QUESTION 2

(20 MARKS)

REQUIRED Use the information provided below to prepare the Statement of Changes in Equity for the year ended 28 February 2022.

INFORMATION The information given below was extracted from the accounting records of Clairwood Traders, a partnership business with Claire and Woody as partners. Balances in the ledger as at 28 February 2022

	Debit (R)	Credit (R)
Capital: Claire		500 000
Capital:Woody		400 000
Current a/c:Claire (01 March 2021		100 000
Current a/c:Woody (01 March 2021)	40 000
Drawings: Claire	500 000
Drawings: Woody	300 000

The following must be considered:

(a) The net profit for the financial year ended 28 February 2022 amounted to R900 000.

(b) The partnership agreement makes provision for the following:

Interest on capital must be provided at 15% per annum on the balances in the capital accounts. Note: Claire increased her capital by R100 000 on 01 September 2021. On the same date, Woody decreased his capital by R100 000. The capital changes have been recorded.

The partners are entitled to the following monthly salaries: Claire R7 000 Woody R6 000 Note: The partners' salaries were increased by 12% with effect from 01 November 2021.

Claire is entitled to a bonus equal to 80% of her salary for February 2022.

Claire and Woody share the remaining profit or loss equally

QUESTION 3

(20 MARKS)

REQUIRED Prepare the Statement of Financial Position as at 28 February 2022.

The notes to the financial statements are not required.

Show workings in the space provided in the answer book.

INFORMATION

The trial balance, adjustments and additional information given below were extracted from the accounting records of Metro Limited on 28 February 2022, the end of the financial year.

	Debit (R)	Credit (R)
Balance sheet accounts section
Ordinary share capital (100 000 shares)		2 000 000
Retained earnings		620 000
Vehicles at cost	1 800 000
Equipment at cost	1 200 000
Accumulated depreciation on vehicles		900 000
Accumulated depreciation on equipment		380 000
Trading inventory	700 000
Debtors control	320 000
Provision for bad debts		40 000
Bank	1 820 000
Cash float	20 000
Creditors control		400 000
South African Revenue Services: Company tax	100 000
Long-term loan: Aries Bank (16% p.a.)		800 000
Nominal accounts section
Sales		4 850 000
Cost of sales	2 400 000
Sales returns	50 000
Salaries and wages	840 000
Bad debts	50 000
Consumable stores	20 000
Rent expense	280 000
Motor expenses	150 000
Bad debts recovered		20 000
Telephone	70 000
Electricity and water	110 000
Bank charges	30 000
Insurance	40 000
Interest on mortgage loan	60 000
Commission income		50 000
	10 060 000	10 060 000

Adjustments and additional information

1. According to physical stocktaking done on 28 February 2022, trading inventory on hand amounted to R680 000.

2. Consumable stores unused according to stocktaking amounted to R2 000 on 28 February 2022.

3. No entry has been made for a commission of 10% earned but not received on 500 items that were sold for R600 each.

4. Received a cheque for R6 000 from an insolvent debtor, J. Marsh, who was only able to pay 30% of her debt. The balance of her account must now be written off. No entries were made for these transactions.

5. The provision for bad debts must be decreased to R15 000.

6. The telephone account for February 2022 was due to be paid on 03 March 2022, R7 000.

7. The rental agreements signed with the lessor (landlord) are as follows: R300 000 for the period 01 January 2021 to 31 December 2021, and R360 000 for the period 01 January 2022 to 31 December 2022. Make the necessary adjustment.

8. The loan from Aries Bank was obtained on 01 September 2021. Provide for the outstanding interest. (Interest is not capitalised.) Loan repayments (excluding interest) are expected to amount to R120 000 in the next financial year.

9. The insurance total includes an annual premium of R18 000 that was paid for the period 01 June 2021 to 31 May 2022.

10. The bank statement for February 2022 reflected bank charges of R1 800 that have not been recorded.

11. The electricity and water statement for February 2022 included an amount of R10 000 for a deposit required by the municipality. This was recorded in the water and electricity account.

12. Provide for depreciation as follows: 12.1 On equipment at 15% per annum using the fixed instalment method. 12.2 On vehicles at 25% per annum on the carrying value (as at 01 March 2021).

13. An account received from Heidi Motors to replace the tyres on the delivery vehicle of the business, R20 000, has not been recorded.

14. The profit after tax for the year ended 28 February 2022, after taking the above into account, was R272 790. 15. The company tax for the financial year amounted to R116 910. 16. The directors proposed a final dividend of 36 cents per share.

QUESTION 4

(20 MARKS)

REQUIRED Use the information provided below to prepare the Cash Flow Statement of Nascar Limited for the year ended 31 December 2021.

	2021 (R)	2020 (R)
Sales	18 560 000	12 000 000
Cost of sales	(12 800 000)	(7 500 000)
Gross profit	5 760 000	4 500 000
Operating expenses	(2 912 000)	(2 120 000)
Depreciation	300 000	260 000
Other operating expenses	2 612 000	1 860 000
Operating profit	2 848 000	2 380 000
Interest on mortgage loan	(240 000)	(720 000)
Profit before tax	2 608 000	1 660 000
Company tax	(782 400)	(498 000)
Profit after tax	1 825 600	1 162 000

STATEMENT OF FINANCIAL POSITIONS AS AT 31 DECEMBER.

	2021 (R	2020 (R)
ASSETS
Non-current assets	24 641 600	24 440 000
Fixed assets	24 641 600	24 440 000
Current Assets	3 560 000	3 360 000
Inventories (all trading inventory)	1 200 000	2 500 000
Accounts receivables	400 000	640 000
Cash and cash equivalents	1 960 000	220 000
	28 201 600	27 800 000
EQUITY AND LIABILITIES
Equity	24 495 600	19 883 000
Ordinary share capital	21 800 000	17 600 000
Retained Income	2 695 600	2 283 000
Non-Current liabities	2 000 000	6 000 000
Mortgage loan (12%p/a)	2 000 000	6 000 000
Current Liabities	1 706 000	1 917 000
Accounts payable	850 000	1 290 000
SARS (Company tax)	96 000	67 000
Shareholders for dividents	760 000	560 000
	28 201 600	27 800 000

Additional information

The issue price of all the shares is R10 each. New shares were issued on the first day of the financial year.

Interim and final dividends for the year ended 31 December 2021 amounted to R1 413 000.

Fixed assets were sold at carrying (book) value during the year for R1 440 000. Fixed assets were also purchased.

The shares in Nascar Limited are currently selling for R12 each.

All purchases and sales of inventories are on credit.

The following ratios have been calculated:

	2021	2020
Profit margin (Net profit margin)	9.84	9.68
Acid test ratio	1.38.1	0.45.1
Return on equity	7.45	5.84

QUESTION 5

20 MARKS REQUIRED

Use the information provided in Question 4 to answer the following questions:

5.1 Calculate the following ratios for 2021 only. Express the answers to two decimal places.

5.1.1 Inventory turnover (2 marks)

5.1.2 Creditor payment period (2 marks)

5.1.3 Return on assets (2 marks)

5.1.4 Debt to assets (2 marks)

5.1.5 Dividend per share (2 marks)

5.1.6 Current ratio (2 marks)

5.1.7 Earnings yield (2 marks)

5.2 Comment briefly but meaningfully on the following ratios which have been calculated:

5.2.1 Profit margin (Net profit margin) (2 marks)

5.2.2 Acid test ratio (2 marks)

5.2.3 Return on equity (2 marks)