FINAL ONLINE SUMMATIVE ASSESSMENT PROGRAMME Bachelor of Public Administration Bachelor of Business Administration Bachelor of Commerce in Project Management Bachelor of Commerce in Financial Management Bachelor of Commerce in Marketing Management Bachelor of Commerce in International Business Bachelor of Commerce in Supply Chain Management Bachelor of Commerce in Human Resource Management Bachelor of Commerce in Tourism and Hospitality Management Bachelor of Commerce in Information and Technology Management MODULE Financial Reporting and Analysis YEAR One (1) INTAKE January 2023 Semester 2 DATE 07 November 2023 TOTAL MARKS 100 Answer ALL questions in this paper. [100 MARKS] QUESTION 1 (20 MARKS) REQUIRED Use the information provided below to prepare the Statement of Comprehensive Income for the year ended 28 February 2023. INFORMATION FIESTA TRADERS PRE-ADJUSTMENT TRIAL BALANCE AS AT 28 FEBRUARY 2023 Debit (R) Credit (R) Balance Sheet accounts section Capital 2 520 000 Drawings 160 000 Land and buildings 1 800 000 Vehicles at cost 1 360 000 Equipment at cost 1 000 000 Accumulated depreciation on vehicles 760 000 Accumulated depreciation on equipment 320 000 Fixed deposit: Rio Bank (10% p.a.) 300 000 Trading inventory 230 000 Debtors control 260 000 Provision for bad debts 16 000 Bank 134 000 Cash float 12 000 Creditors control 220 000 Mortgage loan: Rio Bank (12% p.a.) 640 000 Nominal accounts section Sales 3 000 000 Cost of sales 960 000 Sales returns 20 000 Salaries and wages 838 000 Bad debts 24 000 Stationery 40 000 Rates and taxes 116 000 Motor expenses 180 000 Repairs to building 34 000 Telephone 76 000 Electricity and water 92 000 Bank charges 16 000 Insurance 40 000 Interest on mortgage loan 66 000 Interest on fixed deposit 12 000 Rent income 270 000 7 758 000 7 758 000 Adjustments and additional information 1. Stocktaking on 28 February 2023 revealed the following inventories: 1.1 Trading inventory R220 000 1.2 Stationery R4 000 2. The telephone account for February 2023, R6 000, was due to be paid on 01 March 2023. 3. A debtor who was declared insolvent paid R900 which represented 30% of her debt. The balance of her account must now be written off. 4. The provision for bad debts must be decreased to R14 000. 5. Rent has been received up to 31 March 2023. Note: The rental was increased by R2 000 per month with effect from 01 November 2022. 6. The insurance total includes an annual premium of R15 000 that was paid for the period 01 June 2022 to 31 May 2023. 7. Provide for outstanding interest on the mortgage loan for February 2023. 8. Provide for the outstanding interest on fixed deposit. The investment in fixed deposit was made on 01 September 2022. 9. A payment for the annual service of a motor vehicle was not recorded, R5 000. 10. Provide for depreciation as follows: 10.1 On equipment at 10% p.a. on cost. 10.2 On vehicles at 20% p.a. using the diminishing balance method. Note: A vehicle with a cost price of R360 000 was purchased on 01 December 2022. The purchase has been recorded. QUESTION 2 (20 MARKS) REQUIRED Use the information provided below to prepare the Statement of Financial Position of Trent Limited as at 31 July 2023. The notes to the financial statements are not required. INFORMATION TRENT LTD Extract of PRE-ADJUSTMENT TRIAL BALANCE AS AT 31 JULY 2023 Balance Sheet Accounts Section Debit (R) Credit (R) Ordinary share capital (200 000 shares) 4 000 000 Retained earnings 589 200 Land and buildings 3 904 100 Vehicles (cost) 1 400 000 Equipment (cost) 900 000 Accumulated depreciation on vehicles 510 000 Accumulated depreciation on equipment 397 000 Debentures (12% p.a.; Maturity date 31 July 2028) 1 700 000 Investment (25 000 shares in ABC Limited) 500 000 Trading inventory 1 090 000 Debtors control 360 000 Provision for bad debts 30 000 Bank 287 000 Creditors control 484 000 South African Revenue Services: Company tax 140 000 Adjustments and additional information The profit after tax for the year ended 31 July 2023 amounted to R392 100. The following adjustments were made to the income and expenses but not to the balance sheet accounts: 1. A physical stocktake on 31 July 2023 revealed the following: 1.1 Trading inventory on hand amounted to R1 050 000. 1.2 Stationery unused amounted to R2 000. 2. Rent for August 2023 was received and recorded on 31 July 2023, R14 000. 3. Dividends of 70 cents per share are due from ABC Limited. 4. Commission on sales of R30 000 is owed to the salespersons. 