COURSE: ACCOUNTING IIB

AO2-Q2-2018
-3-
QUESTION 2 (25 MARKS)
(30 MINUTES)
Wolfsburg Ltd is a third part tuning company specialising in VW and Audi motor vehicles has grown
substantially over the past few years.
You have been presented with the following information relating to Wolfsburg Ltd for the reporting periods
ended 31 March 2017 and 2018:

Ordinary share capital of R5.00 per share

Authorised (number of shares) 750 000
Issued 1 April 2016 (number of shares) 275 000

8% preference shares redeemable at the option of the holder issued at R3.75 each
R750 000
on 11 August 2013

15% cumulative non-redeemable preference shares issued on 1 October 2017 R565 000

10% non-cumulative redeemable preference shares issued on 31 December 2017 R627 500

Profit for the period (before preference dividend/interest)

2018 1 475 000
2017 1 296 000

Total comprehensive income for the period

2018 1 650 000
2017 1 296 000

Additional Information

1. The issued ordinary share capital of Wolfsburg Ltd on 1 April 2016 was 275 000 shares of R5 each.
On 1 July 2016 the company bought back 100 000 shares for cash.

2. On 1 November 2016 the company made a capitalisation issue of three ordinary shares for every ten
ordinary shares held on that date.

3. On 30 September 2017 the company secretary proposed a share consolidation of R5 ordinary shares
into R10.00 ordinary shares.

4. On 1 January 2018 a rights issue was made of two ordinary shares for every 5 ordinary shares held
on that date, issued at fair value.

5. No dividends were declared on the 10% non-cumulative redeemable preference shares in the 2018
reporting period. All other dividends were declared on 31 March for both periods. No entry had been
recognised in the accounting records and no cash had been paid yet.

6. Dividends of R793 650 were paid to ordinary shareholders on 31 March 2017.

REQUIRED:
a) Present and disclose the Earnings per share (EPS) and Dividends per share (DPS) in the financial
statements for the reporting period ending 31 March 2018 to comply with the minimum requirements
of the Companies Act and IFRS. (25)

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COURSE: ACCOUNTING IIB
AO2-Q2-2018
-4–
QUESTION 2 (SUGGESTED SOLUTION)
a)
Wolfsburg Ltd
Statement of Comprehensive Income for the reporting period ending 31 March 2018
2018 2017
R R
Total comprehensive income 1 650 000 1 296 000
Earnings per share (cents) 1 110 964 P Commented [MT1]: This is for disclosing under total
comprehensive income

Statement of Changes in Equity for the Reporting Period ended 31 March 2018

Note R R
Dividend per ordinary share (DPS) - 3,49 P Commented [MT2]: This is for disclosing under statement
of changes in equity

Notes to the financial statements for the reporting period ending 31 March 2018

Earnings per share

Basic earnings per share was calculated based on earnings of R1 389 425^P (2017: R1 252 800^P) and a
weighted average number of 125 125^P (2017: 130 000^P) ordinary shares after a capitalisation issue on
1 November 2016 and a share consolidation on 30 September 2017 was taken into account.
Comparative amounts have been restated accordingly. 

Reconciliation of earnings with profit for the year: 

2018 2017
R R
Profit for the period 1 431 800 1 252 800
Less: Cumulative preference dividend (42 375) -
Less: Non-cumulative redeemable preference dividend -
Earnings attributable to ordinary shareholders 1 389 425 P 1 252 800P

Calculations:

Earnings

2018 2017
R R
Profit for the period 1 475 000 1 296 000
Less: Cumulative preference dividend (Interest) (750 000 x 8%) (60 000)  (60 000)
Tax effect 16 800  16 800
Adjusted profit for the year 1 431 800 1 252 800
15% Preference Dividend (565 000 x 15% x 6/12)  (42 375) P -
10% Preference Dividend – not declared - -
Earnings 1 389 425 1 252 800

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 COURSE: ACCOUNTING IIB
AO2-Q2-2018
-5–
QUESTION 2 (SUGGESTED SOLUTION - CONTINUED)

Weighted average number of shares

2018 2017
Actual WANOS Actual WANOS
Balance 1 April 2016 275 000 ^ 275 000 ^ 275 000 ^ 275 000 ^
Share buy-back 1 August 2016
Full Year (100 000) (100 000) (100 000)
Weighted average 9/12  (75 000) 
175 000 175 000 175 000 200 000
Capitalisation issue – 01 November
2016
175 000 x (3/10)  52 500 52 500
200 000 x (3/10) -  60 000
227 500 227 500 227 500 260 000
Share consolidation – 30 September
2017 (5/10) (113 750) (113 750)  - ^ (130 000) ^
113 750 113 750 227 500 130 000
Rights issue - 1 January 2018
113 750 x (2/5) x (3/12)  45 500 11 375  - ^ - ^
159 250 125 125 227 500 130 000

Earnings per share

2018 2017
R R
Earnings/WANOS 1 389 425 1 252 800
125 125 130 000
1 110 cents P 964 cents P Commented [AZ3]: Students should only get these
principle marks if they divided by the WANOS.

Dividends per share

2018 2017
R R
Dividends/Ordinary Shares 793 650
227 500
R0 P R3.49P

29 max (25)

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