ITALIAN BOY, sells exclusive mens wear. The proprietor has supplied you with the following information. REQUIRED: 1.1. The Debtors Collection Schedule for the period, 01 July to 31 August 2017. (6 marks) 1.2. The Cash Budget for the period 01 July to 31 August 2017. (14 marks) NB: copy the format given below in your answer book INFORMATION: 1. Actual and projected amounts: Details ACTUAL PROJECTIONS May 2017 June 2017 July 2017 August 2017 Total sales 400 000 430 000 480 000 540 000 Total Purchases 250 000 268 700 300 000 337 500 Rent income 25 000 25 0000 ? ? Salaries 45 000 45 000 ? ? 2. Sales: Credit sale amount to 40% of the total sales. Credit sales are collected as follows from debtors : 50% in the month of sales less 6% discount allowed for prompt payment. 30% in the month after sales. 20% in the second month after sales. 3. Purchases: All purchases are on credit. Creditors are paid in full in the month following the purchase and earning an 8% discount for early settlement. 4. The monthly rent income will increase by 12% with effect from 01 July 2017. 5. The business has R150 000 invested in fixed deposit. A fixed deposit of R60 000 will be maturing on 01 August 2017. Fixed deposit earns 10% p.a. interest which is received monthly. 6. The business has 6 employees on equal pay. However one employee will be relocating to Gauteng on 31 July 2017. 7. The proprietor has decided to give a donation of R100 000 on his birthday, 15 July 2017, to the local high school where he matriculated, for the building of new classrooms. 8. Additional office equipment costing R18 000 will be purchased in July. Half the amount will be paid immediately and the balance in six equal monthly instalments starting in August 2017. 9. The expected bank balance on 01 July 2017 is an overdraft of R136 156. 2 as Copy the format in your answer booklet and complete the question. 1.1 DEBTORS COLLECTION SCHEDULE FOR THE PERIOD 01 July to 31 August 2017 Months Credit Sales Budget Period July August May June July August Total expected receipts 1.2 CASH BUDGET FOR THE PERIOD 01 MAY TO 30 JUNE 2017.. July August Expected Receipts : Total Receipts Expected Payments : Total Payments Excess Receipts / ( Payments ) Bank balance at beginning of month Bank balance at end of month 3 as QUESTION 2 (20 MARKS) The trial balance, adjustments and additional information given below were extracted from the accounting records of Leo Traders on 29 February 2016, the end of the financial year. REQUIRED Use the trial balance, adjustments and additional information to prepare the Statement of Comprehensive Income of Leo Traders for the year ended 29 February 2016. Use the following format: Statement of Comprehensive Income format Sales Cost of sales Gross profit Other operating income Gross operating income Operating expenses Operating profit Interest income Interest expense Net profit for the year 4 as INFORMATION Leo Traders PRE-ADJUSTMENT TRIAL BALANCE AS AT 29 FEBRUARY 2016 Debit (R) Credit (R) Balance sheet accounts section Capital 660 120 Drawings 54 540 Land and buildings 502 500 Vehicles at cost 369 000 Equipment at cost 264 000 Accumulated depreciation on vehicles 211 000 Accumulated depreciation on equipment 147 800 Fixed deposit: Win Bank (10% p.a.) 79 200 Trading inventory 60 000 Debtors control 70 000 Provision for bad debts 4 000 Bank 50 360 Cash float 1 000 Creditors control 73 580 Mortgage loan: Win Bank (16% p.a.) 132 000 Nominal accounts section Sales 830 600 Cost of sales 317 600 Sales returns 5 000 Salaries and wages 235 000 Bad debts 7 500 Stationery 2 000 Rates and taxes 23 000 Motor expenses 12 800 Marketing expenses 9 400 Telephone 17 800 Electricity and water 26 700 Bank charges 3 300 Insurance 2 600 Interest on mortgage loan 20 500 Interest on fixed deposit 5 900 Rent income 68 600 2 133 800 2 133 800 5 as ADJUSTMENTS AND ADDITIONAL INFORMATION 1. Stationery, cost R200, was taken by the proprietor for personal use. No entry has been made for this. 2. Physical stocktaking on 29 February 2016 showed the following inventories on hand: Trading inventory Stationery R58 000 R100 3. Write off the account of debtor, R. Smit, R1 000. 4. The provision for bad debts must be decreased by R500. 5. Rent income amounts to R4 900 per month. Make the necessary adjustment. 6. The water and electricity account of R2300.00 for February 2013 has been paid, but the payment was erroneously posted to the telephone account. 