Answer ALL questions. [100 MARKS] The information and questions that follow pertain to Hemrock Ltd for the period 01 January 2018 to 31 December 2020.

QUESTION 1 (25 Marks)

REQUIRED Study the information provided below and answer the following questions: 1.1 Explain the changes that possibly took place during 2019 in respect of: 1.1.1 Financing activities (2 marks)

1.1.2 Investing activities. (4 marks)

1.2 Calculate the distribution costs for 2019. (2 marks)

1.3 Of what significance is the statement of comprehensive income to potential investors? (2 marks)

1.4 If the interest rate on loans was 15% whilst the return on assets was 22%, how are the shareholders likely to interpret this? (3 marks)

1.5 Critically assess the performance of the company from the information provided. (12 marks)

INFORMATION The statements of comprehensive income of

Hemrock Ltd for 2019 and 2018 are provided below:

HEMROCK LTD STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER:

2019 (R) 2018 (R)

Sales 4 500 000 4 000 000

Cost of sales (1 950 000) (1 700 000)

Gross profit 2 550 000 2 300 000

Other operating income 150 000 140 000

Distribution costs ? ?

Administrative expenses (600 000) (550 000)

Operating profit 600 000 540 000

Interest income 5 500 2 700

Interest expense (4 350) (8 800)

Profit before tax 601 150 533 900

Company tax (180 345) (160 170)

Profit after tax 420 805 373 730

Additional information 1.

Depreciation for the year is as follows:

2019: R200 000

2018: R300 000