5. Equipment, cost price R120 000, was purchased on credit on 01 July 2023 but no entry has been made for this. Depreciation on equipment is calculated at 15% p.a. on cost and on vehicles at 20% p.a. on the diminishing balance. 6. The bank statement was received after the trial balance was prepared and it reflected bank charges of R1 800. 7. The provision for bad debts must be adjusted to 5% of debtors. 8. Two of the directors of the company are owed remuneration of R20 000 each. 9. Based on the profit for the year, an amount of R30 000 is still owed to South African Revenue Services for company tax. 10. The directors declared a final dividend of 12 cents per share. The interim dividend amounted to R100 000. QUESTION 3 (20 MARKS) REQUIRED Use the information provided below to prepare the Statement of Changes in Equity of Sunray Traders for the year ended 28 February 2023. INFORMATION EXTRACT FROM THE LEDGER OF SUNRAY TRADERS AS AT 28 FEBRUARY 2023 Debit Credit R R Capital: Sunny 600 000 Capital: Raymond 400 000 Current a/c: Sunny (01 March 2022) 100 000 Current a/c: Raymond (01 March 2022) 60 000 Drawings: Sunny 500 000 Drawings: Raymond 700 000 The following must be considered: (a) On 28 February 2023 the Statement of Comprehensive Income reflected a net profit of R1 400 000. (b) The partners are entitled to interest at 15% p.a. on their capital balances. Note: Raymond decreased his capital contribution by R200 000 on 31 August 2022 whilst Sunny increased his capital balance by the same amount on 01 December 2022. These capital changes have been recorded. (c) The partners are entitled to the following monthly salaries: Sunny R25 000 Raymond R20 000 (d) Raymond is entitled to a bonus equal to 10% of his annual salary. (e) The remaining profit/shortfall must be shared between Sunny and Raymond in the ratio of the capital balances as at the beginning of the financial year. QUESTION 4 (20 MARKS) REQUIRED Use the information provided below to prepare the Cash Flow Statement of Alto Limited for the year ended 31 December 2022. INFORMATION The following amounts were obtained from the Statement of Comprehensive Income for the year ended 31 December 2022 and Statement of Financial Position of Alto Limited as at 31 December 2022 and 31 December 2021: 31 Dec 2022 31 Dec 2021 R R Sales 11 000 000 Cost of sales 6 500 000 Depreciation 750 000 Operating profit 1 650 000 Interest expense 450 000 Company tax for the year 400 000 Property, plant and equipment (carrying value) 6 250 000 5 000 000 Long-term investments 350 000 400 000 Inventories 2 150 000 2 050 000 Accounts receivable 1 700 000 1 700 000 Prepaid expenses 200 000 50 000 Cash and cash equivalents 500 000 350 000 Ordinary share capital (All shares issued at R10 each) 3 100 000 3 100 000 Retained earnings 3 000 000 2 500 000 Non-current liabilities 3 600 000 3 350 000 Accounts payable 1 100 000 200 000 Accrued expenses 100 000 70 000 Dividends payable 200 000 250 000 Company tax payable 50 000 80 000 Note: Dividends paid and recommended during 2022 amounted to R300 000. All purchases and sales of inventories are on credit. Some of the investments were redeemed during the financial year ended 31 December 2022. Debtors are granted credit terms of 30 days. QUESTION 5 (20 MARKS) REQUIRED Use the information provided in QUESTION 4 to answer the following questions: 5.1 Calculate the following ratios (expressed to two decimal places) for 2022 only. Note: Use formulas provided in the formula sheet only (that appear after QUESTION 5). 5.1.1 Gross margin (2 marks) 5.1.2 Dividend per share (2 marks) 5.1.3 Return on assets (2 marks) 5.1.4 Current ratio (2 marks) 5.1.5 Acid test ratio (2 marks) 5.1.6 Debt to equity (2 marks) 5.1.7 Creditor payment period (2 marks) 5.2 Comment on the following ratios: 2022 2021 5.2.1 Inventory turnover 3.10 times 6.35 times (2 marks) 5.2.2 Debtors collection period 56.41 days 29.45 days (2 marks) 5.2.3 Return on equity 13.11% 18.80% (2 marks) END OF PAPER FORMULA SHEET Gross profit X 100 Sales 1 Profit after tax X 100 Sales 1 Operating profit X 100 Total assets 1 Profit after tax X 100 Equity 1 Current assets Current liabilities Current assets Inventory Current liabilities Cost of sales Average inventory Accounts receivable X 365 Credit sales 1 Accounts payable X 365 Credit purchases 1 Total debt X 100 Total assets 1 Non-current debt X 100 Equity 1 Operating profit Interest expense Profit after tax X 100 No. of ordinary shares issued 1 Dividends for the year X 100 No. of ordinary shares issued 1 Market price per share Earnings per share Earnings per share X 100 Market price per share 1 Dividend per share X 100 Market price per share 1