365 or 12 Credit purchases 1 Cost of sales Average inventories Average inventories 365 or 12 Cost of sales 1 Closing inventories 365 or 12 Cost of sales 1 Current assets Current liabilities Non-current liabilities : Shareholders' equity Profit after tax No. shares in issue Fixed cost (selling price per unit variable cost per unit) Total assets : Total liabilities Ordinary share dividends No. shares in issue Total ordinary shareholders' equity No. shares in issue PLEASE TURN OVER

14 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I INFORMATION BOOKLET Page ii of viii QUESTION 1 ASSET MANAGEMENT Information relating to Netlogic Netlogic specialises in the retail of laptop computers. The business's year-end is the 31 December, they use the weighted average method to value their inventory, and the periodic stock system to record their inventory. The business is a registered VAT vendor, and they pay VAT every two months. They paid the amount owing for September and October on 25 November Their next payment is due on the 25 January A. INVENTORY 1. The following stock balances were recorded in the books of the business: No. of units Price per unit Total 1 January R1 900 R December 2012??? 2. Inventory purchases during the year: No. of units Price per unit Total 31 May R2 000 R August R2 225 R November R1 900 R December R2 300 R Totals 150 R All recorded prices for purchases of inventory (point 2 above) are exclusive of 14% VAT. 4. Other December purchases for which they can claim back VAT amounts to R including VAT. 5. The following sales (inclusive of 14% VAT) were recorded for the year. January 2012 October 2012 R November 2012 December 2012 R Total sales including VAT R units were sold during the year.

15 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I INFORMATION BOOKLET Page iii of viii B. TANGIBLE ASSETS 7. Netlogic has their own delivery vehicle which is used to collect stock from the suppliers as well as to deliver stock to customers. The following asset register relates to this delivery vehicle. NETLOGIC ASSET REGISTER 1 DELIVERY VEHICLE Description Volkswagen Caddy mini van Registration No. NETECH ZN Date purchased 1 September 2008 Cost price R Method of depreciation? Rate of depreciation? Date Depreciation Accumulated Carrying Value Depreciation 31 December 2008 R R R December 2009 R R R December 2010 R R R December 2011 R R R50 000? R R R Date traded-in? Selling Price? 8. Additional information relating to the delivery vehicle. On average the Volkswagen Caddy travels km per year. The running costs, excluding fuel costs, steadily increased from R for the year ended 31 December 2009 to R for the year ended 31 December The Volkswagen Caddy was traded-in at a profit of R A new model Volkswagen Caddy was purchased. Ignore any VAT for the asset disposal. PLEASE TURN OVER

16 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I INFORMATION BOOKLET Page iv of viii QUESTION 2 MANUFACTURING AND INVENTORY Information relating to Ingivela iafrika Ingivela iafrika specialises in the production of handcrafted ethnic tablecloths. They supply their product to various curio shops around South Africa. The business's financial year ends on the 30 September. 1. The business uses the FIFO method of stock valuation. 2. During the year ended 30 September 2013 they produced tablecloths. 3. The following information relates to their raw materials during the year: 3.1 Raw material balances: No. of metres Cost per metre Total Opening stock of raw material metres R81 R Closing stock of raw material metres?? 3.2 Purchases of raw material: No. of metres Cost per metre Total October 2012 purchases metres R80 R November 2012 purchases metres R86,50 R March 2013 purchases metres R84 R March 2013 purchases returned (200 metres) R84 (R16 800) Totals metres R Issued metres of raw materials into the production process. 4. Information relating to labour costs for the year: 4.1 There are two factory employees. They each work a total of hours per year at a rate of R125/hour. They also worked a combined total of 280 hours overtime during the year for which they are remunerated at twice their standard rate. All factory employees are classified as wage earners. 4.2 The general assistant was paid wages of R for the year. 75% of her time is spent cleaning the factory and the balance is spent assisting with the hand sewing of tablecloths. 4.3 The business contributed 1% to the UIF for all employees.

