Question 3 [30 marks 45 MINUTES] You are the accountant of Blatter Protective Wear (PTY) Limited, a company with a national presence in the manufacturing and distribution of protective gear for construction workers. The statement of profit or loss and the statement of changes in equity for the year ended 30 September 2020, and the statement of financial position at 30 September 2020 and 2019 are provided. The chief executive officer (CEO) is concerned that while the statement of profit or loss reflects a profit, there has been a decline in the cash balances. The CEO maintains that profitable companies should have positive cash balances to limit borrowing. Blatter Protective Wear (PTY) Limited Statement of financial position on 30 September ASSETS Non-current assets Land and buildings, carrying amount Equipment and furniture, carrying amount Current assets Merchandise inventory Trade and other receivables Bank balances Total assets 2020 2019 R R 1 882 500 1 301 000 1 170 000 1 200 000 712 500 101 000 188 440 242 120 93 200 112 000 95 240 76 020 2.070 940 54 100 1.543.120 EQUITY AND LIABILITIES Equity 1 472 230 1077 330 Ordinary share capital 1 200 000 900 000 Retained Earnings 272 230 177 330 Non-current liabilities Long-term loan (non-interest bearing) 280 000 280 000 Current liabilities 318 710 185 790 Trade and other payables 49640 35 790 Current tax payable 150 000 Bank overdraft 219 070 Shareholders for dividends 50 000 2.070.940 1.543 120 Blatter Protective Wear (PTY) Limited Statement of changes in equity for the year ended 30 September 2020. Balance at 1 October Profit for the period Issue of shares Dividends 5 Page Share Capital Retained Earnings R900 000 R177 330 144 100 300.000 (50 000) 1.200.000 271.430