‘Answer ANY FIVE (5) questions in this section. ‘QUESTION 4 ‘Answer the questions from the information provided. 44 12 Calculate the Retai Income balance as at 31 December 2020. Calculate the interest expense for the year ended 31 December 2020. 4.3 Did the company increase its cash balance from 31 December 2019 to 31 December 20207 Motivate your answer with the relevant calculations. 4.4 Calculate the amount that would appear for the ‘purchase of property, plant and equipment” in the cash flow statement forthe year ended 31 December 2020. 4.5 Whatis the likely impact on the following if the LIFO method of inventory valuation is used instead of FIFO during periods of rising prices? 4.5.4 Canrying value of inventory in the Statement of Financial Position. 4.5.2 Cost of sales in the Statement of Comprehensive Income. 4.8 Without making use of any ratios, provide an interpretation of the following over the two-year period: 4.6.1 Invesiments 4.62 Loan INFORMATION (20 Marks) (2 marks) (2 marks) (3 marks) (3 marks) (6 marks) (3 marks) (3 marks) (4 marks) (2 marks) (2 marks) ‘THE FOLLOWING INFORMATION WAS EXTRACTED FROM THE ACCOUNTING RECORDS OF NAVARONE. LIMITED FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2020 AND 2049: NAVARONE LIMITED ‘STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER: 2020 ASSETS Non-current assets 462 468 301 830Property, plant and equipment 442.068 249 330, Investments 20.400 52.500 Current assets ? 2 Inventories 75342 94728 ‘Accounts receivable 77658 88 068 Cash 2 2 Total assets 631.268, 490 266 EQUITY AND LIABILITIES Equity 2 ? Shere capital 160.200 4147 000 Retained income 2 2 Non-current liabilities 185 604 152.496 Loan 185 604 152 496 Current liabilities 92070 59706 Accounts payable 74730 38 052 Other current liabilities: 17340 21654 Total equity and liabilitiesNAVARONE LIMITED ‘STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER: 2020 2019 R’000 R'000 Sales 432972) 286 998 Cost of sales 240540) 144 180 ‘Gross profit 192432) 142818 Operating expenses 60828 49.656 Depreciation 22.038 8580 ‘Other selling, general and administrative expenses 38790 41076 Operating profit, 131 604 93 162 Investment income 8232 12474 Interest expense ? 2 Profit before tax 104 568 81240 Income tax 31370 24372 Net profit 73198 56 868 1. | The number of shares in issue as at 31 December 2020 was 8 010 000. 2. | The credit terms to customers are 30 days. 3. _| Property, plant and equipment were purchased during the year but none were sold. 4. | All purchases of inventory and sales are on credit.QUESTION 2 Use the information from QUESTION 1 fo answer the following questions. 2.4 Caloulate the ratios for 2020 (answers expressed to two decimal places) that would reflect each of the following: 2.4.4 The percentage of the company’s net profit to its revenue. 2.4.2 _Aniindication of the number of times inventory has been replaced in @ year. 2.1.3 The number of days thet the company takes to pays its supplier. 2.4.4 Anindication ofthe operating profit produced by the total assets ofthe company. 2.4.5 The affcioncy with which the company uses its net assets to produce sales. 2.4.6 measurement of the amount of net income earned per share of stock in issue. 2.4.7 The percentage of the total assets that were paid for with borrowed funds. 2.2 Provide TWO (2) significant comments for each ofthe folowing ratios: 2.24 Gross margin (2020: 44.44%: 2019: 49.76%) 2.2.2 Debtors collection period (2020: 65.47 days; 2019: 112 days) 2.23 Current ratio (2020: 1.83:1; 2019 3.16:1) QUESTION 3 Study the information given below and answer each ofthe following questions independently: 34 32 35 Calculate the margin of safety (in Rands). Use the contribution margin ratio to determine the sales value that is required to achieve an operating profit of R400 000. ‘Suppose Abbot Enterprises wants to make provision for 2 10% increase in variable costs and a 5% increase in fixed manufacturing overheads. To compensate for ths, the company wants 0 increase ‘the selling price by R7 per unit. Will te operating proft increase? Show your calculations. Would you recommend an advertising campaign costing R20 000 that would increase the sales volume by 1036? Motivate your answer. Calculate the selling price per unit that wil enable the company to eam an operating profit of R195, 000. (20 Marks) (14 marks) (2 marks) (2 marks) (2 marks) (2 marks) (2 marks) (marks) (2 marks) (6 marks) (2 marks) (2 marks) (2 marks) (20 Marks) (4 marks) (marks) (4 marks) (4marks) (4 marks)The following budgeted information regarding a product produced by Abbot Enterprises is available: The product is sold at R100 per unit. Employees involved in the manufacture ofthe product are paid RAO per hour. The labour time per unit is 0.5 hours. The materials used in the menufacture of the product cost R30 per unit. The salling costs are estimated at R10 per unit sold. Fixed manufacturing overheads and fixed administrative costs are expected to cost R200 000 and R180 000 respectvely. Production and sales are estimated at 15 000 units. ‘QUESTION 4 (20 Marks) ‘Answer the questions from the information provided. 4.4 Use the information provided betow to answer the following questions: (7 marks) 4.44 Calculate the proft that Lotus Suppliers would make ifthe account is settled within 10 days. (6 marks) 44.2 Should the customer fail to pay the amount due and the account is written off after 90 days, how (3. marks) ‘much would be the loss to Lotus Suppliers? INFORMATION Lotus Suppliers is considering selling a reftigerator to Jane on credit. The cost ofthe retigeretor is R12 500 and the selling price is R20 000. Credit terms of 2/10 net 60 were agreed upon. The cost of capital to Lotus Suppliers is 18%. 4.2. Use the information given below to calculate the number of orders that need to be placed annually (6 marks) based on the economic order quantity. INFORMATION ‘The annual sales of a product sold by Bellagio Limited is 3 600 000 units. The purchase price is R12 per unit. The carrying cost of inventory amounts to 25% of the purchase price, The ordering cost is R24 per order. 43 Calcuiate the effectve interest rate from the information given below if (7 marks) 43. the intrest is paid in advance. (marks) 43.2 there is a20% compensating balance requirement. (8 marks) Benson Limited plans to borrow R2 000 000 for one year. The stated interest rate is 15% QUESTION 5 (20 Marks) Use the information given below to prepare the Cash Budget for January. February and March 2022.INFORMATION ‘Some of the items in the Projected Statement of Financial Position as at 31 December 2021 of Lincoln Limited are as follows: Current assets R Debtors/Acoounts receivable 650 000 Current ibilties Bank 20000 Creditors (for material purchases) 160 000 ‘Additional information ‘The following forecasts have been made by Lincoln Limited for the first three months of 2022: +. | The sales manager anticipates the following sales volumes al a constant price of R200 per unit January February March 2.600 units 3200 units 3.900 units Fifly percent (50%) of the sales are for cash and the rest is on credit. Thirty percent of the cash sales are to ‘wholesalers who are entiled to a 10% cash discount. Debtors pay their accounts in the month after the sale. 2. | The unit casts of production include the following: Materials ROS per unit Direct labour R52 per unit ‘The purchases manager expects to purchase materials to manufacture the following quantities each month: January February March 3100 units 3600 units 4.600 unitsNo inventories of materials are held at the end of each month. 4. | Sixty percent (60%) of the materials ere purchased for cash in order to take advantage of @ 5% discount and the balance is purchased on credit. Creditors are paid in the month after the purchase. 5. | Direct labour costs are incurred inline with production and are paid during the month in which they were incurred. 6. | Variabie overheads are R26 per unit produced from January to February, and R29 per unt from March onwards. Fixed overheads are estimated at R90 000 per month, including R'10 000 for depreciation. Overheads are payable in the month in which they are incurted. 7. | The production manager intends purchasing machinery worth R'130 000 on 31 March 2022 on credit. A deposit of 20% is payable immediately and the balance of the debt plus finance charges of R20 000 will be paid in five equal ‘monthly instalments, commencing April 2022 /est 20% of the sales (before any discounts) in excess of R500 000 in a notice deposit 9. |The rent expense for the year ended 31 December 2022 is expacted to cost R73 200 per annum and is payable monthly. Note the rental increases by 10% with effect from 01 November each year. QUESTION 6 (20 Marks) Answer the questions from the information provided. Where applicable, use the present value tables provided in ‘APPENDICES 1 and 2 that appear afier QUESTION 6. 6.1 Use the information provided to enswer the following questions: (9 marks) 6.4.1 Compute the Net Present Value, (6 marks) 6.4.2 Caloulate the Payback Period (expressed in years, months and days). (B marks) INFORMATION ‘Abann Limited is looking atthe possibilty of investing in a naw machine, The machine would cost R1 800 000, and its cash operating expenses would totel R360 000 per year. The equipment would lest for five years. At the end of five years, the equipment would be sold for R140 000. On the benefit side, itis estimated that the new equipment \would generate cash sales of R800 COO per year. The cost of capital is 12%. 