Question 1 (15 marks) A company manufacturing HIV rapid test kits had the following information in relation to its fixed assets: Asset Class Purchase Date Cost Depreciation Policy Manufacturing equipment 1 January 2020 R5.4 million Diminishing balance method over 3 years. No residual value. Other equipment 1 February 2020 R2 million Straight-line basis over 5 years. Residual value = 10% on cost. Other information: 1. The assets listed above are listed at the VAT exclusive cost. 2. The companys financial year end date is on the last day of March. 3. Old and new manufacturing equipment was ready for use exactly one month after purchase. 4. All other equipment were ready for use the date they were purchased. 5. On the 1st July 2021, additional manufacturing equipment with the following details were purchased: The manufacturing equipment was bought at a cost price of R598 000 (VAT inclusive).

Additional wages of R1 150 was used in transporting the equipment to the production facility. The manufacturing equipment was installed at a VAT inclusive cost of R5 750. A 24-month monthly maintenance contract of R9 200 (VAT inclusive) was signed on the date the asset was ready for use. Required: 1.1 Calculate the cost price of the asset which was purchased on the 1st July 2021 and in the process identify any costs which will be excluded in calculating this cost (with possible reasons). (4) 1.2 Calculate the total depreciation expense for the year ended 31 March 2022. (11) Note VAT is calculated at 15%. Round off all final answers to the nearest whole number. Show ALL applicable calculations and steps when calculating your final answer. Question 2 (25 marks) The following information represents those of Cashmore Enterprises. Use the information contained therein to answer the questions that follow: Extract of Statement Cashflows of Cashmore Enterprises for the year ended 31 December 2022. R000 Cash flows from operating activities Cash received from customers A Cash paid to suppliers and employees B Cash generated from operations 4 263 Interest paid C Dividends paid D Taxation paid E Net cash flows from operating activities 1 928

Extract of Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2022. R'000 Sales 19 856 Gross profit 6 346 Other operating income 254 Operating expenses 3 450 Interest expenses 1000 Tax 602 Extract of The Statement of Financial Position at the year ended 31 December 2022. R'000 R'000 2021 2022 Inventory 3 658 3 250 Accounts receivable 2 967 3 495 Cash and cash equivalents 3 864 1 936 Accounts payable 5 432 4 677 Tax payable 630 511 Dividend payable 772 1024 Additional information: 1. Depreciation amounting to R238 000 was included in operating expenses. No amounts related to operating expenses and interest expenses were owing at the financial year ended 31 December 2022. 2. All amounts related to operating income were received by the financial year ended 31 December 2022. 3. Dividends amounting to R600 000 were declared on 31 December 2022. Required: 2.1 Calculate the amounts for 2.1.1 - 2.1.5 below. In the process of calculating these amounts, complete and show the following T accounts: 2.1.1 Accounts receivable 2.1.2 Inventory 2.1.3 Accounts payable 2.1.4 Shareholder for dividends 2.1.5 Tax payable

2.2 Calculate the amount of cash that was generated during the financial year ended 31 December 2022. (3) Note to Student: show all related workings in the process of deriving your answers.

SECTION B (30 MARKS) CASE STUDY Question 1 (30 marks) Read the case study below and answer the questions that follow: The following financial information relates to Good Days (Pty) Ltd, a pine wood furniture manufacturer based in the Northern Province. The company operates through three (3) physical stores. Trial Balance of Good Days (Pty) at 30 June 2022 Dr Cr R'000 R'000 Statement of Financial Position section Ordinary share capital 2000 Fixed assets 3300 Inventories (01 July 2021) 250 Accounts receivable 680 Bank 180 Accounts payable 324 Retained Earnings (1st July 2021) 207 Long-term loan 502 Statement of Profit or Loss section Sales 4180 Purchases 1820 Other operating income 56 Taxation 207 Selling and administrative expenses 482 Other expenses 626 Interest expenses 84 TOTAL 7 449 7 449 Other information: The following additional information is relevant for your calculation and analysis: The companys inventory on 30 June 2022 was R256 000. As a strategy to boost sales, the company sells 80% of its goods on credit. All purchases are deemed to be on credit.

In addition to the points listed above, some of the financial ratios for both the company (for 2021) and the industry within which the company (for 2022) operates, is presented as follows: Number Ratios Company (2021) Industry (2022) 1 Gross profit margins 55% 60% 2 Net profit margins 22% 25% 3 Operating profit margin 30% 35% 4 Current ratio 1,8:1 2,1:00 5 Creditors' payment period 60 days 60 days 6 Debtors' collection period 63 days 75 days 7 Inventory Days 47 days 40 days Required: 1.1 Calculate ratios 1-7 listed below for Good Days (Pty) Ltd for the year 2022. In your calculations, show the formulas used as well as the workings (for the ratios only). Please note the mark allocation for each of the ratios as follows: 1,1.1 Gross profit margins (3) 1.1.2 Net profit margins (3) 1.1.3 Operating profit margins (2) 1.1.4 Current ratio (3) 1.1.5 Creditors payment period (2) 1.1.6 Debtors collection period (3) 1.1.7 Inventory days (2) 1.2 Analyse the profitability of Good Days (Pty) Ltd for the year 2022 by comparing the current years ratios to the past year and the industry. Also, give an overall assessment of the companys profitability vis--vis the previous year and the industry comparison. (6) 1.3 Identify any three (3) practical ways in which Good Days (Pty) Ltd can improve on its profitability by focusing on the operating margins given the current economic and COVID climate. (6)

Note Round off ALL final answers to two (2) decimal places where applicable. Show ALL applicable calculations and steps when calculating your final answer. You do not need to redraft the financial statements, but all components of the ratios must be shown in your calculations.