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y and answer the questions that follow: COLATONIC LTD: THE BEVERAGE GIANT Colatonic Ltd is a marketer of a range of non - alcoholic beverages.

y and answer the questions that follow:
COLATONIC LTD: THE BEVERAGE GIANT
Colatonic Ltd is a marketer of a range of non-alcoholic beverages. It commenced operations a few years ago
with an authorized share capital of 500000 ordinary shares and by 2023 eighty percent (80%) of the shares
had been issued. Its product mix includes soft drinks, juices, energy drinks and flavoured water. These
products are marketed under various brands. The company has distribution outlets in all the provinces in
South Africa, with the headquarters in Pretoria. It negotiated with its suppliers for all purchases to be made on
credit terms of 90 days and it was able to sell all its products to its customers on credit terms of 30 days.
Colatonic Ltd experienced a great dela of success in the recent years because of its excellent sales strategy
and the clever use of social media. However the entry of cheap energy drinks and flavoured water into the
South African beverage market from China and other countries led to a downturn in the financial performance
in 2023. The company did, however, pay an interim dividend of R670080 to the shareholders during 2023. A
final dividend was also declared at the end of 2023. The market price of each share of Colatonic Ltd was R15
on 31 December 2023.
This following are the financial statements for the past two years:
COLATONIC LTD
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER:
20232022
R R
Sales 2000000024000000
Cost of sales (12000000)(13000000)
Gross profit 800000011000000
Selling, general and administrative expenses (5000000)(6600000)
Operating profit 30000004400000
Interest on investment ??
32400004592000
Interest expense ??
Profit before tax 29400004352000
Company tax (823200)(1218560)
Profit after tax 21168003133440
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER:
20232022
R R
Assets
Non-current assets 34800002700000
Investment (maturity date 30 June 2025)20000001600000
Inventories 22000001800000
Accounts receivable 14000001100000
Cash 2000016000
91000007216000
Equity and liabilities
Equity 53700004156000
Long-term loan 20000001600000
Accounts payable 1000000800000
Bank overdraft 5000040000
Dividends payable 600000500000
Company tax payable 80000120000
91000007216000
The financial manager of Colatonic Ltd read about the plight of the local child welfare organisation which
aimed to supplement its funds by making and selling cooking bags which can slow-cook meals or keep food
warm for long periods. The financial manager approached the board of directors who agreed that the
company should assist the organisation. After discussions with the president and treasurer of the welfare
organisation the following budgeted information for 2024 was gathered to assist with trying to improve the
profitability and break-even quantity for the year:
The fixed and variable manufacturing costs are estimated to be R240000 per annum and R42 per unit
respectively. The selling price of the cooking bags will be R120 each. The selling and distribution costs are
expected to total R15000 per month plus 5% of sales. The administration costs are estimated at R31000 per
month plus R6 per unit sold. 15000 cooking bags are expected to be sold.
In keeping with its plans for expansion, the company is appraising the production and sale of a new designer
energy drink. This would involve the acquisition of a new machine with a purchase price of R1600000 which
is expected to have a useful life of six years and a salvage value of R200000. The installation cost of the
machine is R100000.5000 units are expected to be sold annually. The net profit is expected to be R30 per
unit. The straight-line method of depreciation is used by Colatonic Ltd. The companys cost of capital is 16%.
If approved, the implementation date would be 02 January 2025.
QUESTION 1(25 MARKS)
Study the Statement of Comprehensive Income of Colatonic Ltd for 2023 and 2022 and answer the following
questions:
1.1 What evidence does the statement of comprehensive income for the year ended
31 December 2023 provide for each of the following? (Include calculations to support
your answer.)

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