17 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I INFORMATION BOOKLET Page v of viii 5. The following balances were found in the accounting records: Work-in-progress 0 0 Finished goods? R Number of completed tablecloths on hand at year end The accountant provided the following analysis for the year: Total fixed costs R126 per unit Factory Overheads cost per unit? R103 per unit Administration cost per unit R11 per unit R10, 50 per unit Variable costs Direct material cost per unit? R97 per unit Direct labour cost per unit? R71 per unit Total selling and distribution cost R Inflation averaged at 5,7% for the current financial year. PLEASE TURN OVER

18 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I INFORMATION BOOKLET Page vi of viii QUESTION 3 CASH FLOW STATEMENTS Information relating to Investicon LTD 1. Extract from the Income Statement for the year ended 28 February Cost of sales R Interest on mortgage loan R Depreciation? Net income after taxation R Taxation for the year R Extract from the Balance Sheet as at 28 February Ordinary share capital? R Ordinary share premium 0 0 Retained income? R Mortgage bond R ? Tangible assets at carrying value R R Inventory R ? Debtors control?? Creditors control R R Shareholders for dividends R R SARS Income tax R3 500 cr R2 500 dr 3. Additional information for Questions 3.1 and 3.2. A building was purchased during the year. Equipment was sold at its carrying value during the year. The change in working capital for the current year amounted to an outflow of R The rate of stock turnover on 28 February 2013 was 6,5 times. The directors recommended a final dividend of 25 cents per share on 28 February 2013; all shares in issue qualified for this dividend. There were ordinary shares in issue on 28 February New shares were issued on 1 March 2012 at a price of R10 per share. Interest on the loan is not capitalised. During the year a mortgage bond repayment of R was made. Investicon LTD also increased their mortgage bond during the year. The debt to equity ratio on 28 February 2012 was 0,3 : Additional information for Question 3.4. The return on total capital employed on 28 February 2013 was 12,26%. The interest rate on the mortgage bond is currently 10,5% p.a.

19 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I INFORMATION BOOKLET Page vii of viii QUESTION 4 COMPANY FINANCIAL STATEMENTS Information relating to Westek Limited Westek Limited is a listed public company with an issued share capital of ordinary shares. The company applies a mark-up of 80% on cost at all times. A. Extract of the pre-adjustment trial balance on 30 June Debit Credit Ordinary share capital Retained income (1 July 2012) Land and buildings Vehicles Accumulated depreciation on vehicles Shares in Sibiya Limited Loan: Stanric financiers (12% p.a.) Debtors' control Provision for bad debts Trading stock SARS income tax Creditors control Bank B. Additional information, adjustments and corrections. 1. After processing all the adjustments, including the ones listed below the correct net income before tax is R Do not adjust it. 2. Interest on loan is calculated at 12% p.a. The loan was increased by R on the 1 June 2013, the increase was recorded. Interest for 2 months is still outstanding and a repayment of R will be made in the next financial year. Interest on the loan is not capitalised. 3. On investigation it was found that they had over depreciated vehicles by R According to the bank statement, cheque no. 786 for R2 000 issued to a creditor has not been presented for payment at the bank as it was dated 10 July PLEASE TURN OVER

