QUESTION $2(20$ Marks$)$

REQUIRED

Use the information provided below to prepare the following:

$2\mathrm{.}1$ Pro Forma Statement of Comprehensive Income for the year ended $31$ December $2024$

using the percentage$-$of$-$sales method. $(6$ marks$)$

$2\mathrm{.}2$ Pro Forma Statement of Financial Position as at $31$ December $2024.(14$ marks$)$

INFORMATION

The following information was provided by Sharpe Ltd to assist with the preparation of the pro forma financial

statements for the financial year ended $31$ December $2024$:

SHARPE LTD

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED $31$ DECEMBER $2023$

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Sales $6400000$

Cost of sales $(4400000)$

Gross profit $2000000$

Expenses $(800000)$

Profit before tax $1200000$

Company tax $(324000)$

Profit after tax $876000$

SHARPE LTD

STATEMENT OF FINANCIAL POSITION AS AT $31$ DECEMBER $2023$

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ASSETS

Non$-$current assets $2800000$

Fixed$/$Tangible assets $2800000$

Current assets $2400000$

Inventories $800000$

Accounts receivable $1200000$

Cash $400000$

Total assets $5200000$

EQUITY AND LIABILITIES

Shareholders$$ equity $2600000$

Ordinary share capital $1200000$

Retained earnings $1400000$

Non$-$current liabilities $1600000$

Long$-$term loan: VIP Bank $1600000$

Current liabilities $1000000$

Accounts payable $960000$

Company tax payable $40000$

Total equity and liabilities $5200000$

Additional information

$1.$ Sales for the year ended $31$ December $2024$ are expected to be R$8000000.$

$2.$ Company tax is calculated at $27\%$ of the pre$-$tax profit. Company tax payable $($owing$)$ on $31$ December

$2024$ will equal to $10\%$ of the tax calculated in the $2024$ Pro Forma Statement of Comprehensive

Income.

$3.$ An old machine $($Cost price R$400000$; Accumulated depreciation R$136000)$ is expected to be sold at

carrying value $($book value$)$ on $31$ December $2024$ and a new machine with a cost price of R$600000$

will be purchased on the same date to replace it$.$ Total depreciation for the year ended $31$ December

$2024$ is expected to be R$560000.$

$4.$ The company$$s closing inventory will change directly with changes in sales for the financial year ended

$31$ December $2024.$

$5.$ Accounts receivable represent approximately $18\%$ of the annual sales.

$6.$ The cash balance is expected to remain unchanged.

$7.$ The authorized share capital consists of $500000$ shares of which $300000$ have been issued up to $31$

December $2023.$ Forty percent $(40\%)$ of the unissued shares will be sold at R$3$ each during July $2024.$

$8.$ A final dividend of $80$ cents per share is expected to be recommended on $31$ December $2024$ on all the

issued shares and is payable during $2025.$

$9.$ R$200000$ of the loan will be repaid to VIP bank during the financial year ended $31$ December $2024.$

$10.$ Accounts payable will be based on a payment period of $54\mathrm{.}75$ days. Credit purchases for $2024$ are

expected to amount to R$5700000.$

$11.$ The cash balance must be calculated $($balancing figure$)$