Accounting Nov 2020 Memo
Accounting Nov 2020 Memo
PAST PAPER
NSC 2019
MEO 2019
SC CANDIDATES
GRADE 12
ACCOUNTING
NOVEMBER 2020
MARKING GUIDELINES
MARKS: 300
MARKING PRINCIPLES:
1. Unless otherwise stated in the marking guideline, 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 answer. If answer 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 memo 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
from candidates.
7. This memorandum is not for public distribution; as certain items might imply incorrect treatment. The
adjustments made are due to nuances in certain questions.
8. Where penalties are applied, the marks for that section of the question cannot be a final negative.
9. Where method marks are awarded for operation, the marker must inspect the reasonableness of the
answer and at least one part must be correct before awarding the mark.
10. Operation means 'check operation'. 'One part correct' means operation and one part correct. Note:
check operation must be +, -, x, ÷, or per memo.
11. In calculations, do not award marks for workings if numerator & denominator are swapped – this also
applies to ratios.
12. 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 .
13. Be aware of candidates who provide valid alternatives beyond the marking guideline.
14. Codes: f = foreign item; p = placement/presentation.
QUESTION 1
1.3.1 Explain why the change in units produced affected the fixed costs per
unit.
Any ONE valid reason part marks for incomplete / unclear answer
Fixed cost are not influenced by production levels; decrease in units
produced and sold will increase the fixed costs per unit.
Fixed costs remained constant while the number of units decreased.
Economies of scale is only achieved if there is an increase in production 2
1.3.2 Give TWO possible reasons for the increase in direct material cost per
unit. Any TWO valid reasons part marks for incomplete / unclear answers
Increase in price of raw material / including inflation
Reason 1 No bulk discounts due to decreased production
Importing raw material (exchange rate / import duties)
Increase in transport and/or storage cost of raw material
Scarcity – price hikes due to higher demand
Reason 2 Wastage of raw material / poor management and control in
production process / poorly trained workers
Possible theft of raw material 4
1.3.3 Explain why the business should not be satisfied with the level of
production and the break-even point. Compare and quote figures for
both years.
Comparison figures for each year
Any TWO of: Compare BEP of 2019 to production of 2019;
Compare production of 2019 to production of 2018
Compare BEP of 2019 to BEP of 2018
Produced 54 000 units and the break-even point is 50 976; 3 024 above BEP.
Production decreased from 65 000 to 54 000 units (by 11 000 units / 16,9%)
BEP increased from 50 000 to 50 976 units (976 units / 2%)
Profit on 3 024 units in 2019 in comparison to profit on 15 000 units in 2018 /
Drop in profits by 11 976 units 6
TOTAL MARKS
45
QUESTION 2
2.1 VAT
No part marks for workings
Calculate the VAT amounts and indicate the effect of EACH.
DETAILS VAT AMOUNT EFFECT
Accept + or –
2.2.4 As internal auditor you are not happy with the control of cash in this business.
Explain TWO problems to confirm your suspicion. Quote figures. Give advice
on how EACH problem can be avoided in future.
Explanation with evidence Advice
Explanation Evidence
Problem 1 Theft / Fraud / Internal control Supervision (checking) of cash slips
measures are lacking. Cash slips against deposit slip / bank notifications
have not been recorded, R10 500 (sms) for all transactions / Recon / EFT
/ Use security company for deposits
Rolling of cash / security risk. Cash collected must be deposited
Deposit of R50 400 occurs 14 days immediately/ Sales person must not
later / Deposit of R27 750 deposit cash/Divide duties / Supervisor
outstanding from 24 April. must check before depositing.
2.3.3 State TWO strategies that Tonga Hardware can use to ensure that only
reliable applicants are granted credit.
Any TWO valid strategies TWO different options form the list:
Perform credit checks (references / listing / credit bureau)
Check employment history / salary advice / bank statement
Contact details (residential or postal address / contact numbers or emails)
2
TOTAL MARKS
45
QUESTION 3
3.2.2 Calculate how long (in days) it will take to sell the closing stock of
the jeans.
Workings Answer
see 3.2.1
216 600 x 365
1 641 600
see 3.2.1 (COS)
48,2 days
OR: IF UNITS ARE USED one part correct
Higher gross profit because of higher closing stock value / lower cost of sales
Purchase price of jeans is always increasing due to demand / inflation
Stock valued at the most recent prices; less chance of being obsolete / outdated
Gross profit will be based on current market related values
Easier to use this method. 2
3.2.5 The internal auditor is concerned about the stock levels and selling price of
jackets. Explain reasons for his concern, with figures, and give different advice
in EACH case. Be alert to advice that may apply to both, such as 8reduce mark-up%=
Concern Explanation (with figures) Advice
Stock holding period increased from (103 Clearance sale to get rid of
days) to 216 days (by 113 days) / high excess stock / Order in line
Stock level closing stock balance 2 980 (1 220 more with demand
than opening stock / 36% of available
stock; possible obsolescence or theft
Mark-up % increased (from 70%) to Reduce mark-up% / selling
107% (to R1 450 or by R380) price / Offer trade discounts /
Selling price Advertise to increase
Customers find the price of
R1 450 as being too high customers 6
.
TOTAL MARKS
40
QUESTION 4
Interim 1 200 000 x 124 cents or 124% or x 1,24 or 124/100 1 488 000 *
Final 889 200
ASSETS
Non-current assets 11 458 500
Fixed assets at carrying value 11 458 500
Current assets TA – 11 458 500 2 715 750
TOTAL ASSETS 11
14 174 250
See Total Equity + Liabilities
TOTAL MARKS
65
QUESTION 5
* one part correct and must be in brackets / if no brackets, full marks for workings
If inappropriate use of brackets, or not, full marks cannot be earned on that line.
