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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 nonalcoholic beverages. It commenced operations a few years ago
with an authorized share capital of ordinary shares and by eighty percent 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 days and it was able to sell all its products to its customers on credit terms of 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 The company did, however, pay an interim dividend of R to the shareholders during A
final dividend was also declared at the end of The market price of each share of Colatonic Ltd was R
on December
This following are the financial statements for the past two years:
COLATONIC LTD
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER:
R R
Sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Interest on investment
Interest expense
Profit before tax
Company tax
Profit after tax
STATEMENT OF FINANCIAL POSITION AS AT DECEMBER:
R R
Assets
Noncurrent assets
Investment maturity date June
Inventories
Accounts receivable
Cash
Equity and liabilities
Equity
Longterm loan
Accounts payable
Bank overdraft
Dividends payable
Company tax payable
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 slowcook 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 was gathered to assist with trying to improve the
profitability and breakeven quantity for the year:
The fixed and variable manufacturing costs are estimated to be R per annum and R per unit
respectively. The selling price of the cooking bags will be R each. The selling and distribution costs are
expected to total R per month plus of sales. The administration costs are estimated at R per
month plus R per unit sold. 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 R which
is expected to have a useful life of six years and a salvage value of R The installation cost of the
machine is R units are expected to be sold annually. The net profit is expected to be R per
unit. The straightline method of depreciation is used by Colatonic Ltd The companys cost of capital is
If approved, the implementation date would be January
QUESTION MARKS
Study the Statement of Comprehensive Income of Colatonic Ltd for and and answer the following
questions:
What evidence does the statement of comprehensive income for the year ended
December provide for each of the following? Include calculations to support
your answer.
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