QUESTION ONE

REQUIRED Use the information provided below to prepare the:

1.1 Pro Forma Statement of Comprehensive Income for the year ended 31 December 2021. (6 marks)

1.2 Pro Forma Statement of Financial Position as at 31 December 2021. (Note: except where otherwise stated, the percentage of sales method is not required) (14 marks)

INFORMATION TRANSCO LIMITED

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020

	R
Sales	7 125 000
Cost of sales	(4 275 000)
Gross profit	2 850 000
Operating expenses (including depreciation)	(1 521 000)
Operating profit	1 329 000
Interest on loans	(116 500)
Profit before tax	1 212 500
Income tax(28%)	(339 500)
Profit after tax	873 000

TRANSCO LIMITED

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020

	R
ASSETS
Non-current Assets	2 667 000
Fixed Assets	2 667 000
Current Assets	1 876 850
Inventories	641 250
Trade and other receivables	997 500
Cash and cash equivalents	238 100
Total assets	4 543 850
EQUITY AND LIABILITIES
Shareholders equity	2 445 600
Ordinary share capital (700 000 shares)	700 000
Retained earnings	1 745 600
Non-current liabilities	975 000
Long term loan	975 000
Current liabilities	1 123 250
Trade and other payables	783 750
Income tax payable	339 500
Total equity and liabilities	4 543 850

Additional information

1. Sales for the year ending 31 December 2021 is expected to increase by 12%

. 2. The existing gross profit percentage will be maintained in 2021.

3. Operating expenses are expected to increase by 6% in 2021.

4. 200 000 ordinary shares will be issued in 2021 at a value of R1 each.

5. The company will purchase a property costing R400 000 on 1 March 2021. A long term loan will be taken out to fund the purchase. It is expected that interest will be paid at a rate of 12% on this loan. Monthly loan instalments of R16 000 will be paid on this loan beginning on 30 March 2021.

6. Total depreciation for the year ending 31 December 2021 is expected to amount to R310 000.

7. Percentage of sales must be used for the following items:

a. Inventories

b. Trade and other receivables

c. Trade and other payables

8. 10% of the current long term loan will be repaid during 2021. Interest on this loan for 2021 will amount to R97 000.

9. Dividends of R120 000 will be declared and paid by December 2021.

10. Income tax payable is 28% of the tax determined in the Pro Forma Statement of Comprehensive Income.

11. The amount of cash and cash equivalents must be determined (balancing figure)

END OF PAPER