Question
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.
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)
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
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)
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