6.2 Use the information provided below to calculate the following: (14 marks) 6.21 Calculate the Accounting Rate of Return on initial investment (expressed to two decimal places). (4 marks) 6.22 Calculate the internal Rete of Return (expressed to two decimal places). (6 marks) 6.2.3 Should the management of East Coast Manufacturers consider investing in this machine? Why? (1 marks)East Manufacturers 8 considering manufacturing and marketing a new product. The project involves purchasing a spacial machine for R250 000 plus installation costs of R50 000. The expected useful lfe of the machine is five years with no selvage value enticipated. The net proft per year is expected to be R30 OU0. The straight-line method of depreciation is used. The minimum required rate of return is 12%.QUESTION 1 (20 Marks) REQUIRED: 1.1 Prepare the projected statement of financial position for the year ended 31 December 2020 for Anglo Limited. (16 marks) 1.2 Discuss some of the consequences of overestimating sales when drawing up the sales budget. (4 marks) INFORMATION Anglo Limited ‘Statement of financial position for the year ended 31 December 2019 R ASSETS ‘Non-current assets 2.200 000 Fixed/tangible assets [2200000] 200 000 Current assets 1 454 000 Inventories Trade and other receivables Cash and cash equivalents Totel assets: 3654 000 EQUITY AND LIABILITIES Shareholders’ equity 2244 000 Ordinary share capital Retained earings Non-current liabilities 660 000 Long term lan [sao] Current liabilities 750 000 Trade and other payables Notes payable 3.654 000‘Additional information: + Sales for 2019 was R2-200 000 and sales for 2020 is forecast to be R2 400 000 ‘© The percentage o sales is used to determine the following balances: o. Inventories ©. Trade and other receivables ‘© Trade and other payables ‘A new delivery vehicle costing R320 000 willbe purchased in 2020. Total depreciation in 2020 will be R280 000 ‘There willbe no change in notes payable and share capital Dividends of R90 000 willbe paid in 2020. The business predicts a net profit margin of 8% fr 2020. ‘+ An amount of REO 000 willbe repaid forthe long term loan. Cash and cash equivalents must be determined. QUESTION 2 (20 Marks) Chemco Ltd, a chemical manufacturing company, is considering replacing one of its chemical processing equipment that has reached the end of is useful lite. Two alternatives ere currenty being considered. Equipment A can be purchased for R550.000 which excludes transport and instalation costs of R50 000 to bring the equipment to a state of production. This equipment will have a useful feof four years and will have no scrap value after four years. All equioment is depreciated on the straight line basis, The expected net cash inflows from the sale of units produced by Equipment Ais as follows: Year 1 Year2 Year3 Year4 Net cash inflow per litre R190 R2.00 R215 R2.22 No of lites 100.000 105 000, 412.000 120 000 Equipment B can be purchased for R600 000 and will have a useiul life of 4 years, after which itis expected to be disposed Of at its scrap value of R40 000. The net cash revenue from the sale of production related to Equipment B is 100 000 litres sold for a flat price of R1.80 over each ofthe four years. Itis the company's policy to reject any capital projects that have a payback period of more than three years The intemal rete of return for Equipment Ais 17.66% _ end for equipment Bis 9.84%. The company's cost of capital is 12%. The financial director hes requested you to advise the capital expenditure committee on which equipment will the most feasible to purchase. REQUIRED: Prepare a report tothe capital expenditure committee in which you evaluate the two options and make a recommendation Con the option fo be chosen. Your report should include all workings showing the application of relevant capital expenditure techniques thet you have used in coming to your decision.QUESTION 3 (20 Marks) REQUIRED: Prepare the Cash flow statement of Carrier Enterprises for the yeat ending 31 December 2020. INFORMATION ‘The following extracts of the financial statements of Carrier Enterprises were presented to you! Statement of Comprehensive Income for the year ending 31 December 2020: R Sales 7200000 Cost of sales (272000) Gross profit 628.000 Operating expanses (224000) Operating profit 204000 Interest expense (500) Profit before tax 294 500 Taxation (62460) Profit after tax 212040 Dividends paid (42.000) Profit after tax 170 040 ‘Statement of Financial Position as at 31 December: 2020 2019 ‘ASSETS Non-current assets #1 000_| 319000 Current assets 431790__| 286 000 Tnventory ‘99 000 64.000 Debtors 115000 | 98000 Bank 217 790_| 124000 342790 | 605 000 EQUITY AND LIABILITIES “Owners” Equity 71 040_| 507 000 Ordinary Shares 175000__| 175000 Retained Earnings: 496040 _| 326.000 Non-Current Liabilities ‘90.000 30.000 Debentures 12% "90,000 "30,000 Current Liabilities 81750 74.000 Trade creditors 81750 74000 842790 | 605 000Additional information: ‘© Nomnon-current assets were sold during the year. Depreciation of R42 000 is included in operating expenses for 2020. QUESTION 4 (20 Marks) 44 Gucei Enterprises makes handbags. The fixed costs of operating the workshop for @ month total R5 000. Each handbag requires material that cost R20. Each handbag takes 2 hours to make, and the business pays the handbag makers R12.50 an hour. The bag makers are all on contract and if they do not work for any reason, they are not paid. Each handbag is sold to fashion stores at R70. The business expects to sell 350 handbags per month The business is considering to rent @ bag making machine. Doing so would incease the fotal fixed costs of operating the ‘workshop for a month to R9 375. Using the machine will reduce the labour ime to 1 hour for each handbag. The handbag ‘makers’ labour rat will remmain unchenged REQUIRED: 4.4.4 Would you aivse the business to rent the machine ifyou consider the effect on operating profi?” (10 marks) 4.4.2 Would your response in 4.1.1 be any diferent if you considered the breckeven quantiy and margin of safety of both options? (Smarts) 42 Furncraft Manufacturers manufacture lounge suites that sel for R3.000 per suite. They have the same basie design but may vary the fabric coverings. Ithas the capacity to produce 1 400 lounge suites each month although production very seldom exceeds 1 000 per month. The sales manager received a request from a cut-price discounter (with many branches) who made an offer to buy 300 lounge suites at R2 400 per suite. The latest monthly gures reveal a seling price per unit of 3.000 and variable costs of R1 800 per unitwith a volume of 900 units. Fixed costs amounted to R810 000. REQUIRED Would you advise the sales manager to accept or reject the offer? Substantate your answer marks)QUESTIONS (20 Marks) 5.1 REQUIRED Use the information provided below to calculate the cost of sales end gross profit for the year ended December 2019 using the following methods of inventory valuation: 5.11 FIFO (5 marks) 5.1.2 Weighted average cost. (Round off the weighted average cost per unit to the nearest cont) (5marks) Note: Use the format of the statement of comprehensive income to present your answer. INFORMATION Wain Stationers, a slalionery Store, had the following inventory of math sets on 01 January 2019, the start of the financial year: 20 units at R40 each purchased on 30 November 2018. During 2019 the following transactions were recorded: 300 units at R45 each were purchased on 20 January 2019. 7160 units at R5O each were purchased on 31 May 2019. £80 units at R55 were purchased on 30 November 2019. 400 math sets were sold at R80 each during 2019. 5.2 REQUIRED Calculate the economic order quantity (E0Q) for 2020 from the information provided below. (6 marks) INFORMATION The monthiy usage of an fem during 2020 is estimated at 600 units. The budgeted costs are as follows: ‘The cost per unit is R12. The ordering cost emounts to R10 per order and the holding cost per unit is equal to 10% of the unit cost ofthe item, 53 REQUIRED Use the information given below to determine the cost (as a percentage) to Super Traders of not accepting the discount (6 marks) INFORMATION Walton Wholesalers’ usual credit terms to Super Treders are 30 days but the supplier is prepared to allow a 2.5% rebate if the account is settled within 10 days.QUESTION 6 (20 Marks) 64 INFORMATION Premier Intemational Limited expects to sell 3000 desk fans at a price of R300 per unit. The cost fo manufacture each fan is R200. ifthe selesare made on credit, collection costs of approximately R5 per unit sold will be incurred. The cost of capital to the company is 12%. REQUIRED: Calculate the profit to Premier intematonel Limited if: 6.1.1 Allsales are for cash (marks) 6.1.2 Allthe sales are on credit and the accounts are paid in 60 days (4 marks) 6.1.3 Allthe sales are on credit and a 5% discount is granted ifthe accounts are paid in 20 days. Suppose that 50% of customers pay their accounts within 20 days. (Gmarks) 62 ‘Moondrops Manufacturers has annual sales of 82 200 000, cast of sales of R1 400 000, inventory of R330 000 and accounts receivable of R410 000. All sales are on credit. Accounts payable are R340 000 and credit purchases amount fo R1 400 000. REQUIRED: 62.1 Calculate and comment on the operating cycle. (4 marks) 62.2 Evaluate the cash conversion cycle of Moondrops Manufacturers and suggest ways in whch this can be improved. (4 marks)APPENDIX 4 ‘Table : Present value of SI: PVPA (&): = Taker of aw fae | ae {sw foe | me | am fom [aes | us fe fous | ues | ae fous fame | ase | ame fas | asx ends [OR TOE | WHEE | RO | OH OT TO | OE RT [OATS | OR [RT [ [OE | [OE OT a aT [ous [or [maa oT [ona [es Pars [OT [UTS [ATH [OTe [wa [CAD Fast [OST [OST | OW) [OMR | OMT [ GAT] OAH | OTD OSL AEE [OTE [WRT 730 | CASS [OBIT | LALA [ 6 [USE [OST] GST [ase [ogee [omer] ser [oat [oma [ aay 735 | a7et | as abe [OARS [UT aw Oss [0S [SRT asIs [O47 [OA | CABS Fas or [om OH [OAS S| OTRO wn | OY [ [WHS [OSH | oS [ AST | ATE [oA [SOT [wai [oa [Ow [OST wR Om ORT | a AD OT | Cm | RT| OSA [ WS [em | Om [ a | aS [Oak | [ae OST [I [UT | asED om [ONT | 075 [OTT [ons | WATT SKS [oS | OST RT [OSS [WAST [a SH [USN [LR [ ST9 [059 [07H [OWT [ass Foass [ort] eran Lore | ore | ean] ns [asy [aaa [uae [oan | oma [13506 a0 [oss | ave [ 0 [o2wT [26 [OI [asi Tomek [eet Tn [ots [e918 [es on | owat [ 0a [ue [on [ony [cas [as [oa [es [0s Tom [ono To [sess [os [ozs [oes [03 [ass [oss [vat ar [oanss [03s [za [osu [oer [cae [0206 [oan [oir [urs [as [ore Tr Te | OR [A | we | OTT [OA [ST | THA | OE [wa a | ORT [ TA WTR | | [ UT Toss | 0785 [OE SN TY A NT TT 15 [rer [70 [oto [ons [a0 [04s [040 [0377 1.55 [oar [e300 ae Pues |e [9 [aes [0100 [os [ows Tomb aT [usa | OST [aT [aS [TE [5 | Oe [OT [ ABH YAS | OT [TT [ OS [oe [oT [UBT 15 [os [ei [oo [oss [ na [oats [oN | La | OTT [1 an a9 [OT | nwa [ ons [ome [wo HA TO TR S| OT | a | NT | NT Te | | | | aT [Te oe TT 17st [ a7 os | ost [ aes ars [ani | oz ean [ore [oes] 1456 [22 [oT | ao [aos [oss [oe | es [ams [wa To | OE USK | | AS OAR [eH [OS] TAT OW Pe] oT [oN [cM | ose Ws ons [ LOST ns [oa 19 [or ews [srs [oars [0357 [ass anes [0217] cases fous [137 [ue [ess [ooo [cis [ss [ose [oor [ csr [ a8 [ome 2} TST] DTH SSH OAR [OT | OIE CHS OAS Oe a POA OST [ma [OTN [OT [ST [HOS [OURS | OOD [oT TR | ORAS OT | OT | ORT ON | OT | OR OT TE | OO || TT OT | TE OA 7a [0301 [aay oas [oz [ora [rss [owas | ose cuss [oar [ont [us [oie | ans [ noi [on [ooo | umes [am? [oot TTT | Day ANT [ON | OT oma [UTS we Loe | OMT [Lo [Ss [osr [wo [uy [aus [om [maT [oN [oss [2m [ae [om [nse | cow Towns | oor] ones Lose [omar [ncn | noni [ano | non | aoe [amr [om [anmer | « feel eo ss [0565 [ 16 ost [035 [ows ors Tous | oasr| ons Toons oan [uoor [aos Foo [oom [awn * | * | + [= Their eo or cvinal pesAPPENDIX 2 Table I: Preset valu ofa regular annuity of 1 per period frm periods: PVE (a Washer ew | % ee fom] fom fu fam tay fase | vee | ams | ass | a9 Ja ea Ta aa | OR | | | TT | aT Ta [is osi6 [ar | ras [1a |] 15 [ATS | TR La asm aor EE ESE FRE Te [so [an soir sss | 31 | CIENT aa Tsar Sass ins oer || ec rae ha [ae SI 0 ss | sme Su Soe | Smee | aa [a | a | | os | | as [we | | ae [a 7 ene [arn Sm] sae [sori [uae [er [a [amg [aa [at [a [so as [a |e © isn ins scat [ sis Sus] us [538 [ast | ans [re [9 aa a 3 [ase 1 TU] 67] 6ST] 6S | SORT] STN] SST] SDO] IAT [aes TIS EC) [9B | 9906 Tra] TOL] TRS] OTT] GATT se | S| SAN] AD [UN | SOK [0 | ss [AAT [089 |S THOR SRR | OS | TT] THT] TT | SRT | WT | A ST | S| | SET a TPES [OSS Sasa | AT A | RAG] TT] TST [THT [RTA [oT Sea [SS sr TEs us Toss [ss oe [RINT | ASST] TO Ta | | [was [a aE ST aT TST aE TS | oa | BAR| ATR] AAT | TIN | TMT [mT A [ eS [om | STE a 15 [ss a [sas [as er [ari [ae [as | ar [row [re aa [aaa |e | Se 05 Te sr sa se Ta aT [ae [asses [si mat [nants [are | a2 [aS [Kon [7S mA oi [aT se oe a Ta [ane [uo | are | we [wig cr ont | 480 sia [sins esa Tan [LIS [8 as | AST [34 [78 oR [4 180 [so | as Ta_[iaes is PTS BARD [6 [SD [OAT [SINS [ST | Tomas Ta | To [6a | IF Se [6 ERE HST A | SN YH | EA | TR | oT | WRN | DOD | RENT] TT | TT TN | | RT | Sk | SRT AT SRO RF] AD TOO] SIS | | LADD TENE [TTT | | NG] ID | SRT TET | IT SE 16 | SIT AT SSR [6] 1-02 S| || [SAT | [SMUT AMS TR ET as [cea | [se [0 [aS 3» i STRAT PT RN TTT [REST [STE [ TMT [ST RE TR | [TE [NS STS ST [SON EI @ 950 [4 ao [2055 |e || [AO [eT ss] aso [TTS [Tr [ ae [oe [san 55 san | AONQUESTION 1 INFORMATION NUWARE LIMITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019 Cash flows from operating activities Profit before interest and tax Non-cash flow adjustments ‘Add: Depreciation Profit before mocking capital changes ‘Working capital changes Decrease in inventory Decrease in receivables Inorease in payables Cash generated from operations Interest paid Dividends paid Company tax paid Cash flow from investing activities. Land, buildings and equipment purchased Cash flow from financing activities Increase in long-term borrowings Net decrease in cash and cash equivalents: Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year R 2540 000 7700 000 700 000 700 000 6.400 000 690 000 780 000 310 000 200 000 ‘9080 000 (150 000) (4 900 000) (1500 000) (4200 000) (4 200 000) 1100 000 1100 000 7 7 7 (20 Marks)REQUIRED: 1.4 Why was depreciation included in computing the cash flow from operating activities? (2 marks) 1.2 Calculate the cash balance on 31 December 2019 if there was a bank overdraft of R460 000 on 31 December 2020. (2 marks) 1.3 Based on the cash flow information above, how does the company appear o be performing? Explain by referring to at least five items in the cash flow statement. (10 marks) 1.4 Long term loans were increased during 2020. Was this the most appropriate way of financing the purchase of assets? (3 marks) 1.5 What cash receipts increase cash but not profits? (3 marks) QUESTION 2 (20 Marks) The following budgeted information for the year ended 31 December 2020 is provided by Voltex Ltd, a manufacturer of a single product: TOTAL R ‘Sales (30 000 units) 360 000 Direct material 54 000 Direct labour “42 000, Variable manufacturing overheads 33.000 ‘Sales commission 33.000 Total fixed costs R78 000 ‘The sales forecast for the year ended 31 December 2020 is 15% less than the actual sales for the year ended 31 December 2019. The sales director produced three proposals to improve the position Proposal A involves launching an aggressive marketing campeign. This would involve a single additional fixed cost of 18 000 for advertising. Sales commission will increase by R1.20 per unit. Sales volume is expected to increase by 10% above the 2020 budgeted sales with no change in the unit selling price. Proposal B involves a 10% reduction in the unit selling price. Fixed selling overheads will also reduce by R12 000. The budgeted sales volume is expected to increase by 10% Proposal C involves a 10% reduction in the unit selling price and this is estimated to bring the sales volume back tothe budgeted level as the year ended 31 December 2019. The sales force wil be incentivised with a salary increase totalling R15 000 for the year. REQUIRED 2.1 Due to the uncertainties related to forecasted sales which have been compounded with the effects of COVIDI9, the financial manager would like to know which of the three proposals have the least risk in terms of achieving a sales volume that would not result in a loss. (4 marks) 2.2. The financial director has asked you to indicate which of the three proposals should be chosen to achieve the highest operating profits (14 marks)2.3 Based on your findings for both 2.1 and 2.2 which proposal would you advise this company to adopt. (2 marks) QUESTION 3 (20 Marks) 34 REQUIRED: Calculate the value of closing inventory as at 31 December 2019 and gross profit for the year ended 31 December 2019 Using the weighted average cost method. (Round off the average cost per unit to two decimal places and the income statement figures to the nearest Rand) (@marks) Use the format ofthe Statement of Comprehensive Income to present your answer. INFORMATION: ‘Compu Mania, a call phone accessory company's inventory records are presented in the table below: Closing inventory of 220 units at RBO each on 31 December 2018 20 units at R66 were purchased on 15 Merch 2019 Ta units at RGO were purchased on 15 July 2019 100 units at R94 were purchased on 10 September 2019 During the year (lan-Dec 2019) 500 units were sold at R160 each 32 REQUIRED: 3.2.4 Calculate the incremental profitloss after tax. (8 marks) 3.2.2 Determine the incremental retum on sales if these new customers are accepted. (3 marks) INFORMATION: Osman's Stores is considering extending credit to some customers who may be at risk of defauting in payment. Sales will increase by R620 000 if ceditis granted to these customers. From the new accounts receivable generated, 8%is expected ‘to be uncollectable. Additional collection costs will be 4% of sales, and the production and selling costs will be 65% of sales. ‘The firmis subject to tax at 28%.QUESTION 4 (20 Marks) Unican Ltd is looking to expand its operations and increase its market share in the canned food industry. To achieve this, itis looking o increase its current productive capacity of 1 000 000 cans a yearby at laast §% for each ofthe next years. {tis considering two canning machines and is unsure which to purchase. Machine A can be imported at a landed purchase cost of R380 000 and a further R20 000 transport ard installation costs vill have to be incurred to getit ready for production. This machine is expected to last § years after which time it can be sold for 5% ofits landed purchase cost. Net cash revenue from the sale of the adcitional production is expected to be R140 000 in the frst yearand this is expected to increase by 8% every year over the lifetime of the machine. This machine vill enable Unican to achieve a 3% increase in productive capacity. ‘Machine B can be purchased locally for R300 000 and will also have a useful life of 5 years. It will not have any resale value at the end ofthe § years and will be disposed of. Net cash inflows from additional production will amount to R140 000 per annum for each of the five years. This machine will enable Unican to achieve a 2% increase in productive capacity. Unican Ltd requires a retum on capital of 12% forall investments made, The depreciation policy is to depreciate all non- current assets on a straight line basis. Assume that all cash flows occur at the end of each financial year except for the initial investment which occurs in period 0. Ithas already been determined that the internal rate of retum is 28.73% for Machine A and 36.7% for machine B The capital expenditure committee has indicated thet R700 000 is available for this capital expenditure. In terms of the company’s capital expenditure policy, only projects with a payback period of less than three years are accepted. REQUIRED You are the financial manager at Unican Ltd and have been asked by the Board of Directors to advise them on which machine/s to authorise for purchase. Using appropriate capital budgeting techniques compile a report to the Board of Directors detailing the option that should be chosen.QUESTION 5 (20 Marks) INFORMATION: The following information is available for Conlog Enterprises: 1. On 30 June 2020 the bark account in the general ledger reflected a credit balance of R 125 000. 2. The following related to sales for May and June 2020: Way actual June actual Selling price per unit R60 R60 Sales Volume 7000 units 200 units The selling price is expected to increase by 10% from 1 July due to the effects of COVID 19. Seles volume are expected to increase by 8% for each month from July onwards as the company attempls to reach full operation after the COVID lockdown. (Projected sales price per unit and sales volume must be rounded up to the nezrest rand) 3. 30% of sales are for cash 4. Collections from debtors are expected to be as follows: 40% -30 days after the sale - these customers qualify for a 5% discount 50% - 60 days after the sale 10% written off after 90 days 6. The production records for finished goods reveal the following production costs and volumes: JUNE ACTUAL PER MONTH Cost Volume Direct Material RIO Direct Labour Rio ‘Overheads RIO 12000 unis Production volume is expected to increase by 5% for each month from July onwards as the company attempts to reach {ull production capacity after the COVID lockdown. Ignore opening and closing stock for cash budgeting purposes.6. All material purchases are on credit. Creditors are usually paid one month after purchase. Material costs are expected to increase by 10% from July onwards due to the deterioration in the exchange rate. 7. Payment of overhead costs and seling and administrative costs are delayed by one month. Overhead costs per unit are expected to remain the same for the projected period as the company attempts to minimise costs. Actual selling expenses for June was 8% of actual sales. Selling expenses for July to Septare expected to increase to 10% of budgeted sales due to increased marketing efforts. 