ASSESSMENT 6: ACCOUNTING AND FINANCIAL MANAGEMENT QUESTION 1 Required: (20) Use the information given below to prepare the following for Altech Limited for July and August 2021: 1.1 Debtors Collection Schedule 1.2 Cash Budget (4) (16) Note: Provide separate monetary columns for each month. Where applicable, round off amounts to the nearest Rand Information: Sales Extract of Statement of Comprehensive Income for the month ended 30 June 2021 R 200 000 Cost of sales 100 000 Rent income 8 000 Advertising 4 000 Salaries and wages 10 000 Rates and taxes 1 200 Electricity 3 000 Other operating expenses 9 000 Additional information: 1. The business uses a fixed mark-up of 100% on cost. 2. Sales are expected to increase by 10% each month. 3. Thirty percent (30%) of the sales are for cash and the balance is on credit. Collections from credit sales are as follows: 40% in the month of the sale, and these customers are entitled to a 2% discount; 55% one month after the sale. The balance is usually written off as bad debts. . 4. Closing Inventories are kept at a constant level. 50% of purchases are for cash. Creditors are paid one month after purchase. 5. In terms of the lease agreement, the rental income will increase by 10% per annum with effect from 01 July 2021. Rent is received monthly. 6. Advertising is paid monthly and is estimated to be the same percentage of sales as for June 2021. 7. Salaries and wages will increase by 10% with effect from 01 July 2021. 8. Rates and taxes will be paid in one instalment for the year during July 2021. Rates to be paid will amount to R6 000 9. Other operating expenses are expected to increase by R500 every month. These expenses are paid for in the month in which they are incurred. 10. Electricity is expected to increase by 12% from 1 August 2021 due to tariff increases 11. The balance in the bank on 30 June 2021 is estimated to be R40 000 (favourable). (20) QUESTION 2 INFORMATION: Vista Limited intends purchasing a new machine and has a choice between the following two machines: Equipment A R220 000 5 years Nil R Equipment B R240 000 5 years Nil R Initial cost Expected useful life Scrap value Expected net cash inflows: End of: Year 1 Year 2 Year 3 Year 4 Year 5 55 000 60 000 62 000 60 000 70 000 70 000 70 000 70 000 70 000 70 000 The company estimates that its cost of capital is 12%. Required: 2.1 Calculate the Payback period of both equipment. (Answers must be expressed in years, months and days). (4) 2.2 Calculate the Accounting Rate of Return (on initial investment) for both equipment A and B. (Answers must be expressed to 2 decimal places). (5) 2.3 Calculate the Net Present Value of each equipment. (Round off amounts to the nearest Rand.) (6) 2.4 Calculate the Internal Rate of Return of Equipment B. (5) QUESTION 3 (20) 3.1 Prepare a projected statement of comprehensive income for the year ended 31 December 2021 to determine the sales needed to produce a profit after tax that is 25% more than that for the year ending 31 December 2020. (Where applicable round of amounts to the nearest rand) (10) INFORMATION: Calder Enterprises Statement of Comprehensive Income for the year ended 31 December 2020 Sales Cost of sales Gross profit Operating expenses Income from operations Interest expense Profit before tax Income tax Profit after tax R 5 445 000 (3539 250) 1 905 750 (1 122 000) 783 750 (98 900) 684 850 (191 758) 493 092 Additional information: 1. Cost of sales is expected to be 60% of sales. 2. Operating expenses will increase by 4%. 3. Interest expense will increase to R120 000. 4. The tax rate will remain at 28% 3.2 Use the information from question 3.1 (not your solution) and calculate the following for the year ending 31 December 2020: 3.2.1 Gross margin (3) 3.2.2 Net profit margin (3) (2) 3.2.3 Operating margin (2) 3.2.4 Interest coverage