20 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I INFORMATION BOOKLET Page viii of viii 5. Westek Limited rents out a furnished office. The rental is set at R2 400 per month. The rent income for the period 1 July 2012 to 31 March 2013 has been used for the upgrade of an existing storeroom. The balance of the rental income was deposited into the bank on 30 June No entries have been recorded yet for the upgrade or the amount received. 6. A debtor was declared insolvent, and his estate deposited R840 into Westek's bank account. This deposit represented 30 cents in the rand and has been recorded. The balance of his account needs to be written off. 7. A debtor with a credit balance of R1 600 must be transferred to the creditors' ledger. 8. A debtor returned stock with a selling price of R1 530, no entry was made to record this return. 9. Provision for bad debts must be adjusted to 5% of the outstanding debtors. 10. The stockroom manager was called to an urgent meeting with the directors, and in his haste he left the stockroom unlocked. Upon his return, he discovered that stock costing of R had been stolen. A claim was lodged with the insurance, and they will pay out 75% in July The following information relates to consumable stores: Consumable stores available during the year, R3 450 Consumable stores used during the year, R A trading stock deficit of R4 550 has not yet been recorded. 13. On the 30 June 2013, a vacant plot of land was sold at a profit of R On the same date the proceeds of the sale, R60 000, were transferred into the bank account. The profit was included in the net income, but no balance sheet entries have been made. 14. Included in the advertising cost for the year is a 12 month campaign that was launched on the 1 December 2012 at a cost of R A director is still owed an amount of R in terms of his directors' fees for the year. 16. The following information relates to dividends at the end of the year: Interim dividend paid R Final dividend declared 14 cents per share 17. Income tax is calculated at 38% of the net income.

21 NATIONAL SENIOR CERTIFICATE EXAMINATION NOVEMBER 2013 ACCOUNTING: PAPER II EXAMINATION NUMBER Time: 2 hours 100 marks PLEASE READ THE FOLLOWING INSTRUCTIONS CAREFULLY 1. This question paper consists of 12 pages and an Information Booklet of 7 pages (i to vii) with a Ratio Sheet on page i. Please check that your question paper is complete. 2. Read the questions carefully. 3. Answer the questions in the space provided. 4. It is in your own interest to write legibly and present your work neatly. 5. You may not use red or green ink. You may use a pencil, but please use a soft, dark pencil. 6. All calculations should be rounded off to two decimal places. 7. The allocation of marks and appropriate time to be taken for each question are as follows: Question 1: Analysis of published financial statements (60 minutes) Possible marks 50 Actual marks Marker signature Moderator signature Question 2: Budgeting (30 minutes) 25 Question 3: Reconciliations (30 minutes) TOTAL Checker PLEASE TURN OVER

22 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 2 of 12 QUESTION 1 ANALYSIS OF PUBLISHED FINANCIAL STATEMENTS (50 marks, 60 minutes) Refer to the Information Booklet for information relating to the accounting records of Illovo Sugar Limited. Note that amounts are given in millions of rands (Rm). Required: 1.1 Earnings per share for 2011 was 112c, and dividends per share for 2012 were 66c Show how the earnings per share for 2012 of 132c was calculated. Base your calculation on shares. (3) Comment on the earnings per share and dividends per share for 2012, mentioning TWO points. (2) Explain whether shareholders would be happy with the dividend policy. (2)

23 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 3 of Sugar production in 2012 was lower than in 2011 as a result of drought conditions. However, revenues increased How is this possible, and what might have caused this? (2) What do you think the trend of Illovo Sugar Limited's share price will be in the future? Explain why. (2) 1.3 Consider the assets listed in the Statement of Financial Position (Balance Sheet) Why is growing sugar cane included as part of the assets of Illovo Sugar Limited? (2) Suggest why cane roots are included as non-current assets but growing cane is included as current assets. (2) PLEASE TURN OVER

24 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 4 of The current ratio for 2011 was 1,18 : Calculate the current ratio for How is it possible that both Cash and Cash Equivalents and the overdraft have increased? (2) Suggest why the current ratio has improved by more than 50% from 2011 to 2012, quoting figures for the specific item that is the biggest contributor to this improvement. (2) Calculate the return on average shareholders' equity for (3) (5) Explain whether shareholders would be happy with this return. (1)

25 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 5 of The net asset value per share in 2011 was R12, Explain why shareholders and investors calculate the net asset value of a share. (2) Calculate the net asset value per share on 31 March Base your calculation on shares There were no new shares issued during the year. Suggest why the net asset value per share has increased in spite of this. (3) (1) 1.7 The debt : equity ratio for 2011 was 0,17 : Calculate the debt : equity ratio on 31 March Has the gearing increased or decreased since 2011? (1) (3) PLEASE TURN OVER