8. The company has been forced to lower the direct labourrate by 10% from 1 July due tothe lockdown effects. Employees have agreed to this decrease as they understand itis essential to decrease cosis in order to save jobs. Direct labour costs are paid in the month in which they are incurred 9. Actual salaries for June was R80 000. This was only 40% of the normal selary bil as staff had been put on unpaid leave due to the lockdown. Its expected that all staff will return to work from 4 July. 10. During July the company will sell two ofits delivery vehicles as it attempts to mirimise some of its running costs. These vehicles together had an original cost of R225 000 and a book value of R80 000. They will both be sold for a total profit R40 000. 10. A fixed deposit of R90 000 will mature on 31 July and wil be redeemed. This investment was eaming interest of 12% per annum which wes being paid out monthly 412. The proprietoris expected to increase his capital contribution by R30 000.0n 4 July. REQUIRED: 5.1 Compile the debtor's collection schedule for July and August (4 marks) 5.2 Compile a cash budget for July and August (16 marks)QUESTION 6 (20 Marks) INFORMATION ‘Youare the loan applications assistant at ABSA Bank. Amco Ltd has applied for loan of R800 000 and has provided the information below to suoport their application. Your duties involve preparing a submission to the loan approval manager in which you provide a financial analysis ofthe financial statements of loan eppicants. ‘Ameo Ltd has been operating for 10 years and for the year ended 31 December 2019 achieved total sales of RB 200 000 , all of which were on credit. Amco Ltd attained a gross profit percentage of 30%. Operating expenses for this period ‘amounted to R890 000 and the interest paid on liabilities wes R240 000. Taxation is payable at 26%. The company has 1 milion ordinary shares issued at Ri each and this remained unchanged in the 2019 financial year. Retained income on 31 December 2018 amounted to R322 400. The company hed long term loans on 1 January 2019 totalling Rt 300 000. During the 2019 financial year, R100 000 capital was repaid on these long term loans. The company had non-current essets totalling R3 100000 on 31 December 2019. On 31 December 2019 accounts payable amounted to R680 000 and other current liabilities totalled R740 000. The company had a favourable bank balance at year end amounting to R260 000 The value of inventory on 31 December 2019 amounted to R920 000 and debtors at year end totalled R820 000. ‘Absa will charge interest at 12% per annum if the loan is granted. ‘Some of the industry averages for the sector in which Amco Ltd operates are as follows: Gross profit % | - 25% Curentraio -3:1 Acid testratio = 1.2:1 Interest cover -4 fimes, Debt toassets 70% Detttoequity -60% Retum on equity - 22% REQUIRED Use the information provided above to: 6.1 Compie the Statement of Comprehensive Income for the year ended 31 December 2019 (5 marks) 6.2 Compie the Statement of Financial Position on 31 December 2019 (5 marks) 63 Calculate three relevant ratios to determine if the bank should approve the loan of R800 000 to Amco Ltd. Assume interest on existing debt will remiain unchanged. Provide a recommencation to the loan approval manager. (10 marks)‘APPENDIX 1 ‘Table L: Present value of $1: PVEA (4) ma % my fas | | is | un | us ss | ass | tos foams | ae | aoe fas | 298 Tova | RG RT | STE [USE [WHR |USDW | OUT | MOT [OSU | WAIN ORT [TD] OHS [ONT [OAT | OTS | ON |S | Ta 61 | | Ts | OTD | oIn | OAT | ORTH | ORAT | OAD [Oslo | Oma | HH | O76 [ORD [OTR | OTD [ORD | was | To [OM TY GMT] KIN [OH [ONTKE [OAR | oTTD OTS arm mw | ema [wD | OATS [UMA [OAD [ome [OSHS [OST [UST TG | OTR] GRA] ORDTT | OHN[ OTN | OTD |OUR | OAD [OAS | WAS | ISS | 50M | OSIK [OST | OST | OSIK [OAR | OAS | CAN TEE TSS OMT wm UT IS [OTS [OTR | OA | OH | OAIO | OHI | mses | SHDN [STH] OAD [Ose [UAT | OST [0am | aad [OAT at AT [CS | OT [MRD | ON | OIE [ws [ST [ne [ Om [sR [Oa [Oe [Oe [os [oT [oa [TOT s| Ti [oar [oat | 79 a | ST eis [OSD [USTED [OTT [0485 [Os [oun [wars [sss [os [ae [089 [07 [RST oes [ass aes [07 Tes [TE [asa [0Smn [oss [oes [ony | was [assim [oe [oss [oes [ont [De [oN [OTE AGA] [DG | OHS [OTD [OSS [OSD [was [UAT [ow | | ODF [OHS [OE [ODD [OTH | OSS [oN | OINN [ OTT g aD A [WR OA9 [OSH | OsOD [04RD [oss [UaES 0357 | waza | 0K [26H | OTE [OKT [0NWD | OIL [O17 | ols OAT SSA [OST | OAD [OTS [05S | OAT Tae | COD | BSE [OUT TS | OTe | ON | OR TORE [OTS mT [UAT | OTT [ONS [0G | OE Tam [RRS [san | OTD [OL [OD POT [06 [OTRO KR | CAST | OTT [O42 | OOT | OTS | OT | OD YOUN | DS] IES | OF | WKS | O1OE | OOS [OSH [US [OTH [OAT YOST [OSU UAT [ WHT US [OT | ODD | OPN | 0 [OTT OUST | IST | S| CATO mAs [DOE | OUTS OM TS OIE [OT [ ONY OSS [we [OAT [ KD OSISD [OES | ON [ ODN | ORT [O15 [Os | WD] | Homey | ORGS [DOTA | ooHH [ONT Te [0 | | | OD | OT IN| OTS |UD |OUR | OTT [OTS | OT | | WR [OT | TU | DoE | SET OAT T7_[ 08d [O7ie [oat [OST [006 OD | OIL | UIE [O16 | 0.146 | OST OT | LD] mM | S| Km | DON | OT [ODS TR [UR [OT [Ose Yan [wats ww [19] ODN | eTaN | UIWN |OUR O18 [oe [om ae] oem [na | ome [OORT [oa [DOT TH [UAT [Oat [OST | CATH | 03s | ORO | IES] UIT | OHS | UIS | OLIT OT | oot [oD | LT | SB | HoT | OORT [DOT | OTS OME SS AE TTB | ABS | TI | TAT HT | ORD [OTT | OTRO | OTT | ON | OAT | sw UOT [RT | ON | OeS [Omer [om [OMT [ons [oT Tras oss [water | ees] 251 [ HT [OUT | omK | oust | OTs [aT | moss | Us [wow | OST [WONG [omsO | oan [omss [oxo [oo TT was ue | mR DD [BT [ Oak [OMAN [ou [UT [was oN | was [oss [Omer [oom [oa [was [oom owo7 | OAT Tse [OSTIS ODM | IAT] ANT RET [OOS [OAH | OOIE [ames [oss | | oma | mois [ Come [wom [Ooo | eons [ome acon [© @|2] 4] <1 ss [oT 0167] cows | oasis [om [ons [om [omer [ums [oan oom [oom fomms| com fuowi fomay + | * | + | Th ivr sas fn ilpsQUESTION 1 (20 Marks) INFORMATION: Shield Industries plans to manufacture gas stoves and the following information is applicable: Eslimated sales for the year ‘OOO units at R450 each Estimated costs for the year Variable costs 320 per unit Factory overheads (all fixed) R80 000 Administrative expenses (al fixed) R30 000 REQUIRED: 11 Caleulate the total operating proit for the estimated figures. (4 marks) 1.2 Calculate the break-even quantity (3 marks) 13 Caleulate the break-even value (3 marks) 14 Calculate the margin of safety in units. (3 marks) 15 Caleulate the target sales volume to achieve a profit of R50 000. (3 marks) 1.6 The sales manager is of the opinion that a greater profit wll be made ifthe selling price is decreased by 10% as sales volume will then increase by 10%. Calculate the total operating profit at the new selling price and advice management whether to implement this suggestion (4 marks}QUESTION 2 (20 Marks) REQUIRED Study the information provided below and answer the following questions: 2.1 Calculate the Payback Petiod for both pants. (Answers must be expressed in years, months and days.) (6 marks) 2.2 Calculate the Accounting Rate of Return for Plant Beta on initial investment. (3 marks) 2.3 Calcuiate the Net Present Value of each plant. (Round off amounts to the nearest Rand.) (6 marks) 2.4 Calcuiate the Internal Rate of Return for Plant Beta. (4 marks) 2.5 Based on your results in 2.3 which plant should be accepted? (1 mark) INFORMATION Hydro Enterprises is seeking to expand operations and is considering increasing production capacity by purchasing the latest plant and equipment. The following two plants are being considered for acquisition as they are technically superior to the current plant and will enable higher production volumes with lower cost inputs. The fnance department has projected the cash flows forthe life of the plant and has asked you as the investment manager to advise the Board onwhich of these plants to acquire. Hydro's current cost of capital is 12%. ‘The following information relates to the two plants that are being considered: Plant Alpha Plant Beta Thitial cost R550 000 R400 000 Expected useful fe 4 years 4 years Depreciation R137 500p.2. R100 000 p.a. Net cash inflows, Net cash inflows, Net profit, Expectednet cash inflows R R R TP year 180 000 130 000 30000 2e4 year 190.000 130 000 30000 3 year 210.000 130 000 30000 Am year 160 000 130.000 30.000QUESTION 3 3.1 REQUIRED Calculate the following variances: 3.1.1 Raw material price variance 3.1.2 Raw material usage variance INFORMATION The standard cost of material for Product X for the first quarter of 2019 was: 4-kg material at R20 per kg 22.000 kg of material was purchased at R22 per kg The actual production of Product X for the third quarter of 2019 was 5 000 which used 22 000 kg 3.2 REQUIRED Explain the most likely reasons for the material price and usage variances calculated in 3.1 3.3 REQUIRED Discuss the 5C’s of credit that are used by bankers as an indicator whether a loan will be repaid on time (20 Marks) (3 mars) (3 mars) (4. marks) (10 marks)QUESTION 4 (20 Marks) REQUIRED Use the cash statement below to answer the following questions: 4.1 Why wes depreciation included in computing the cash flow from operating activites? (2marks) 42 Calculate the following 4.2.1 netincreaseldacrease in payables (2marks) 4.2.2 netincreaseldacrease in cash for the year (2marks) 4.2.3 cash balance on 4 July 2018 (2marks) 4.3 Based on the cash flow information provided below, how does the company appear to be performing? Refer to at least 5 items on the statement in your evaluation of performance. (S marks) 4.4 The long term loan was increased during the financial year. Explain ifit was prudent for the company to increase its ong term liabilites. (3 marks) 4.5 Comment on the dividend poly of the company. (2 marks) 4.6 Suggest two ways in which the company can improve its liquidity (2 marks) INFORMATION Eindorf Limited Cash flow statement for the year ended 31 June 2019 R Cash flow from operating activities (255 000) Operating loss _ (280 000) Adustmenis Depreciation 100 000. Profit before working capilal changes [180 000) Working capital changes “55.000 Increase in inventory (200 000) Increase in receivables (175 000) Increase/decrease in payables 2 Dividends paid (60 000) Interest paid (70 000) Cash flow from investing activities (300 000) ‘Acquistion of plant and equipment (300 000) Cash flow from financing activities 450 000 Increase in long term loan (25%) 450 000 Net decrease/increase in cash 2 Cash balance (1 July 2018) 2? Cash balance (30 June 2019) (160 000)QUESTION 5 (20 Marks) 5A (10 marks) INFORMATION Sedgars Limited Extract from the Statement of Comprehensive Income for the year ended 31 December 2018 R Sales 4 140 000 Cost of sales (3.490000) ‘Opening inventory 7140 000 Purchases 3.630 000 Gross profit 650 000, ‘Operating expenses 1429000) Operating profit 224 000 Interest expense (35.000) Profit before tax “186.000 Taxation (62800) Profit after tax 4133200 Additional information: Dividends paid during the year amounted to R&S 000. The market price per share on 31 December 2018 was RSS. The company has ordinary share capital of 20 000 shares issued at Rt each. REQUIRED Use the information provided above to calculate the following ratio's for 2018: 5.1.4 Net profit margin (2marks) 5.1.2. Earnings retention ratio (2 marks) 8.1.3. Price eamings ratio (2marks) 5.1.4 Dividend per share (4 marks) 52 (10 marks) Comment on each of the following ratios of Sedgars Limited, Ratio ‘Sedgars Limited | Industry average 5.24 ‘Acid test ratio 08:1 1.24 522 ‘Current ratio. 