7. Rates and taxes include an amount of R2 400 that was paid for the next accounting period. 8. An amount of R100 appeared in the February 2013 bank statement for cash deposit fees. This amount was not recorded by the bookkeeper. 9. The investment in fixed deposit was made on 01 March 2015. Provide for the outstanding interest. 10. The loan from Win Bank was obtained on 01 March 2015. Provide for outstanding interest of R620. 11. Provide for depreciation as follows: * On equipment at 10% per year on cost. * On vehicles at 20% per year using the diminishing balance method. 6 as QUESTION 3 PARTNERSHIP (20 Marks) Use the information extracted from the accounting records of LS TRADING, a partnership owned by partners, LONG and SHORT, and prepare the Statement of Changes in Equity for the year ended 28 February 2017. NB: copy the format given below in your answer book. INFORMATION: 1. Extracts from the Trial Balance on 28 February 2017. Accounts Debit Credit Capital : Long 300 000 Capital : Short 300 000 Current Account : Long 3 000 Current Account : Short 11 000 Drawings : Long 225 000 Drawings : Short 255 000 2. The net profit on 28 February 2017 amounted to R500 000. 3. The partnership agreement made provision for the following : Partners are entitled to the following monthly salaries : Long, R9 500 Short, R11 000 Interest on each partners capital must be provided at 12% p.a. NB: Partners had made the following changes to their capitals during the year and were properly recorded: Long decreased his capital by R60 000 on 01 June 2016. Short increased his capital by R60 000 on 01 September 2016. Short is entitled to a special bonus of 10% of the net profit for the year. Partners are to share any remaining profits / losses equally. 7 as LS TRADING Statement of Changes in Equity for the year ended 28 February 2017. CAPITAL ACCOUNTS Long Short Total Balance on 01 March 2016 Changes in capital Balance on 28 February 2017 CURRENT ACCOUNTS Long Short Total Balances on 01 March 2016 Net profit for the year Interest on capital Salaries Bonus Interest on drawing Share of remaining profit / loss Drawings Balances on 28 February 2017 8 as QUESTION 4 (20 Marks) REQUIRED Use the information provided below to prepare the Statement of Financial Position of Ndlozi Limited as at 31 May 2016. Ensure that the statement includes headings for Non-current assets, Current assets, Equity, Noncurrent liabilities and Current liabilities. The notes to the financial statements are not required. INFORMATION The following balances were obtained from the accounting records of Ndlozi Limited after all the adjustments and closing transfers were completed on 31 May 2016: R Ordinary share capital 278 000 Retained income 100 000 Loan: Briks Bank 50 000 Equipment 460 000 Accumulated depreciation on equipment 60 000 Inventory 70 000 Debtors control 20 000 Provision for bad debts 1 000 Accrued income 2 000 Bank (DR) 23 000 Cash float 2 000 Creditors control 45 000 Accrued expenses 14 000 South African Revenue Services: Company tax payable 5 000 Shareholders for dividends (Dividends payable) 24 000 Additional information 1. R10 000 of the loan balance of R50 000 is expected to be repaid during the next financial year. 9 as QUESTION 5 (20 MARKS) REQUIRED 5.1 Use the information provided below to calculate the following ratios. Where applicable, round off answers to two decimal places. 5.1.1 Profit margin (2) 5.1.2 Debtors collection period (2) 5.1.3 Return on equity (2) 5.1.4 Acid test ratio (2) 5.1.5 Debt to equity (2) 5.1.6 Return on assets (2) 5.1.7 Interest coverage (2) 5.2 Comment on the current ratio which was 1.56:1 in 2014 and 2.19:1 in 2015. (4) 5.3 Provide two possible reasons for a drop in the gross margin from 2014 to 2015. (2) INFORMATION Extracts of the financial statements of Converse Limited are as follows: CONVERSE LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2015 R Sales (all credit) 803 000 Cost of sales (676 000) Gross profit 127 000 Operating expenses (92 000) Operating profit 35 000 Interest expense (12 000) Profit before tax 23 000 Income tax (7 000) Profit after tax 16 000 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2015 Non-current assets 146 000 Current assets *327 000 Shareholders equity 196 000 Non-current liabilities 128 000 Current liabilities 149 000 * Note: Current assets include accounts receivable of R170 000 and inventories of R80 000.