ACCOUNTING

MEMORANDUM

MARCH 2020

NATIONAL
SENIOR CERTIFICATE

GRADE 12

MARKS: 100

MARKING PRINCIPLES:

1. Penalties for foreign items are applied only if the candidate is not losing marks elsewhere in the question
for that item. No double penalty applied.
2. In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect.
3. Where penalties are applied, the marks for that section of the question cannot be a final negative.
4. Codes: f = foreign item; p = placement

This memorandum consists of 7 pages.

Accounting 2 March Common Test 2020

QUESTION 1
1.1.1 Retained income
Balance at the beginning 1 282 500
Net profit after tax (1 170 000 X 70/30) two or nothing 2 730 000
Buy- back of shares (532 500 – 420 000) two or nothing  (112 500)
Dividends operation one part correct  (1 680 000)
Paid 980 000
Final (1 400 000 x 0.50) two or nothing 700 000 10
Balance at the end (5 720 000 – 3 500 000) 2 220 000 10
1.1.2 Trade and other payables
Trade creditors( 177 500 + 2 000) operation one part correct 179 500
Accrued expenses 12 000
Income received in advance 11 500
Shareholders for dividends see 1.1.1 700 000 6
operation one part correct 903 000 6
1.2 Balance Sheet ( Statement of Financial Position) on 29 February 2020
Assets
Non-current assets (TA – CA ) 5 956 300
Tangible assets ( NCA – FA) 4 456 300
3 Financial assets 1 499 500
Current assets operation one part correct 2 076 700
Inventory (426 800– 5 600 + 16 000) 437 200
Trade and other receivable (400 000 + 2000 410 800
– 6 000 +10 000 + 4 800)
Cash and cash equivalent (1 093 000 x 1.5) = 1 639 500 – 406 800) 1 232 700

13 Total assets (TA = TE&L) 8 033 000

Equity and liabilities

Equity (1 250 000 x 457.6)/100 5 720 000
Ordinary share capital 3 500 000
3 Retained income 5 720 000 – 3 500 000 2 220 000

Non-current liabilities 1 220 000

Loan (1600 000 + 34 000 – 224 000 – 190 000) 1 220 000
1 376 000 two marks + 34 000 one mark – 19 000 one mark

Current liabilities operation one part correct 1 093 000

Trade and other payables see 1.1.2 903 000 28
Current portion of loan see NCL 190 000 28

9 Total equity and liabilities operation one part correct 8 033 000
Incorrect or incomplete details -1 (max -2)
-1 for poor presentation TOTALMARKS Accept figures for balancing items If this are due to prior errors by

44 The candidates.

44

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Accounting QUESTION 2

2.1 Ordinary share capital

Authorised 2 000 000 shares
Issued
1 200 000  shares @ R3.5 4 200 000 
(40 000)  buy-back of shares @ R3.5 (140 000) 
800 000  shares @ R Operation 3 584 000  7
1 960 000 Shares 7 644 000  7

2.2 Calculations Answers

2.2.1 Tax paid

450 000 – 12 400 – 8 900 OR Operation one part correct (428 700) 
12 400 + 8 900 – 450 000 OR 4
-12 400 – 8 900 + 450 000 4
2.2.2 Dividends paid

70 000 + 480 000 OR Operation one part correct (550 000) 

70 000 + (1 118 000 – 638 000) 3
Candidate cannot get full marks if a foreign amount is introduced (lose method 3
mark on answer)
2.2.3 Purchases of tangible assets

3 350 000  + 180 000  + 200 000  – 2 000 000  OR (1 730 000) 
2 000 000 – 180 000 – 200 000 + 3 350 000
operation one part correct
Candidate cannot get full marks if a foreign amount is introduced (lose method 5
mark on answer)
5
2.2.4 Net change in cash and cash equivalent

560 000  + 400 000  960 000  3

3

2.3 Net asset value per share (NAV)

7 697 000  X 100

1 960 000  See 2.1 1
392.7 cents  Operation one part correct Accept 393 cents 3
Candidate cannot get full marks if a foreign amount is introduced (lose method mark on answer) 3

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Accounting 4 March Common Test 2020

2.4.1 Calculate the percentage (%) of shares that Glencoe owns after the
repurchased of shares.
556 800 shares owned by Glencoe before repurchased of shares
556 800  X 100
1 160 000  1

3
48%  3

2.4.2 Calculate the minimum number of shares Glencoe must buy when the
unissued shares have been issued to gain control of the company.
980 000 + 1 = 980 001 – 556 800 see 2.4.1
= 432 201 
OR
One mark One mark Method mark
980 000 + 100 = 980 100 – 556 800 = 423 300
OR 3
1 960 000 x 51% = 999 600 – 556 800 = 442 800 3