26 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 6 of What two other items of information would the directors need to consider when deciding whether or not this change in gearing is a good idea? (2) When is it generally a good idea to use borrowed money rather than own money when wanting to expand business operations? (2) 1.8 The chairperson's report includes the following: Corporate governance The directors and employees of Illovo strive to ensure that the company is managed in an efficient, accountable, responsible and moral manner and to this end the board subscribes to the principles contained in King III As part of their commitment to good corporate governance, 96% of senior management completed the anti-bribery and corruption training. In future, the directors of Illovo might want to invite tenders from potential suppliers for a large supply of vehicles or equipment. What controls should the directors put in place to ensure good governance in this regard? Suggest TWO controls that are likely to be effective. (4)

27 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 7 of Give TWO examples (other than the anti-bribery training) of how Illovo subscribes to the principles of King III or good corporate governance, based on the information provided in the Information Booklet. (4) 50 PLEASE TURN OVER

28 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 8 of 12 QUESTION 2 BUDGETING (25 marks, 30 minutes) Refer to the Information Booklet for information relating to the accounting records of Bunce Traders. Required: 2.1 Calculate the projected credit sales for January. 2.2 Complete the Projected Statement of Income (Projected Income Statement) for the three months ending on 31 January (Show workings in brackets.) Bunce Traders Projected statement of income for the three months ending on 31 January 2014 ( ) Cost of sales ( ) Gross profit Operating expenses Administrative expenses (2) Operating profit Net profit (13)

29 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 9 of Calculate the projected mark-up % that is expected to be achieved Why is this not the same as the intended mark-up of 100% on cost? (1) 2.4 Dean Bunce requires your advice Advise him on whether or not the expansion is financially beneficial as well as whether he should buy or rent if the business does expand. Show calculations in support of your suggestions. (2) (5) Apart from the information you have used in your calculations, provide two other factors that he will need to take into account if he decides to expand. (2) 25 PLEASE TURN OVER

30 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 10 of 12 QUESTION 3 RECONCILIATIONS (25 marks, 30 minutes) Refer to the Information Booklet for information relating to the accounting records of Gorham Stores. Required: 3.1 Prepare the statement that can be sent to P. Jadhu on 31 October 2013 showing her transactions for the last 3 months. Note that her account in the Debtors' Ledger is incomplete, so you will need to take the additional information into account. GORHAM STORES < STATEMENT P. Jadhu 31 October 2013 Date Details Debit Credit Balance 2013 Aug 12 Invoice , ,00 13 Credit note , ,00 18 Receipt 698 (cheque received) 2 900,00 nil Payment due on 30 November Interest charged at 12% p.a. on amounts overdue. 3.2 Complete the Debtors Ledger account of J. Robertson. J. Robertson DL 26 Date Details Debit Credit Balance 2013 Aug 10 Invoice , ,00 Sept 12 Credit note 51 (inv 807) 1 300, ,00 20 Invoice , ,00 30 Interest on overdue account 23, ,00 Oct 2 Credit note 57 (inv 810) 2 400, ,00 26 Invoice , ,00 (3) (3)

31 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 11 of Complete the Debtors' Age Analysis of Gorham Stores on 31 October 2013 by filling in the information indicated by the *. DEBTOR Credit Limit July August September October +60 days 60 days 30 days current Total P Jadhu R8 000 *? J Robertson R3 000 * * *? L Bierman R1 500 R1 500 R R4 504 R3 800 * R3 304 R704 Other Debtors? * * R5 858,77? R8 352 R7 656 * R R Percentage of debt 24% * 14% 40% 100% (9) 3.4 Write a detailed report evaluating whether you think Gorham Stores are effectively managing their debtors, identifying problems, if any, and giving suggestions on improvements that could be made. Refer to individual debtors and/or the age analysis and quote figures to support your points. (8) PLEASE TURN OVER

