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MAC 3702 Assignment 2: 2021 QUESTION 2 (15 marks, 27 minutes) Paw Patrol Ltd is a company that operates in the safety and security industry with a specific focus on domestic security systems. They are retailers in security devices and appliances. The following information is available on 28 February 2021: Statement of comprehensive income for the year ending 28 February 2021 2021 2020 Rand Rand Notes Turnover 1 8 500 000 7 850 000 Cost of sales (3 850 000) (3 600 000) Opening inventory 850 000 1 200 000 Purchases 2 4 200 000 3 250 000 Closing inventory Gross profit 4 650 000 4 250 000 Operating expenses 3 (3 220 000) (2 180 000) Operating profit 1 430 000 2 070 000 Dividends received 500 000 420 000 Finance charges on long term loan (net) (118 000) (98 000) Impairment loss on goodwill (100 000) - Profit before taxation 1 712 000 2 392 000 Taxation (372 960) (552 160) Profit for the year 1 339 040 1 839 840 Attributable to Ordinary shareholders 1100 500 1550 000 Non-controlling interest in subsidiaries 238 540 289 840 1 339 040 1 839 840 MAC 3702 Assignment 2: 2021 PAW PATROL LIMITED(continued) Statement of financial position on 28 February 2021 Notes 2021 2020 Rand Rand Assets Non-current assets 3 120 500 3 480 500 Property, plant and equipment 250 000 1 550 000 Goodwill 450 000 650 000 Investments in associates 850 500 850 500 Long-term financial assets 570 000 530 000 Current assets 2 698 000 2 150 000 Inventory 1 200 000 850 000 Trade receivables 1 048 000 980 000 Cash balances 450 000 320 000 Total assets 5 818 500 5 630 500 Equity and liabilities Equity 2 525 000 2 325 000 Ordinary share capital (800 000 ordinary shares) 1 600 000 1 600 000 Non-controlling interests 250 000 250 000 Accumulated reserves 175 000 125 000 Retained income 500 000 350 000 Non-current liabilities 2 442 000 2 558 000 Long-term loan 950 000 1 200 000 Debentures 12 000 8 000 Preference shares (250 000 shares) 1 000 000 1 000 000 Deferred taxation 480 000 350 000 Current liabilities 851 500 747 500 Trade payables 350 000 425 000 Short-term debt 501 500 322 500 Total equity and liabilities 5 818 500 5 630 500MAC3702 Assignment 2 ECP & Semester 2 Notes and additional information 1. Credit sales increased from 55% of turnover in 2020 to 65% of turnover in 2021. 2. In 2021, 40% of the company's purchases were made on credit in comparison to 50% in 2020. 3. Operating expenses includes a once off expense related to expert valuation costs incurred during the year in order to write down the value of goodwill. 4. Credit terms for the trade receivables of the company are 60 days from invoice date and for the standard industry terms are between 45 and 60 days. 5. The company's payment terms to trade payables are between 45 and 60 days from invoice date, and discount of 10% is received if payment is made before 45 days. Standard payment terms for the industry are 60 days from invoice date. 6. The average inventory turnover period for the industry is 90 days and the average business cycle forthe industry is 100 days. 7. All raw materials are purchased on the just-in-time (JIT) basis. The inventory in the statement of financial position consists of nished goods only. 8. VAT is levied at 15% and the company's tax rate is 28%. You may also assume there are 365 days in a year. REQUIRED (a) Calculate the business cycle of Paw Patrol Limited for year 2021 in days and comment on the performance of each subsection of the calculation included in line with the additional information. (Use closing balances and round off your answers to two decimal places.) (15) QUESTION 2 TOTAL [15]