230-1 280.1 5.23 ‘Debtors collection period 39.25 days 30 days 5.24 Inventory tumover 4.75 times 65 times 5.25 Return on equity 14.1% 19.2%QUESTION 6 (20 Marks) 61 REQUIRED: Calculate the value of closing inventory as at 31 December 2018 and gross profit for the year ended 31 December 2018 using the frstn-frst-out (FIFO) cost method. (10 marks) Use the format of the Statement of Comprehensive Income to present your answer. INFORMATION: Galanz Limited, a supplier of laboratory equipment, inventory records are presented in the table below: Closing inventory of 60 units at R220 each on 31 December 2017 ‘90 units at R230 were purchased on 30 Apri 2017 110 units at R240 were purchased on 30 June 2017 700 units at R250 were purchased on 30 August 2017 During the year (Jan-Dec 2078) 270 units were soldat R380 each 62 REQUIRED: Use the information given below to answer the folowing questions: 6.2.4 Calculate the profit that Elecra Ltd would make i the account is settled within 20 days. (marks) 6.2.2 Should the customer fail to pay the amount due and the account is written off after 90 days, what would be the loss to the firm? (marks) INFORMATION: Electra Lid is considered seling an aircon unt to a customer on credit. The cost of the aircon is R18 000 and the seling Dice is R24 000. A credit term of 2:20 net 60 days was agreed upon. The cost of capital of Electra Lid is 12%.FORMULA SHEET plc 499 Speroting refit soy dividends for the year ‘mmumber of ordinary shares issued x 100 garr, market price per share “earnings per share ‘Sates cost of sales ‘average inventory crest seer dete ® 100 sales met assets rencoret tty 99 eae x 100 Operating profit Interest expense operacing profte ‘cepitel enpioyed x 100 profit after tax number of ordinary shares issuedtotal fired costs contribution margin per unit fixed costs contribution margin ratio break even quantity x selling price sales units — break-even sales units sales - breakeven sales total fixed costs + targeted ‘marginal income per unit fit (actual price - standard price) x actual quantity issued (actual quantity -standard quantity) x standard price (actual rate - standard rate) x actual hours worked (actual time worked - standard time allowed) x standard rate (Actual hours ~ standard hours) x standard rate (Actual rate — standard rate) x actual hours Actual rate = actual variable overhead rate / actual number of hours Standard rate = standard variable overheads! standard number of labour hours Actual fixed overheads ~ Budgeted fixed ‘overheads Budgeted fixed overheads ~ standard fixed overheads Standard fixed overheads = Number of units produced x standard time to make 1 product x Standard rate per hour ‘Standard rate per hour = standard fixed overheads / standard number of labour hours, (Actual selling price - Standard selling price) x actual quantity sold (Actual quantity sold - budgeted sales) x selling price D1 PO ba Po pt wnt 9 Ks= Rf + B(RM-Rf) 2p Np K(-)‘APPENDIX 4 Table: reset vale of 1 PVA ba) = > Take a fm fae [aw fw a] om fae | ow | a aw fuss | us | ass | aoe | me | ams | 19s 20s] as eb Ta |S | [OOTY OE | OT wT | [TaN ON | OT | RT aa [sms [assts [oss [osas asi [asso [owe [ass [oat [oxo [oats [un [.ma [9s [se [oa [as [071 [ere [a [sr] ose [pTs aay ase oR OME THR | OTH [OTT [OAD [OT [OAR [TN [CAS | omuT| wAD [oa | OE [SAT [asst [ase [os Poses [sor [avn [ores [ora [ov [os [oaser [uss [oats [usa [oss [035 soy [oss] wf on [OTe RT OT [OTT] | OH ORDH [OS |e [SEN [TH CWT [eae | aR | OAT | WaT | aT [OT] | DT OTT | | OA | ORT OS [| OR ON [| TS oa [OO TT [NH | OT [sa os fais ear sis [oar [ose [ns [ws [wary [3s [033 [was [0399 [ow [oer [oss Toass [ns a [oar ms [ose [osu [ome [oan [oatw | iar9 ine nase | aT cat fons 9 [sas oe [es [5 oms [aso [ose [oso [oe [oa [on [as [9 [as [ws ctw [os [0 TW ons [oan Fora [srs ati oss [ss | ous [out [cas [oss fot [as [ey [ae ars [outs [ore Ta TR | | OER ST |W OR SR | OTS | RT | [Oa OTS [ | OR [at Ts | SS 1 Os [ eT [120 POAT INH | A [OS IE | OH [ON BT [uate i [oe [oat [er [ose [cot [03s [oman an [en [ots oa [ 019 oat [eam [ms [ms [aT UST] SIs | 0a a8 Or oe [NOT [OUST LAS | WIT [oT BS | oT [OAT ON sais ssh a | oars Foe [sts ones [cae [ec [or ns [ua [oe Tos [os Toss [ours [ue Toes Tw oy a | [ce oe ear [ee ce oe [a Fo Fass [i Fos [sit [te [os [ost [02m [oom [ cave [oes 0.486 0 [urs [ony ow [ves [ac [us [st ows TE aso oS [an OS [Oss | [OD ONY | C0 | IT [ow OC wT | WS oe [ UT | [OT 15 [waz [ ous Foss [us [099 [oss [ us| 01 [oes [cas [sr [one [st [uns [aon ase | ws [oss [sr [es [oes [1 [oma | SS Ose | OTN OST [0 [OES aT | CH OT] O07 | ma | mT | ST OS | KS [oa Ce | aS OTR [wee | TOT | RT| | OTe | TT || | IB OT | COS OET | TOO | | [ora ossat [nai Pow [onset [ot [oot [worst | eosrs [ous [cs [ues [ams wnt [eo aco [ ooo [ones [ome [oa [vo ts OR [OT | [ows [OMe | eNe| eA [ONE Oe OATS OST WAT | wo ors | as [eo ONT NT [ova Foss [zon [ua [oo [ss [one [owns [ors [cows Tose [ns on ane | wows | os [acme [cos [ooo [omer | + ‘a [oss oae [oer [ws [oasis ows [oss fons [oon Tose [osoe won Toon foam + [+ [+ [+ © Theficerisze fou dina psAPPENDIX 2 1 a es ‘Table 1: Present valu oa regular annuity of St per period forn periods: PVA (kn) =. oF - a _ “Tl fos] = me] ein fw | om | aoe va [ass | aes [i | ans | ams | Taw] oe Tons tae ase Tae | co [LL Ps Tse |S asd 3 [ae aa [os ose | aren | ae | 20 | oer 23 | Ze 23 as | See sare Ser sors es | a | [as [ce os a isin Tae overeat | Sor] S| ssa [ [Se [a [a [a aa [ae [eT [ars [se | z Tera ear an ao | ese | sar S| Sona [rr [ase [ee [a [a Tia ae | es me Te | | | | TELUS OST 998 BST [RE RR TT [TST TT [eR [a SI TPs or Co re Pare was | ass ao Poa Ta Ten Tame Tees Tot [sss [sap [sme | a [as Thee a TR | Sa AT || a [se [eS DARD [US| TSHR | DATA SIDES | MSE [TORS [TARDE | DRE [OAD | | RE SPE 07 5007 | AR 5mm waa TERE | T-TREE Ta [as [Pat Pa [es Pea Sse sa eas Tete [ae | [a [or [ase [eas [wt [et Poa [SMTP SEQUESTION 1 (20 Marks) REQUIRED se the information given below to prepare the following for Anglo Limited for June and July 2019: 1.1 Debtors Collection Schedule 4) 4.2 Cash Budget (18) Note: Provide separate monetary columns for each month. Where applicable, round off amounts to the nearest Rand, INFORMATION Extract of Statement of Comprehansive Income for the month ended 31 May 2019 R Sales 49.000 Cost of sales 20.000 Rent income 4000 Advertsing 2000 Salaries and wages 6000 Rates and taxes 180 Other operating expenses 8000 Additional information 1. The business uses a fixed mark-up of 100% on cost. 2. Sales are expected to increase by 10% each month. 3. Thirty percent (30%) of the sales are for cash and the balance is on credit. Collections from credit sales are as follows: ‘© 40% in the month ofthe sale, and these customers are enitied to a 2% discount ‘© 55% one month after the sale. © The balance is usually writen off as bad debts. 4. Inventories are kept ata constant level. ll purchases are for cash 5. In terms ofthe lease agreement, the rental wil increase by R1 200 per annum with effect from 01 July 2019. Rent is received monthly. 6. Advertising is paid monthly andi estimated to be the same percentage of sales as for May 2019. 7. Salaries and wages wil increase by 10% with effect fom 01 June 2019. 8. Rates and taxes will be paid in one instalment forthe year during July 2049. Rates are calolated at 80 cents (RO.80) per R100 on the value ofthe premises. The premises are valued at R300 000. 9. Other operating expenses are expected to increase by R400 per month. These expenses are paid for in the month in which they are incurred. 410. The balance in the bank on 31 Nay 2019 was R20 000.QUESTION 2 (20 Marks) 2.1 Answer the questions below based on the following information. Income tax is calculated at 35% of profit. Vuvu Traders Sisi Stores 2018 2017 2018 2017 ®) ® ®) ®) ‘Operating profit 400000 [320000 [420000 | 380.000 Profit after tax 720000 | 700000 | 740.000 | 80 000 Non-current debt: (10% | 200000 | 0000 [1200000 | 1000000 pa) Equity ‘B00 000 [720000 [300000 [280.000 Note: The enterprise has no current lbiltios REQUIRED 2.4.4 Calculate the retum on assets for both enterprises for 2018. 4 2.1.2 Calculate the retum on equity for both enterprises for 2018. (4) 2.1.3 Which enterprise is more profitable? Explain, ( 2.4.4 Should Vuwu Traders be satisfied with its retum on assets? Explain. Q 2.2 In 2017, Baba Wholesalers had R2 000 000 of assets, R200 000 of currant iabilties and R600 000 non-current liabilties. Operating profit was R500 000, interest expense was R120 000 and the tax rate was 40%. REQUIRED Calculate and comment on the following ratios: 2.2.1 Debt toassets 3 2.2.2 Debt to equity @ 2.2.3 Interest coverage 8QUESTION 3 (20 Marks) INFORMATION Lampard Limited intends purchasing a new machine and has a choice between the following two machines: Machine A Machine B Initial cost 200000 200000 Expected usetil fe 5 years 5 years Scrap value o 0 Expected net cash inflows: R End of Year 1 50000 58.000 Year 2 60000 58000 Year 3 65000 58000 Year 4 75000 58000 Years 40.000 58.000 ‘The company estimates that its cost of capital is 12%. REQUIRED 3.1 Calculate the Payback Period of both machines. (Answers must be expressed in years, months and days.) 4) 3.2 Calculate the Accounting Rate of Return (on average investment) of Machine A. 4) 3.3 Name one advantage of using net present value as a capital investment eppraisal technique. (t) 3.4 Calculate the Net Present Value of each machine. (Round off amounts to the noarest Rand.) 6 3.5 Calculate the Internal Rate of Retum of Machine B. 6)QUESTION 4 (20 Marks) Marvel limited is considering an upgrade of its machinery. The following data based on expected production and sales of 10.000 units are provided for analysis: Variable manufacturing cost R780 000 Fixed manufacturing cost F350 000 Sales commission (R12 per unit R20 000 Fixed administration cost Ri60 000 Sales Ri500 000 ‘Study the information provided above and answer the folowing questions independently: 4,1 Calculate the break-even sales value. 