32 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 12 of In order to prevent cash flow problems, the owner of Gorham Stores is considering doing away with all sales on credit and selling for cash only. Explain what the owner must consider before taking this decision. (2) 25 Total: 100 marks

33 NATIONAL SENIOR CERTIFICATE EXAMINATION NOVEMBER 2013 ACCOUNTING: PAPER II Time: 2 hours 100 marks INFORMATION BOOKLET Gross Profit 100 Sales 1 Operating expenses 100 Sales 1 Gross Profit 100 Cost of sales 1 Operating profit 100 Sales 1 Net Profit 100 Sales 1 Operating profit 100 Cost of sales 1 Net profit after tax 100 Average shareholders' equity 1 Net profit before tax + interest expense 100 Average capital employed 1 Current assets : Current liabilities (Current assets inventories) : Current liabilities Average debtors 365 or 12 Credit sales 1 Average creditors 365 or 12 Credit purchases 1 Cost of sales Average inventories Average inventories 365 or 12 Cost of sales 1 Closing inventories 365 or 12 Cost of sales 1 Current assets Current liabilities Non-current liabilities : Shareholders' equity Profit after tax No. shares in issue Fixed cost (selling price per unit variable cost per unit) Total assets : Total liabilities Ordinary share dividends No. shares in issue Total ordinary shareholders' equity No. shares in issue PLEASE TURN OVER

34 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II INFORMATION BOOKLET Page ii of vii QUESTION 1 ANALYSIS OF PUBLISHED FINANCIAL STATEMENTS Information relating to Illovo Sugar Limited China to become largest sugar importer BEIJING China is likely to become the world's largest sugar importer by 2020 as consumption grows along with incomes, said Commonwealth Bank of Australia (CBA) yesterday. CBA said increased urbanisation and a Westernisation of diets would see sugar consumption rising rapidly in countries with low rates of sugar consumption per person, such as China. [Reuters, The Witness, 19 January 2012] The following information was extracted and adapted from the annual report of Illovo Sugar Limited for the year ended 31 March Group profile Illovo is Africa's biggest sugar producer and has extensive agricultural and manufacturing operations in six African countries. The group produces raw and refined sugar for local, regional, EU, USA and world markets from sugar cane supplied by its own agricultural operations and from independent outgrowers who supply cane to Illovo's factories. Income statement for the year ended 31 March 2012 March 2012 Rm Revenue (Sales) Cost of sales (5 667) Gross profit Operating profit Profit before taxation 951 Taxation (345) Profit for the year 606 Earnings per share (cents) 132

35 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II INFORMATION BOOKLET Page iii of vii Statement of financial position (balance sheet) as at 31 March 2012 March 2012 Rm March 2011 Rm ASSETS Non-current assets Property, plant and equipment (tangible assets) Cane roots Other non-current assets Current assets Inventories Growing cane Trade and other receivables Other current assets Cash and cash equivalents Total assets EQUITY AND LIABILITIES Shareholders' equity Non-current liabilities Current liabilities Short-term borrowings (current portion of loan) Trade and other payables Bank overdraft SARS (Income tax) Other current liabilities Total liabilities Total equity and liabilities Key production and market statistics 96% of senior management completed our Anti-Bribery and Corruption training assessment module. Recipes for sustainability Removed of all its sucrose-containing moisture, residue cane fibre called bagasse, is routed to the factory boilers where it is used to generate electricity for our own milling, agriculture and other operations [producing 89% of our energy requirements], and in Swaziland, is exported commercially into the national power grid, ultimately to comprise around 15% of that country's total electricity supply by The following press release was found on Illovo's website (< 30 November 2012 ILLOVO QUALIFIES FOR 2012 SRI INDEX The JSE has announced that Illovo Sugar Limited has qualified for its 2012 Socially Responsible Investment (SRI) Index. This is the sixth consecutive year that the company has qualified for inclusion in the Index. Launched in 2004, the Index serves to focus attention on the triple bottom line performance (environment, social and governance) of companies listed on the FTSE/JSE All Share Index, for the purposes of promoting responsible investment into emerging markets, such as South Africa. PLEASE TURN OVER

