ASSIGNMENT 3 DUE DATE 16TH JULY 2021 TASK 1 (5) Study the attached set of financial statements and answer the following questions. 1. Use your knowledge of ratio analyses and comment in detail on the financial situation of Ndlovu Farming. (20) 2. Calculate the amount of tax payable from NFI and FP (use the tax table). 3. Is the concept of advantageous financing applicable for Ndlovu Farming? Motivate your answer by using the available information. (10) 4. Calculate the debt repayment ability for Ndlovu Farming. (10) 5. Discuss the factors which could place Ndlovu Farming's repayment ability under suspicion (5) BALANCE SHEET FOR NDLOVU FARMING AS ON THE 28TH FEBRUARY 2018 2019 LIABILITIES ASSETS Current liabilities 2018 2019 Current assets 2018 2019 96 000 40 000 Bank overdraft Provision for income tax 70 000 40 000 Debtors 50 000 Stock on hand Harvest on lands Marketable livestock Production items Moveable assets 550 000 Breeding livestock Vehicles & Tractors Less depreciation 420 000 230 000 120 000 150 000 60 000 450 000 140 000 90 000 130 000 Medium term liabilities Medium term loan 650 000 600 000 680 000 80 000 790 000 750 000 50 000 360 000 430 000 Implements Less depreciation Long term assets 80 000 60 000 Long term liabilities Bond loan on farm Total Debt 3 900 000 2 3 000 000 Fixed Improvements 3 ? Less depreciation 1800 000 1900 000 180 000 190 000 Nett Worth ? ? Land @ Cost 3 500 000 4 000 000 Total Liabilities ? ? ? ? Total Assets Value of land rented Total Capital employed 550 000 550 000 ? ? NDLOVU FARMING INCOME STATEMENT FOR THE PERIOD 1/3/2018 TO 29/02/2019 ITEM PRODUCTION ENTERPRISES CROPS DAIRY Sales: Cash 850 000 520 000 : Credit 420 000 580 000 Consumption Household 25 000 35 000 Insurance claim 296 000 Stock adjustment Closing stock 290 000 370 000 Less Opening stock 200 000 196 000 Livestock purchases 280 000 Less: Production-, marketing, and administrative costs a) Production items used Used b) Remuneration Wages 380 000 Rations 265 000 C) Depreciation Motor vehicles 330 000 Fixed improvements 250 000 d) Reparation 300 000 165 000 Less Land Rent Interest -Overdraft -Mid term loan -Bond loan Total rent and interest FARM PROFIT Plus: capital appreciation on land Less: Income tax provision Private expenses Farm products used 275 000 200 000 80 000 190 000 ? ? 850 000 180 000 365 000 64 000 TAX TABLE Taxable Income (R) 0-79 000 79001 - 365 000 365 001 - 550 000 550 001 and above Rate of Tax (R) 0% of taxable income 7% of taxable income above 79 000 20 020 + 21% of taxable income above 365 000 58 870 + 28% of the amount above 550 000 ASSIGNMENT 3 DUE DATE 16TH JULY 2021 TASK 1 (5) Study the attached set of financial statements and answer the following questions. 1. Use your knowledge of ratio analyses and comment in detail on the financial situation of Ndlovu Farming. (20) 2. Calculate the amount of tax payable from NFI and FP (use the tax table). 3. Is the concept of advantageous financing applicable for Ndlovu Farming? Motivate your answer by using the available information. (10) 4. Calculate the debt repayment ability for Ndlovu Farming. (10) 5. Discuss the factors which could place Ndlovu Farming's repayment ability under suspicion (5) BALANCE SHEET FOR NDLOVU FARMING AS ON THE 28TH FEBRUARY 2018 2019 LIABILITIES ASSETS Current liabilities 2018 2019 Current assets 2018 2019 96 000 40 000 Bank overdraft Provision for income tax 70 000 40 000 Debtors 50 000 Stock on hand Harvest on lands Marketable livestock Production items Moveable assets 550 000 Breeding livestock Vehicles & Tractors Less depreciation 420 000 230 000 120 000 150 000 60 000 450 000 140 000 90 000 130 000 Medium term liabilities Medium term loan 650 000 600 000 680 000 80 000 790 000 750 000 50 000 360 000 430 000 Implements Less depreciation Long term assets 80 000 60 000 Long term liabilities Bond loan on farm Total Debt 3 900 000 2 3 000 000 Fixed Improvements 3 ? Less depreciation 1800 000 1900 000 180 000 190 000 Nett Worth ? ? Land @ Cost 3 500 000 4 000 000 Total Liabilities ? ? ? ? Total Assets Value of land rented Total Capital employed 550 000 550 000 ? ? NDLOVU FARMING INCOME STATEMENT FOR THE PERIOD 1/3/2018 TO 29/02/2019 ITEM PRODUCTION ENTERPRISES CROPS DAIRY Sales: Cash 850 000 520 000 : Credit 420 000 580 000 Consumption Household 25 000 35 000 Insurance claim 296 000 Stock adjustment Closing stock 290 000 370 000 Less Opening stock 200 000 196 000 Livestock purchases 280 000 Less: Production-, marketing, and administrative costs a) Production items used Used b) Remuneration Wages 380 000 Rations 265 000 C) Depreciation Motor vehicles 330 000 Fixed improvements 250 000 d) Reparation 300 000 165 000 Less Land Rent Interest -Overdraft -Mid term loan -Bond loan Total rent and interest FARM PROFIT Plus: capital appreciation on land Less: Income tax provision Private expenses Farm products used 275 000 200 000 80 000 190 000 ? ? 850 000 180 000 365 000 64 000 TAX TABLE Taxable Income (R) 0-79 000 79001 - 365 000 365 001 - 550 000 550 001 and above Rate of Tax (R) 0% of taxable income 7% of taxable income above 79 000 20 020 + 21% of taxable income above 365 000 58 870 + 28% of the amount above 550 000