8 4.2 Caloulate the sales volume required to achieve a profit of R10 500 000 6 43 Suppose Marvel Limited is considering @ decrease of R8 per unit in the seling price of the product with the expectation that it would increase sales volume by 10%. Is this a good idea? Motivate your answer with relevant caleuations. (10)QUESTION 5 (20 Marks) 61 REQUIRED ‘Study the extracts of the Cash Flow Statement of Nathi Limited for the year ended 30 June 2019 and answer the following: 5:1.1 What do you understand by “Cash flow from operating activitios R120 000°? 4) 5:1.2 Name three transactons that improve cash flow but do not increase profit. © 5:13 There i a combination of a positive nat cash flow from operating activities and a negative cash flow from investing activites. Is this good for the company? Explain. © INFORMATION: Nathi Limited Extracts of Cash Flow Statement for the year ended 20 June 20.19, R Cash flow from operating activites 120 000 Cash flow from investing activites (820000) ‘Addttions to plant and machinery (820 000) Cash flow from financing activites 270.000, Tnerease in ong term borrowings 270.000 52 REQUIRE! Calculate the incremental profivloss after tax. © INFORMATION: Furn City is considering extending credit to some customers who may be at rsk of defaultng in payment. Sales will increase by R400 000 if credit is granted 10 these customers. From the new accounts receivable generated, 10% is expected to be uncollectable. Additional collection costs will be 5% of sales, and the production and selling costs will be 60% of sales. Taxation is 28%QUESTION 6 (20 Marks) 64 REQUIRED: Calculate the vaiue of closing inventory as at 31 December 2018 and gross profit for the year ended 31 December 2018 Using the weighted average cost method. (10) Use the format of the Statement of Comprehensive Income to present your answer. INFORMATION: Offcesupp Limited, a supplir of office accessories, inventory records are presented in the table below: Closing inventory of 80 units at R150 each on 31 December 2017 70 urits at R170 were purchased on 30 April 2017, ‘0 urits at R180 were purchased on 30 June 2017 20 urits at R190 were purchased on 30 August 2017 ‘During the year (Jan-Dec 2078) 240 units were soid at R300 each 62 REQUIRED. Use the information given below to answer the following questions: 6.2.1 Calculate the proft thet Telepoint Ltd would make ifthe account is settled within 15 days. ® 6.22 Should the customer fal to pay the amount due anc the account is witten off efter 90 days, what would be the loss to ‘the firm? @ INFORMATION: ‘Telopoint Ltd is considered selling a television to a customer on credit. The cost of the television is R12 000 and the seling price is R16 000. A credit term of 2/15 net 60 days was agreed upon. The cost of capital of Telepcint Lid is 12%.‘Table I: Present value of $I: PVFA (A) = (+n) APPENDIX 4 Tak Peds 8 Us us. 1s as Ws, Ie 1a m7 we cH ae a as eae ma TT ae 1a TAT ee TT Ta a ws rH 19s oy 1a was oat 1a al 1s 17a Ws 1s Uk we my 9s 9 my 1 [NT nae wre wat) wa ws al UTS a) ae a cae rs ase oa at [as Ws on 14 wa ey 1a Tse 157 tsi Wa 7 (aa Ua wa [a (us Lae 1a 15H 13a 15 1a LT 1a 0 a i) i 1s [i oe ae 15 15a 15s 156 1a 1S 1a La ny 3 ae wi at im ie On 155 1s 1st wai 1a 1a 1 15 1a wa 18) ass ney i se 0 | 05a Osi 1H 1a 1309 1510) 1a 1 Waa ust mi wis) m7 7 is 7 ri 1a wa 1ae 1h 1a 1s 1a 1s 1s ue 13 (a oo (as 069 id | 046 ay Lay 02 1 1M us wan law ust urs wns 18) my 0587 asa [oats 1a 13 1a 13a 1a tae ae we un ua wt us es 1a as as ssa Te |e i Ts Ta Tas 1 TIT ta Te Ua ay ou a Wi Tw 80 1580 roo (3a 0 (eT 1s 1a tau ul UR Uy i une ss 1 wae wal TSE Ta ae Tas Ts Tae ta 1a TMT Us TH wa wim 1 a a ti an [ase 1318. Os 1a 128 UT 1 ws ey oa 0r as 1S a mm ay [aa 1 025 wai om Wal 1S uy me) 1 aT 06 ia wa ue ss) 0 sms [ales (a 1 un Uh Ss 1} Un 1s os 0840 i) ome ast Tis 1s | at wa ic) ua 1 Te Ta WaT Tos Te 087 oie wa ast OS, as [as war UB a wT om oT Us i} te Us Ut 0067 ous Gy 0 1357 Ti) al [aa Tus ores Ta ua GT Toe wm ws ay Toes Tas ce ous wie as id 1 [aa ay we we oa we Ta Tom iy wa Uo ToT Tot wane i) (a) 14 os cura [aus cw ss 57 wT ay my is st lls os wn ui co ws aay 136 wa ws a war wish oT toms 1s} wT ny To Un on on i 37s my 07 us ua ons oy iss 1s wo ls i) ut im (uo m7 10H as a Us Eels wis (wi ois oy He om on ee we m7 ot Tetra fal passAPPENDIX 2 Table: Present value of regular annuity of I per pero for n erods: PVA (ka) = 3 aa” Take es) ss] ee fore foe | oe Yams [are | iam Jan | oes | ass fae | rs | as | | Sa] Wa mT | RR || Ta | TON OAT | ORT | aN || ORT OAT | NT | | mT | 691 aR LAS [ume LMR La ot [uss Pes [mt | a | A | ST | Tan] aw] Dow TST Dan, 255] 2a TR |B [Da [TAS | PS Son] wor | 17m | an 797 || as one | Dea a [HT SH eas ese | STS | 3D [ss [Sse Ne em [as [SRE [| RSE] See] SAE] SN | TTA | ATR ANS | AT [TT TNT LT | | | CoS eee [cons | sms [sss [sas | ser sons | aner[ari[asen [em erat [nt [som sas | 57 [ae rasiT| Tass [tur ae | aaa [aa [son | sae ses | sa Her [sae [aves [4 [aa [ 6 |r [ams 956 [TE TST] AI] TAT TABS TOT | RST] SIPS | STH SST [SH [STAT ATT | es [a [RE TY [OT Pes T Hl a z 7 i i [oars | goig esm [eo [ rir] rsa [non [art [auras [ se [ss [082 Soy [ss [si [cr [8 [cs Ten | | | ||| AT RT| | ST [| ST | [ [| a T 5 Usa WSN wea wT wT | ANE] TORY TI [Tia RT| [TA [ ore [Seam] Se SIT [ae [a aS [aT Tana es | oak | 9 [AMET] ATT TON | TaN ue [oro | aS [WG [ss | Sa [Moy [ us |S aay [AST Tse TIT [THA | A | VBA ATES ARE | TM TOT AD | WS [ON | STAT STS | SOE [SU | A sf usast ign aie te [ios [ora nnasses [aor | rat [7m nn [ace | gum [sere sss [sine [som [aa [4a Te ESOT SMT | TAE | TORO PS |W TT | TI WT ||| SUNT SS | SAY [Te [aT GG) NC I 5s [S25 [90 | aT [wom or ss [mason [ae [om Tao [ame arse] ame [7m | aT [Ay | ca ss [some [sm [an 15a ssa 15 [AAS [ AT] S| se | AS A | TAH TN[ S| eNO | AIT 3ATS [ss [ss [sa | ss 3S STE | ATS YTS [OSD [SAT [BRS | ASG | S| TR TOW GA NE | S| ST | ST IOS | 3 ae [a TE |G | OR SR |S AT | TT TOT aT | OT | | ST | [rr [as [on rv ss [ak [ow [Ho | [| os raw ese cm | Sow [S| ST [ a_ [8] 3.0 90K POL [SOS [TT | TH | MRT PT | RNY ANE [TN TT] aaTE | AIS [ST 53 | [Su as | [nase [sro [ ss] ease [gas aT | as ers [m7 [nes | us| sa | Ss | Ss [a [as Pet OS RSH [TA | BY] RS LW) | 9 Sa[AsDw [TTT [oA [Mr [snl | S8] [ aQUESTION 1 (20 Marks) 4.4 REQUIRED Prepare a projected statement of comprehensive income to determine the sales needed to produce a profit after tax of R525 000. (10 marks) INFORMATION: Impala Enterprises Staterrent of Comprehensive Income for the year ended 31 December 2017 R Sales 5500 000 Cost of sales 3575000 Gross profit 7925 000 Operaiing expenses (675000) Tncome from operations 950 000 Interest expense ($500, Profit before tax 625.000 Tncome tax (187.500) Profit efter tax 457 500 ‘Additional information: 1. Cost of sales is expected to be 60% of sales. 2. Operating expenses willincrease by 10%. 3._ Interest expense will decrease to R300 000. 4, The tax rate wil remain at 30% 12 (10 marks) REQUIRED se the information from question 1.1 (not your solution) and calculate the following: 1.2.1 Gross margin (3 marks) 1.2.2 Net proft margin (3 marks) 1.2.3 Operating margin (2 marks) 1.2.4 interest coverage (2marks)QUESTION 2 (20 Marks) 241 REQUIRED Prepare the Statement of Financial Postion of Springbok Lid as at 31 December 2017. (15 merks) INFORMATION: R ‘Accumulated Depreciation 300000 Retained eamings 174.000 Cash in bank 66.000 Worigage bond 218 800 ‘Accounts receivable 73.200 Provision or bad debis 28 400 Pant and equipment at cost 7028 000, Ordinary share capital 423200 Inventories 712400 Sharesin Bidvest 48.000 ‘Accounts payable 9.000 Notes payable 116 200 22 REQUIRED: Calculate the incremental profitloss after tax. (© maks) INFORMATION: Louis Stores is considering extending creit to some customers who may be at risk of defaulting in payment. Sales will increase by R500 000 if credit is granted to these customers. From the new accounts receivable generated, 10% is expected to be uncolectable. Additional collecion costs willbe 5% of sales, and the production and seling costs wil be 80% of sales. Taxation s 30%QUESTION 3 (20 Marks) INFORMATION: Kilimanjaro Industries plans to manufacture toasters and the following information is applicable: Estimated sales forthe year 3.000 units at R300 each Estimated costs for the year Direct Material Ri00 per unit Direct Labour RO per unit Factory overheads (all xed) R100000 Selling expenses R20 per unit soid ‘Administrative expenses (all fixed) a0 000 REQUIRED: 3.4 Calculate the total operating profit for the estimated figures. (4 marks) 3.2 Calculate the break-even quantity (3 marks) 3.3 Calculate the break-even value (3 marks) 3.4 Calculate the margin of safety in units (3 marks) 3.5 Calculate the target sales volume to achieve a profit of R100 000 (3 marks) 3.6 Calculate the new break even quantity and value ifthe selling price is increased by 10%, (4 marks) QUESTION 4 (20 Marks) REQUIRED ‘Study the information provided below and answer the following questions: 4.1 Caleulate the Payback Period for both projects. (Answers must be expressed in years, months and days.) (6 marks) 42 Caloulate the Accounting Rate of Retum for Project B. (3 marks) 43 Calculate the Net Present Value of each project. (Round off amounis to the nearest Rand.) (6 marks) 44 Calculate the Internal Rate of Retum for Project B. (4 marks) 4.5 Based on your enswer in 4.3 what advice would you give if these were independent projects. (2 merks) INFORMATION ‘The following information relates to two capital investment projects.Project A Project B Initial cost R400 000 R300 000 Expected useful ite ayears Fyears Scrap value R20 000 Nil Depreciation R95 000 pa. R75 000 pa. Expected net cash inflows R R 18 year 140 000 90000 24 year 450 000 90 000 3 year 465 000 90 000 4 year 155,000 90.000 ‘The company’s cost of capital is 12%QUESTION 5 (20 Marks) REQUIRED Use the following information provided by Everest Enterprises to: 5.1 Prepare a Debtors Collection Schedule for March and April 2019. (6 marks) 5.2 Prepare the Cash Budget for March end Apri 2019. (14 marks) Note: Where applicable, round off all amounts to the nearest Rand. INFORMATION 1. Everest Enterprises expects to have a favourable bank balance of R80 000 on 26 February 2019. 