REQUIRED Study the Statement of Comprehensive Income of Fairmont Ltd and additional information below based on the Pro-Forma Statement of Comprehensive Income for July and August 2019. Use the below information to answer the following question INFORMATION The Statement of Comprehensive Income of Fairmont Ltd for the year ended 30 June 2019 is as follows: R Sales 6000 000 Cost of sales (4000000) Gross profit 2000 000 Rent income 216 000 2216 000 Operating expenses (1375000) Salaries 655 000 Advertising 240 000 Bad debts 120 000 Depreciation 60 000 Other operating expenses 300 000 Operating profit 841 000 Interest expense (76000) Net profit 765 000 Additional information 1. Sales for the period April to June 2019 are forecast at R480000 per month. Sales for July 2019 are expected to be 5% greater than the sales for June 2019. A decrease of 10% is expected during August 2019. 2. Cash sales account for 60% of the total sales, with the balance of the sales on credit. Five percent (5%) of the credit sales are expected to be irrecoverable and these are written off three months after the sale. 3. The existing mark-up percentage on cost will be maintained during July and August 2019. 4. The rental agreement makes provision for an increase of 12% each year, effective from 01 July Salaries increase by 10% on 01 August each year. 6. The amount spent on advertising each month is calculated as a percentage of sales. The percentage for the period ended 30 June 2019 will be maintained in the next financial year. 7 Depreciation for the year ended 30 June 2019 was calculated as a percentage on the cost price of the equipment, R400000. New equipment with a cost price R120000 will be purchased on 01 July 2019. Other operating expenses are spread evenly throughout the year and are expected to 15. 8 increase in the OU UUU 1. 2. 3. Depreciauon Other operating expenses 300 000 841 000 Operating profit Interest expense (76000) Net profit 765 000 Additional information Sales for the period April to June 2019 are forecast at R480000 per month. Sales for July 2019 are expected to be 5% greater than the sales for June 2019. A decrease of 10% is expected during August 2019. Cash sales account for 60% of the total sales, with the balance of the sales on credit. Five percent (5%) of the credit sales are expected to be irrecoverable and these are written off three months after the sale. The existing mark-up percentage on cost will be maintained during July and August 2019. The rental agreement makes provision for an increase of 12% each year, effective from 01 July. Salaries increase by 10% on 01 August each year. The amount spent on advertising each month is calculated as a percentage of sales. The percentage for the period ended 30 June 2019 will be maintained in the next financial year. Depreciation for the year ended 30 June 2019 was calculated as a percentage on the cost price of the equipment, R400000. New equipment with a cost price R120000 will be purchased on 01 July 2019. Other operating expenses are spread evenly throughout the year and are expected to increase by 10% in the new financial year. Repayments towards the loan will result in interest expense dropping by 10% per month. Interest expense for June 2019 is expected to amount to R6000. 5. 16. 7. 8. 9. REQUIRED Study the Statement of Comprehensive Income of Fairmont Ltd and additional information below based on the Pro-Forma Statement of Comprehensive Income for July and August 2019. Use the below information to answer the following question INFORMATION The Statement of Comprehensive Income of Fairmont Ltd for the year ended 30 June 2019 is as follows: R Sales 6000 000 Cost of sales (4000000) Gross profit 2000 000 Rent income 216 000 2216 000 Operating expenses (1375000) Salaries 655 000 Advertising 240 000 Bad debts 120 000 Depreciation 60 000 Other operating expenses 300 000 Operating profit 841 000 Interest expense (76000) Net profit 765 000 Additional information 1. Sales for the period April to June 2019 are forecast at R480000 per month. Sales for July 2019 are expected to be 5% greater than the sales for June 2019. A decrease of 10% is expected during August 2019. 2. Cash sales account for 60% of the total sales, with the balance of the sales on credit. Five percent (5%) of the credit sales are expected to be irrecoverable and these are written off three months after the sale. 3. The existing mark-up percentage on cost will be maintained during July and August 2019. 4. The rental agreement makes provision for an increase of 12% each year, effective from 01 July Salaries increase by 10% on 01 August each year. 6. The amount spent on advertising each month is calculated as a percentage of sales. The percentage for the period ended 30 June 2019 will be maintained in the next financial year. 7 Depreciation for the year ended 30 June 2019 was calculated as a percentage on the cost price of the equipment, R400000. New equipment with a cost price R120000 will be purchased on 01 July 2019. Other operating expenses are spread evenly throughout the year and are expected to 15. 8 increase in the OU UUU 1. 2. 3. Depreciauon Other operating expenses 300 000 841 000 Operating profit Interest expense (76000) Net profit 765 000 Additional information Sales for the period April to June 2019 are forecast at R480000 per month. Sales for July 2019 are expected to be 5% greater than the sales for June 2019. A decrease of 10% is expected during August 2019. Cash sales account for 60% of the total sales, with the balance of the sales on credit. Five percent (5%) of the credit sales are expected to be irrecoverable and these are written off three months after the sale. The existing mark-up percentage on cost will be maintained during July and August 2019. The rental agreement makes provision for an increase of 12% each year, effective from 01 July. Salaries increase by 10% on 01 August each year. The amount spent on advertising each month is calculated as a percentage of sales. The percentage for the period ended 30 June 2019 will be maintained in the next financial year. Depreciation for the year ended 30 June 2019 was calculated as a percentage on the cost price of the equipment, R400000. New equipment with a cost price R120000 will be purchased on 01 July 2019. Other operating expenses are spread evenly throughout the year and are expected to increase by 10% in the new financial year. Repayments towards the loan will result in interest expense dropping by 10% per month. Interest expense for June 2019 is expected to amount to R6000. 5. 16. 7. 8. 9