5.3.1 Explain which company has the better liquidity. Quote TWO financial
indicators to support your opinion.
Part marks for incomplete / unclear / partial explanation
Liquidity ratios of Lulu Ltd are more efficient than that of Coco Ltd.
Current ratio 1,7 : 1
Acid test ratio 0,9 : 1
OR
Liquidity ratios of Coco Ltd one mark are higher / they have more CA one mark
Coco has more liquid assets than stock (0,6 : 1 compared to 0,8 : 1 in Lulu)
Current ratio 4,2 : 1 one mark
Acid test ratio 3,6 : 1 one mark 4
5.3.2 Comment on the earnings per share and the % return on equity of
Lulu Ltd. Give TWO reasons why the shareholders will be satisfied with
these indicators. Quote figures.
EPS increased (from 233 cents) to 273 cents (by 40 cents / 17,2%)
ROSHE increased (from 14%) to 25% (by 11% / 78,6%)
5.3.3 Comment on the market value of the shares in Coco Ltd. Explain TWO
points. Quote figures.
TWO valid points. Figures
5.3.4 Compare the dividend pay-out rates of both companies and explain why
the directors of EACH company decided on these pay-out rates. Quote
figures or calculations.
5.3.5 Noah says that the dividend of 110 cents per share he earned from
Lulu Ltd is better than the dividend of 200 cents per share from
Coco Ltd. Give ONE point to prove that he is incorrect. Quote figures or
calculations.
200 cents – 110 cents = 90 cents more per share was earned in Coco Ltd.
OR: He earned 90 cents more per share in Coco Ltd. four marks
Also be alert to learners who commented in the following way to prove Noah is correct:
In Lulu Ltd, he earned 110c on a share which cost him 700c (16%) two marks
In Coco Ltd, he earned 200 cents on a share which cost him 2 800c (7%) two marks
OR:
In total he earned dividends of R440 000 from Lulu Ltd, and R200 000 from Coco Ltd four marks
4
5.3.6 Comment on the risk and gearing of EACH company. Quote TWO
financial indicators.
THREE marks per company: Financial Indicator with figure and Comment
Accept the correct figures (if financial indicators are not mentioned)
Lulu Ltd:
Debt/equity ratio is 0,8 : 1
ROTCE is 20%
Comment
The business makes extensive use of loans (high risk) /
ROTCE is higher than the interest rate of 13%, indicating positive gearing
Coco Ltd:
Debt/equity ratio is 0,2 : 1
ROTCE is 10%
Comment
The business does not rely on loans (low risk) /
ROTCE is lower than interest rate of 13%, indicating negative gearing
Arrangement of information may vary; financial indicators and/or comment may be compared in the same statement 6
5.3.7 Noah wants to buy shares in Lulu Ltd on the JSE at current market value
to become the majority shareholder and CEO. Calculate how much Noah
will have to pay for the shares that he needs.
Workings
1 100 000 / 2 + 1
(550 001 – 400 000 ) x R9,50 = R1 425 009,50 one part correct
150 001 two marks
OR 50% + 100
(550 100 – 400 000) x R9,50 = R1 425 950
150 100
OR 51%
(561 000 – 400 000) x R9,50 = R1 529 500
161 000
TOTAL MARKS
70
QUESTION 6
6.1 6.1.1 False
6.1.2 True
6.1.3 True Accept T or F 3
16 530 x 100/38
43 500
(ii) OR 25 056 x 100/60 x 100/96 one part correct
(7 500 – 6 000)
1 500 x 100/20 x 12
Additional loan OR 1 500 x 12 / 20% 90 000
one mark one mark one mark one part correct
to be acquired
on 1 June 2020 OR 450 000 – 360 000
two marks one mark 4
Be aware of alternative ways to calculate this figure 11
6.2.3 The directors did not adhere to the Cash Budget during May 2020.
Identify TWO overpayments. Provide figures. Give a valid reason for
EACH overpayment.
Overpayment (with figures) Reason
Advertising Wanted to increase sales OR
Paid R8 400 or R2 800 more Special clearance sales
Point 1
than budgeted or 50% over the required greater advertising.
budget
Vehicle maintenance To get a reasonable price when
Paid R36 350 or R24 150 more vehicle was sold / in order to
than the budgeted or 198% over use vehicle until replaced OR
Point 2
the budget Vehicles are old or damaged
OR used more frequently for
free deliveries to increase sales 6
6.2.4 Why are the auditors concerned that the agreement with Tradecor is
unethical or possibly a crime? Explain THREE points.
Any THREE valid concerns part marks for incomplete / unclear / partial responses
The property was sold at carrying value (which is its original
Point 1 cost / historical cost concept)
Property appreciates in value and should be have been sold at
a market-related price.
Point 2 The company could have benefitted from a large profit on sale
of asset and an improved profitability.
Total assets are depleted / valuable asset disposed
Corruption / under-handed / unethical deal to enrich CEO and
Point 3 his wife (nepotism); no transparency or involvement of the
Board of Directors in this decision
Other Consciously placing the business at financial risk / cash flow
valid problems due to rent of R26 000 per month that must be paid
answers and not budgeted for. 6
# the same point (concern) can be stated differently / repeated.
Award marks for appropriate responses not included in the list above.
TOTAL MARKS
35
TOTAL: 300
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