36 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II INFORMATION BOOKLET Page iv of vii QUESTION 2 BUDGETING Information relating to Bunce Traders Cash budget for the three months ending on 31 January 2014 November December January Total Cash receipts Cash sales Collections from debtors Cash payments (77 500) (87 500) (82 500) ( ) Payments to creditors Administrative expenses Marketing expenses Rent expense Interest expense Cash surplus (deficit) Cash balance at beginning Cash balance at end Debtors' collection schedule Credit sales November December January September sales October sales November sales December sales January sales? Additional information: 1. Sales 1.1 Goods are marked up by 100% on cost. 1.2 Some of the goods are sold directly to the public for cash, the remainder being sold to retailers on credit. All these customers are very sensitive to price changes. 1.3 A trade discount of 20% is given to retailers.

37 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II INFORMATION BOOKLET Page v of vii % of debtors are expected to pay within the month of sale, 70% paying the next month to comply with the credit terms of 30 days from the statement date, and the balance is expected to be written off as bad in the following month. 1.5 No settlement discounts are given. 2. The interest rate on loan is 9% p.a. The interest is payable quarterly. 3. Assets are depreciated by R p.a. 4. R2 500 will be paid in January for an advertisement to be placed in February. 5. Dean Bunce, the owner of Bunce Traders, is considering expansion. He is considering another property in addition to the existing property they are currently renting. Some of the factors he is considering are: (a) (b) (c) Neighbouring premises can be bought for R or rented at R per month. The business does not have investments to finance the purchase. They could take out a 25-year mortgage bond at an interest rate of 9% p.a. Annual sales at present are R , but can be increased by 50% if the new premises are acquired. Dean expects to maintain the same mark-up % he had budgeted for in the past. PLEASE TURN OVER

38 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II INFORMATION BOOKLET Page vi of vii QUESTION 3 RECONCILIATIONS Information relating to Gorham Stores The Debtors Clerk of Gorham Stores fell ill at the end of October 2013 before completing the entries of debtors P. Jadhu and J. Robertson. Information: 1. Debtors are sent a statement at the end of each month and are expected to pay the closing monthly amount reflected in the statement within 30 days of the date of statement. 2. On the last day of each month, debtors are charged interest of 12% p.a. on overdue accounts. 3. The following two Debtors' Ledger accounts are incomplete as at 31 October P. Jadhu DL25 Date Details Debit Credit Balance 2013 Aug 12 Invoice , ,00 13 Credit note , ,00 18 Receipt 698 (cheque received) 2 900,00 nil J. Robertson DL26 Date Details Debit Credit Balance 2013 Aug 10 Invoice , ,00 Sep 12 Credit note , ,00 20 Invoice , ,00 30 Interest on overdue account 23, ,00 Oct 25 Credit note , ,00 26 Invoice , ,00 4. P. Jadhu bought goods for R3 750 on 26 October 2013 as per invoice 817.

39 NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II INFORMATION BOOKLET Page vii of vii 5. Bank statement for Gorham Stores downloaded on 31 October 2013: Tran. Date Transaction Description/Narrative CCYY-MM-DD Payments Deposits Balance Statement Opening Balance R IB payment to Ranjith Dealers R R IB payment to Hochstadter Traders R R Cash deposit R2 900 R Unpaid cheque P. Jadhu, reference 18/8 R2 900 R Cash deposit R R Service fees R170 R Deposit L. Bierman, reference DL12 R1 500 R IB payment to Hochstadter Traders R8 700 R IB Payment to Telkom R800 R Deposit L. Bierman, reference DL12 R3 800 R Deposit P. Jadhu, reference DL 25 R2 900 R Cash deposit R R Service fees R170 R IB payment to Ranjith Dealers R R Deposit J. Robertson, reference DL26 R2 300 R Cash deposit R R Service fees R170 R Statement Closing Balance