2.4.3 Glencoe wants to purchase the additional shares at R3,00 without

advertising the shares to the public. Give THREE reasons why you
would not approve of this.
Any relevant answer   
 All shares must be advertised to the public as this is a public company
and it is a requirement of the Companies Act.
 She is only offering R3.00 while the market value is 400 cents (R4).
 This is an example of insider trading and it is a criminal offence/Glencoe
will be taking advantage of her position to enrich himself.
 The value of R3.00 is below the net asset value of 393 cents See 2.3. 3
3

2.5 The directors are of the opinion that the liquidity has decreased. Quote
THREE financial indicators (with figures) to support this opinion.
 Acid test ratio decreased from 0.9 : 1 to 0.5 : 1 by 0.4
 Current ratio decreased from 2: 1 to 0.9 : 1 by 1.1 3
 Stock turnover rate decreased from 15 times to 11 times by 4 times 3
If candidates provide additional irrelevant indicators, search for the correct ones in the answer provided
by the candidate and award marks accordingly.
For those who provide more than three options, penalty of - 1 for any irrelevant indicators (max - 1).
Do NOT accept Debtors collection period

TOTAL
MARKS
37
37

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Accounting 5 March Common Test 2020

QUESTION 3

3.1 Choose an accounting concept from Column B that best matches the analysis
questions in Column A.
3.1.1 D
3.1.2 B 3
3.1.3 A 3

3.2.1 Choose the correct word from those in brackets and explain your choice.
Masakhane Ltd received a/an (qualified/unqualified/disclaimer of opinion)
audit report.
Choice :
Disclaimer of opinion 
Explanation:

Auditors could not find sufficient audit evidence to express opinion  2

2

3.2.2 Briefly indicate how this audit report would possibly affect the shares of
Masakhane Ltd on the Johannesburg Securities Exchange (JSE). Mention
TWO points.
Any TWO valid points  
 Potential investors and shareholders would lose confidence in the company
and directors / would not want to invest in the company
 Current shareholders will lose confidence in the company and directors / will
try to sell their shares
 Share price of the company will drop (supply and demand)
 Negative image of the company (bad publicity) 2
2

3.2.3 You have been appointed as the external auditor of Masakhane Ltd. The
managing director, Aaron Mathabela, has asked you to reflect his
directors’ fees of R8 million under ‘Salaries and wages’ in the Income
Statement. Would you agree to his request? Give a reason for your
answer.
Would you agree? No 

Reason: Explanation of reason  

This is a material amount which is of interest to the shareholders who have
appointed the directors. (GAAP materiality concept).
The Companies Act No. 71 of 2008 and King Code requires for the director’s
fees to be disclosed separately
3
3

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Accounting 6 March Common Test 2020

3.3.1 Compare and comment on the dividend pay-out policies of the two
companies. Award part-marks for incomplete answers
Financial indicators or Comparison and comment 
explanations thereof; with Do not accept comparison of the DPS only
figures Must mention both companies : One mark
UVONGO DPS 585 cents UVONGO Ltd is distributing a higher
Ltd EPS 650 cents percentage of income earned; UMLAZI Ltd has
Distributes 90% decided to retain half of EPS
earnings  OR
UVONGO Ltd appears to keep shareholders
UMLAZI DPS 490 cents Satisfied by giving them good dividends;
Ltd EPS 980 cents UMLAZI Ltd appears to have plans for growth 3
Distributes 50 %  (better long term benefits 3

3.3.2 Comment on the value of the shares of the two companies on the
Johannesburg Securities.
Financial indicators or Explanation, must involve a choice
explanations thereof; with Do not accept comparison of JSE prices only
figures 
UVONGO JSE price of 470 I would invest in UVONGO Ltd as the shares
Ltd cents greater than seem to be in demand.
NAV of 350 cents OR
I would not invest in UVONGO Ltd as the
shares might be overpriced.
OR
I would invest in UMLAZI Ltd as the shares
UMLAZI JSE price of 700 seem to be under-valued.
Ltd cents less than NAV OR
of 800 cents I would not invest in UMLAZI Ltd as the shares 3
might be in low demand. 3

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Accounting 7 March Common Test 2020

3.3.3 Comment on the degree of risk and gearing. Explain how this will influence
your choice of company.
Financial indicators or Comparison, must involve a choice
explanations thereof; with figures Accept valid alternative terminology

UVONGO Debt-equity is 0.4:1 I choose Uvongo Ltd as financial risk is low
Ltd OR and gearing is positive (ROTCE exceeds 3
ROTCE is 16% while interest) 3
the interest rate is 11% OR
I choose Uvongo Ltd for its positive gearing
(ROTCE exceeds interest) but they are not
UMLAZI Debt-equity is 1.1:1 making effective use of loans
Ltd 
OR
OR
I do not choose Umlazi Ltd as there is high
ROTCE is 10% while
financial risk and negative gearing / too
the interest rate is11%
much money borrowed and not able to use
the funds effectively
OR
I choose Umlazi Ltd as there is high use of
loans and, and if they can improve efficiency
(ROTCE), profit would improve significantly.

TOTAL
MARKS
19
19

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