QUESTION $2(38$ marks$)$

You are provided with the following information for West $($Pty$)$ Ltd$.$

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME OF WEST $($PTY$)$ LTD FOR THE YEAR ENDED $30$ JUNE $2024$

Notes

$2024$

Rand

Revenue

$1500000$

Cost of sales

$(1000000)$

Gross profit

$500000$

Other income

$1$

$5500$

Other expenses

$2$

$(300000)$

Finance cost

$(30000)$

Profit before tax

$175500$

Income tax expense

$(47740)$

Profit for the year

$127760$

Other comprehensive income

$-$

Total comprehensive income for the year

$127760$

$1.$ The other income consists of:

Dividends received

$5000$

Fair value adjustment $($held for trading investment$)$

$500$

$2.$ Other expenses include the following:

Depreciation

$43000$

Loss on sale of vehicle

$5000$

$8$ HFAC$231-1-$Jan$-$Jun$2024-$SA$1-$CP$-$V$2-08122023$

STATEMENT OF FINANCIAL POSITION OF WEST $($PTY$)$ LTD AS AT $30$ JUNE $2024$

$2024$

Rand

$2023$

Rand

ASSETS

Non$-$current assets

$521000$

$435160$

Property, plant, and equipment

$521000$

$435160$

Current assets

$441000$

$345000$

Trade receivables

$214000$

$150000$

Inventory

$170000$

$140000$

Bank

$57000$

$55000$

Total assets

$962000$

$780160$

EQUITY AND LIABILITIES

Share capital

$100000$

$100000$

Retained earnings

$711260$

$583500$

Total equity

$811260$

$683500$

Current liabilities

$150740$

$96660$

Trade payables

$103000$

$71000$

Taxation payable

$47740$

$25660$

Total liabilities

$150740$

$96660$

Total equity and liabilities

$962000$

$780160$

$9$ HFAC$231-1-$Jan$-$Jun$2024-$SA$1-$CP$-$V$2-08122023$

REQUIRED:

$2\mathrm{.}1)$ Using the direct method in accordance with IAS $7$ Cash Flow Statements, calculate and present the cash generated from operations figure only in the Statement of Cash Flows of West $($Pty$)$ Ltd for the year ended $30$ June $2024.$ Comparative figures are not required. Round all answers to the nearest Rand.

$(19$ marks$)$

$2\mathrm{.}2)$ Prepare the note to the financial statements of West $($Pty$)$ Ltd to reconcile the cash generated from operations and the profit before tax for the financial year ended $30$ June $2024.$ Comparative figures are not required. Round all answers to the nearest Rand.

$(14$ marks$)$

$2\mathrm{.}3)$ Assume that West $($Pty$)$ Ltd$$s Statement of Cash Flows for the year ended $30$ June $2024$ showed cash flow from operating activities of R$226520.$ You are required to:

$$ Calculate the ratio of quality of earnings of West $($Pty$)$ Ltd for the financial year ended $30$ June $2024.$ Round your answer to two decimals.

$$ Provide a brief interpretation of the ratio calculated.

$$ Give one reason why the ratio of quality of earnings is an important ratio to analyse.

$(5$ marks$)$

$10$ HFAC$231-1-$Jan$-$Jun$2024-$SA$1-$CP$-$V$2-08122023$

Competency Framework Reference:

B$1$

REPORTING FUNDAMENTALS

B$1\mathrm{.}1$

Fundamental reporting concepts

a$)$

Identify users$$ needs and develop a reporting approach by selecting suitable reporting and regulatory framework$($s$)$ which satisfies most users$$ needs in general purpose reporting by: $($i$)$ Applying the fundamental theories related to reporting, $($ii$)$ Applying the objective, usefulness and limitations of the available reporting frameworks, $($iii$)$ Applying the objective, nature and characteristics of regulatory frameworks and requirements

b$)$

Apply the qualitative characteristics and principles of useful information

c$)$

Identify, define, and evaluate appropriate reporting boundaries

d$)$

Identify, define and evaluate the different elements in reporting frameworks

e$)$

Apply the recognition and de$-$recognition criteria to an element

f$)$

Select and apply a measurement basis to an element

D$1$

PERFORMANCE MEASUREMENT FOR EXTERNAL USERS OF GENERAL$-$PURPOSE FINANCIAL STATEMENTS

D$1\mathrm{.}1$

Financial reporting: in accordance with International Financial Reporting Standards $($IFRS$)$

a$)$

Prepare, analyse and evaluate general purpose financial statements in accordance with IFRS for an entity, which could be a for$-$profit