2. Total sales figures for 2018 and 2019 are as follows: December 2018 | January February March ‘April ‘Actual (R) Budgeted (R) Total sales 420.000 300 000 280.000 300 000 310000 3. 30% of sales are cash sales. 3. Debtors settle their accounts as follows: ‘* 50% one month after the sale — a discount of 5% is given to these debtors 45% two months after the sale + 5%is writen off as bed debts 4. Purchases of inventory for 2019 are as follows: January February March ‘April Total purchases (R) | 200000 220 000 200 000 70.000 5. 60% of the purchases are for cash. The balance is purchased on credit. Creditors are paid one month after the month of purchase. 6. The proprietor’s cash monthly drawings amount to RB 000. 7. Monthly salaries amount to R10 000. Salaries will increase by 6% with effect from 01 April 2019. 8. A fixed deposit of R40 000 will mature (expire) on 31 March 2019. Interest at 12% per annum is received monthly on this fixed deposit. 9. Equipment costing R90 000 will be purchased on 31 March 2019. A deposit of R30 000 will be paid on this date. The balance will be paid in four equal monthly instalments commencing 30 April 2019. 410. Other cash operating expenses are expected to amount to REO 000 for February 2019 and are expected to increase by 5% each month irom 1 March 2019. 11. Property rates and taxes are paid monthly and amount fo R2 000 per month. These are expected to increase by $% with effect from 4 March 2019. 412. Rentals of R12 000 per month are received from a tenant. Rentals are increased annuelly by 10% with effect from 1 Aoi.QUESTION 6 (20 Marks) 64 REQUIRED: Celoulate the value of closing inventory as at 31 December 2017 and gross profit for the year ended 31 December 2017 using the weighted average cost method. (10 marks) Use the format of the Statement of Comprehensive Income to present your answer. INFORMATION: Diamond Ltd, a supplier of ofice accessories, inventory records are presented in the table below: Closing inventory of 60 units at RT60 each on 31 Dacember 2016 ‘7O units at R170 ware purchased on 30 Apil 2017 ‘GO units at R10 were purchased on 30 June 2017 ‘80 units at R180 were purchased on 30 August 2017, During the year (Jan-Dec 2017) 220 units were sold at R220 each 62 REQUIRED: Use the information given below to answer the following questions: 6.2.4 Calculate the proft that Sapphire Ltd would make ifthe account is settled within 15 days. (7 marks) 6.2.2 Should the customer fall to pay the amount due and the account is wntten off after 90 days, what would be the loss to the fem? (3 marks) INFORMATION: ‘Sapphire Ltd is considered seling a television to a customer on credit. The cost ofthe television is R10 000 and the seling price is R15 000. A credit term of 215 net 60 days was agreed upon. The cost of capital of Sapphire Ltd is 12%.QUESTION 1 (20 Marks) Pad-one (Pty) Ltd supplies components for iPads. INFORMATION 1. The following figures are available: ‘Actual (2047) Estimated (2017) January] February March | April May R R R R R Sales 792000 240000| 120000 920000 | 400 000 Purohases 200000| 100000] 320000 | 168000 | 120.000 ‘Sales commission 800 7200 2400 | 1.600 800 Wages 7600 7600 7600 7 2 2. Cash transactions: - 40% of all sales are for cash with the balance being on credit = 35% of all purchases are for cash with the balance belng on credit 43. Collections for credit sales are as follows: = 20% is collected in the month of the sale and a 2% discount is granted on these collections. - 60% is collected in the month following the month of sale. - 15% is collected in the second month following the month of sale. The remaining 5% is written off as bad debts 4, Pad.one (Ply) Lid will make an investment of R130 000 in fixed deposit on 01 April 2017. interest ‘of Rt 300 per month is expected to be received from 30 April 2017. 5. Creditors are paid 2 months ater the date of invoice 6, Rent expense amounts to R18 000 per month and is payable onthe fist day of each month 7. Wages will be increased by 10% in April 2017 and wil increase by a furher 5% in May 2017, 8, Anew machine is expected to be purchased for R40000 cash on 1 May 2017, Depreciation is calculated using the straight Ine method 8. Commission is paid to sales perscnne in the month followin the month in which twas eared. 10, On 31 March 2017 Pad-one (Pty) id had a bank overdraft of R7 000, REQUIRED: Use the information provided to: 1.1 Prepare @ debtors cdlection schedule for April and May 2017. (6 marks) 1.2. Prepare the Cash budget for Apil and May 2017, (14 marks) Note: Where applicable, round off all amounts to the nearest Rand,QUESTION 2 (20 Marks) 2.1 [Oaklahoma Limited ‘Statement of Comprehensive Income for the year ended 31 December 2017 ooo Sales 5340 000 Cost of sales (2.055 600) Gross protit 3284 400 Selling, general and administrative expenses (2.084 400) Income from operations [— 7200000) interest expense (744000) Interest inoome 264-000 Profit before tax 7320 000 Income tax (396 000) Profit after tax 524 000 Earnings per share 702 cents REQUIRED: Study the Statement of Comprehensive Income of Oaklahoma Limited for the year ended 31 December 2017 above and answer the following questions: 2.4.1 The eamings per share for the year ended 31 December 2016 was 92 cents. Comment on the earings per share from the point of view of the shareholders. (2 marks) 2.1.2 Provide TWO (2) possible reasons why the gross profit margin is lower in 2017 than in 2016. (67% in 2016) (4 marks) 2.4.3 Recommend TWO (2) ways in which the company can sustain its profitability levels. (4 marks)22 ‘Silverton Limited ‘Statement of Financial Position as at 30 April 2017 R ASSETS Non-current assets 3.000 000 Fixed assets (Property and vehicles) 3000-000 Current assets 2.670 000 Inventories 1800 000 Trade and other receivables 720 000 Cash and cash equivalents 150 000 Total assets 5670 000 EQUITY AND LIABILITIES ‘Shareholders’ equity 41.890 000 Ordinary share capital 1 080 000 Retained earnings 810 000 Non-current liabilities ‘900 000 Long-term loan ‘300,000 Current liabilities 2.880 000 ‘Trade and other payables “480 000 Notes payable 2.400 000 Total equity and liabilities 5670000 Information: . Sales for the year is estimated to be R6 000 000. = The business maintains a cash balance of R150 000. = Trade and other receivables represent 20% of sales. . Inventory represents 30% of sales. . Amotor vehicle costing R900 000 will be purchased in May 2017. Total depreciation up until year- end 30 April 2018 is expecied to be R450 000. = Trade and other payables represent 5% of sales. . There will be no change in notes payable and share capital. . Dividends of R270 000 will be paid on 28 April 2018. . The business predicts a 10% profit margin. . R120 000 of the long-term loan will be repaid before year-end, April 2018. . The amount of external funding required must be calculated. REQUIRED: Use the percentage-of-sales method to prepare the pro forma statement of financial position (batance sheet) of Silverton Limited as at 30 April 2018. (10 marks)REQUIRED: 4.4.4 Calculate the incremental profilloss after tax. (7 marks) 4.1.2. Determine the incremental return on sales f these new credit customers are accepted. (3 marks) 4.1.3 Briefly explain any 3 methods used to collect overdue accounts. (3 marks) 4.2 Wema Lid, a supplier of casual shoes stock records are presented in the table below: Closing inventory of 0 units af R150 each on 31 December 2016 60 units at R160 each, was purchased on 30 May 2017, '55 units at R170 each, was purchased on 31 October 2017 During the year (Jan-Dec 2077) 130 pairs were sold at R205 each REQUIRED: Calculate the value of closing inventory as at 31 December 2017 and gross profit for the year ended 31 December 2017 using the fist in first out (FIFO) method, (7 marks) (QUESTION 3 (20 Marks) Ketalong Ltd plans to manufacture kettles and the following information is applicable: Estimated sales for the year 20.17 14-000 units at R80 each Estimated cosis for the year 20.17 Direct material R24 par unit Directlabour Ra per unit Factory overheads (all fed) RAB 000 par annum Solling expenses 30% of sales ‘Administrative expenses (all xed) R78 000 per annum REQUIRED: 3.1 Caloulate the break-even quantity. (4 marks) 3.2 Caloulate the break-even value. (3marks) 3.3 Calaulate the break-even value using the marginal income ratio. (3marks) 3.4 Caloulate the seling price per unit ifthe profit per unit is RA. (4 marks) 3.5 Calculate the new break-even quantity and value if selling price is increased by 10%, (Gmarks)QUESTION 5 (20 Marks) ‘51 Eaton Enterprises has the opton to investin machinery in projects A and B but finance is only available to investin one of them, You are given the following projected data: ProjectA] Project (R) (R) Initial cost 450 000 450 000 69.000 | Year2 75.000 69.000 Year3 102.000 69.000 Year 4 129 000 69.000 Year5 81 000 69.000 ‘Additional information Cash fons will comprise of net profit plus depreciation. Project A machinery ill be disposed of at the ond of year § with a scrap value of R6O 000. Project B machinery wll be disposed of at the end of year5 with a nil scrap value. Depreciation is calculated on a straightJine basis. The discount rate to be used by the companys 12%. Rene REQUIRED Use the information provided by Eaton Enterprises to answer the following questions: 5.1.1 Calculate the payback period for project B. (Answer must be expressed in years and months) (3 marks) 5.1.2 Calculate the accounting rate of return (on average invesiment) for project A. (Answer must be expressed to two decimal places) (4 marks) 5.1.3 Calculate the net present value of each project. (Round off amounts to the nearest Rand.) (6 marks) 5.1.4 Using your answers from question 5.1.3, which project should be chosen? Why? (2 marks) 5.2 Amachine with a purchase price of R420 000 is estimated to eliminate manual operations and save the company R129 000 cash per year. The machine will last 5 years and have no residual value at the end ofits life. Use a discount rate above 15%. REQUIRED Calculate the internal rate of retum. (Use a discount rate above 15%) (6 marks)‘APPENDIX 1 ‘Sake of | 1% ae fan | sw foam fom | om fom | ame fourm | as | asm | aa fas | ts | a vw Jam | 296 esas [a RD | WITS | UOTE | UOT [OSE | OHH | OST [OHO OAR | RT] WT ORE] ORT [UT] OME | OY [OAR | TOT [ass [oss oss [ozs [aso oan oars | was Ost [ue [unis [oe [wt [os [ars [az [aos aT | ORE [set [ usa Tasik [oat [oot Town [ows [oases Taare] comme [orm [aTsTs [OTH [OTR [OT | OATS [ORs [aT [aA Oe | OT [ OST [OST [rast [ose [oss [oast [oso [ol [area] ass | ont [wa [omer [048 [0919 [oP [osTs [ass | assi7| wsis | 04N7 | 0ADY| Cae [SIs [Omer fone TOAD [OTS [OAT OTL |e | OS [Da | OSHS | OSH [OSH [OST TOs [OAT [OAs [OAITT [OA [OIF CT FN SS A NE [usar [osne [oxi [0759 [arto [ost [oor [osess| ose [asia [os [04s [ost [os [oss [oss [oe ass 079 [070 [car [eas ONS | OTS [0 7OT [usr [OATH ase | OSs Ky [nes | UATY | O4D [05TH [oss [OsDs osu | A a | OKT [125 | WIE [snes [om [ore [rams [ase [ose Paseo | csun | ea [020s [03> [ose [0535 [oars [ames [aaa | ass a20ss | one [use [a1 Tw [oss [osm [aren [ners [ts [set [oss 04st [04s Poss [oss [ost [sas | a2 [02472 | 267 [0a [O01 [0186 [Ns [ae TG | ORT [ OTA | OS [OAT [OSD | OTT | OAD | OTS | ANOS [ TS | WNT [ UOT [ Oe | ODED | OH [OTR | wy aT [OTS [OTE [Oe [aS [sO | OT OHH [OAS [asta [ONS] OEY [OUT [OR [OTN | OTR fas OTT [Tw sri 070 | so [ons | OSHS [04s [O40 [O36 [oan [oaus [wast [mH [ 302 | NO [01s [O14 | U1] Ons ou TT OT | OTT | OSTS | OST [OY | OBE | OSHS [OT [OKT CIMT S57 | TaTS| CLT [ OHIO | Os [OTE as | 00 | | OS [ oN [OAD [03s [ost | TS OBE 186 awa [ess [ws [oes [ons [oT 1s [oss oa oT any | OTH |e [ae POT [as [ws | wes wa | MT | oo [ore |e [ RT 17s [07 se [0S [ 021 eos POSH [0.25 [aa | wo ao [ uss | On| ons [OHS OOS [oa [a sur [oman [ors [ox eso [oT [aN [omne| aoea [snr [ons | ONT Lore ao fos [ome comes 07 oes [oes [7 [outta [9 [ores] ass [ooste [ ona) [ omer [oh [aoe [ass] osr ser] 2145 ort foe fo. P0405 [oma rs [ owt | sit [wos [Ones | ons [Ost [aos om BRT | HT | ORT] | OT ON TR TRE TOT | WORE] EET [OAT OT | OTN | TaR | 0 [ara ale [ ara [ots ost [oss Ponss [or [ons [ns ous [ ors [ ais [aon [oro | anss oase [owns [aa TER RTE ORE OO OTE OOD [OATS OTOL HOTS | WO [OUST Om [OOTY [OTE [OnE Loma [awOT [naw ur [se omy | cons [ ome owes [oss Toons [oa [aon | oom ae [aone| ona [ooo [amor | [asst sss [nats [ors oooe omer Towss [oom Toast Loomer Tuo [oom foo foot * [+ [+ |» The facoris zat fo inal plesAPPENDIX 2 a 1 - ir ‘Table 1: Present value of a regular annuity of $1 form periods : PVA, —- (+k) regular annuity I per perio fora ps wi boa a Yas rales ‘ x fm fm % vee | ame fans | am | eds Taare) or | TT TO 2D isra eTass ars [a oss ss [se | Sa a NP 4 sor] sea] asiw 34st sare] sa | 3237 |e $ eure ae Canara [oa | ai om fea [am [ha |e |S PT SSS S| TE ST SPAT | ARR [EE TE ST TT [OT Tero eea ara ean Sm Sane eS Soa sw [TY am ee eva TS A Soper ne aarp arse oe [as a [ees roe een Ps | ae ars ea SESE ESS Thar Ss Sie Soe SS ore io saa ss ms [ra [ere af [sa [se [Se [ sa [ Sa a [se [A [99 | TTR WE | TT | | |ST | | TT ST| | T| CT TPS eB STP RN [RATS TSB RATT | [Sa [SHS [Se STARE PTS TSI ATOR we [RKTT RST] Ta [a ||| [TT | SN SST SON STS [AF ETT] TE a PASS aS PP Sm SPSS a [sn Fa az aA [oar [i [ ea [oe [aes [ Sane Ss [se [Sus La a Ten |e | | ae a | | | TT [SS | TT ease [TS Te [eT ST ir a AT ira Tes [ee [LRT wm es [a [es [Pes [Ss Ss [rs [SG ENTS [SM LT HS [TWAT Te [a [AS [SH [ [ST [SS | | YT | OT TS ||| SE Tr at |r |e ene | re ss 3 ao [ase oa a [wos [us| | To fase [ra [ ro af rf fs IT an sow RN | fa |S [ST a Sane sr [a Ps | ne oT Tess] eT a | To [a [wr [a ae [ms [rs awe ena a [we [| ccQUESTION 1 (20 Marks) Tunis Limited (Ltd) Statement of Comprehensive Income for the year ended 30 June 2017 (Extract) R Sales 4600 000 Cost of sales 2.050 000 Gross proft 72-450 000 Operating expenses 780 000 Profit rom operations T1670 000 Tnierest income 35000 Inierest expense 7 Proft before tax 71605 000 Income tax 481 500 Net profit 1123 600 Required: 1.1 Provide two possible reasons why the shareholders would be interested in the statement of ‘comprehensive income. ® 1.2 Calculate the interest expanse for the year ended 30 June 2017. ® 1.3 Explain the accounting treatment of sales retums and allowances. } 1.4 Interest has been calculated at 8% per year on the amount invested. Assume that there wes no change in investments during the year, determine the value ofthe investment. @ 1.5 Which method of depreciation will result in lower net profit in the early years of the life of the asset? Briefly expiain? } 4.6 Comment on the significance of the operating profit to investors. (4)QUESTION2 24 22 23 24 25 26 27 Extracs of the nancial statements of Venezuela Limited for 2016 are given below. INFORMATION | Venezuela Limited | Extract of the Statement of Comprehensive Income for the year | ended 31 December 2016 70000 (415000) | "255000 | 733000 93 100 | Extract of the Statement of Financial Position as at 31 December 2016 | Assets ® ‘Non-current assets ‘807 500 1556 750 | 71364 250 | Equity and liabilities Ordinary share capital (200000 shares) =—s(iti(‘ié‘é*«N OOO Retained eamings 49 760 | Nor-currentiabiiies a. "200000 | Current iabilties 114-600 Total equiyandliabiites ~——stst—=<=S~*é‘éSCOC*C*‘*d OO Required: Calculate the following ratios for 2016. Where applicable, round off answers to two decimal places. Operating profit on turnover Retum on assets Return on equity Acid test rato Interest cover Eamings per share @ @ 8 Current ratio e @ @ @ (20 Marks)QUESTION 3 (20 Marks) The information provided below was extracted from the accounting records of Satum Lid forthe financial year ended 31 August 2017: R Sales 360 000 Cost of sales BT OO Rentincome 2000 Salaries and wages TH 000 Advertsing 76 600 Taxes and rates TAO ihe operating expenses 792000 Additional informati 1. Sales are divided equally each month, Sales are expected to increase by 18% forthe financial year ending 31 August 2018. 2._ Fifly percent (50%) ofthe sales are for cash and the balance & on credit. Debtors normally pay their accounts as follows: 40% in the month of the sale, and these debtors are entited to a 6% discount: ‘55% one month after the sales. ‘The balance is usually written off as bad debts. 3. Allinventories are expected to be priced at cost plus 25%. 4. Inventories are kept at a constant level. All purchases are for cash. 5. Interms of the lease agreement rentis received monthly. The rent for the year ending 31 August 2018 is expected to be 10% more than in previous twelve months. 6. Advertising is paid for monthly and is estimated to be 10% of each month's purchases (inventory). 7. Salaries and wages will increase by 7% with effect from 01 October 2017. 8. Taxes and rates are paid in one instalment for the year during September 2017. Rates are calculated at 75 cents (RO.75) per R100 of the value of the premises. The premises are valued at R1 100 000. 9. Other operating expenses are expected to increase by 5% and are spread evenly throughout the year. (Operating expenses are paid for in the month in which they are incurred. 10. On 31 August 2017 the company's favourable bank balance is R55 000. Required: Prepare each of the following for September and October 2017 from the information provided above: 3.1 Debtors collection schedule. Oy 3.2 Cash budget. (16)QUESTION 4 (20 Marks) 4.1. The management of Bahrain Industries has to choose between two machines, namely machine ‘Abe and machine Bab. The folowing information is presented to you: ‘Machine Abe Wachine Bab Iniial investments R400 000 R480 000 Not cash inflows: Year R R 7 720000 170 000 Zz 720 000 720 000 a 720000 120 000 a 720000 740000 5 120000 710.000 The required retumn is 15%. The straight line method of depreciation is in use. Required: ‘Study the information given above and enswer the following questions: 4.1.1 Calculate the payback period for Machine Bab (yeers, months and days). @) 4.4.2 Calculate the Net Present Value (NPV) for each machine. (round off amounts to the nearest Rand.) 6) 4.4.3. Advise management based on your answer in (4.1.2) above. @ 42 Discuss the FOUR goals of financial management. @)QUESTION 5 (20 Marks) 5.1 Kremlin Fashioners is considering extending credit to some customers who may be at risk (defaulting in payment), Sales will increase by R200 000 if crecit is granted to these customers. From the new accounts receivable generated, 10% is expected to be uncollectible. Additional collection costs will be 3% of sales, and ‘the production and selling costs will be 70% of sales. The firm is taxed at 28%. Required: 5.1.1. Calculate the incremental profitloss after tax. (6) 5.1.2 Determine the incremental return on sales i these now credit customers are accepted. (3) 5.1.3 _ Briefly explain any 3 methods used to collect overdue accounts, 8) 5.2 Nkandla Ltd stock records are presented in the table below: Closing inventory of 75 unils at R150 each on 31 December 2015 ‘30 units at R160 each were purchased on 30 May 2016 ‘35 units at R170 each were purchased on 31 October 2016 During the year (Jan-Diee 2076) 130 units were sold at R200 each Required: Calculate the value of closing inventory as at 31 December 2016 and gross prof forthe year ended 31 December 2016 using the weighted average cost method. Show all workings. ®‘APPENDIX 4 Table I: Present value of SI: PVA (kn) Tae a fis wef | oe | om fw os | aes bs | ass | ws | ame | ase | avs fame | 256 Peas T OBO RD OST | OBE | OBE | WOE | OR DH | UOTE [OAT [| ON | ON | ONT Tay [a [ease [OS [OSD [DOT AFH UAT UATE [IT [ NOH Use | OTE [ORS OT | a [Os OR EN OT TS 98 [ast Osi rete asi oss [oes [ery [aon [an [07s [Tt [www [ose [oss [om [59m [ass [uss [user sis [aaa [oaks Pose [SS [OST [ON | OT [ORI [OTE | UTEN] Wi | SHY [OANA [OSHS] OST] OSD OST | OAITE | UAT [ASHI GANT [ual | OY [OTT [aan] ws | S| || | ea | [He | SN | tw | Oe | OT | Teas [ose [Oa fas [ os [om | 75 [or [ost [vor | sess [ase [asin [oar | 0m | ons [ois [ory [uses [| wa19 [anes [ow [oaer [ass [08s [07] aa [oan [oars [usar] sans asus [oases [osm] oa aan [o3ss | osam [uss [uz ax ana | ome [are [aay ost [os [mae [wus [99 [so [oso [cas [aso [oa [osm [ 0 [Ts | us mn [oe [85 [aan [oe [0 Tues oscs oat [ose [wie [ssi [uss [asst [cox [cass [osm [ost [026 [260 | caer [ner [mn [won [ars [outs foe TA BW [Oe [OR [OST Sw RT| We [TS [a |S | oa ae | aD |e [a | wae [RE TE [UBF TA [OTE [ORD [ OSH AFT A | UT [85 [ Tw [ ONS | OST [ONT] OT] BH [HIT [san | WISE] aw [ONES OBeT TB [rer ari [ot [one [0305 [nas oalso | wor [oar [ww [oases | oer [oer ann [es [nse [0.89 [06s [aioe [ows [ows [sr 0759 [oT [057 [Us [nas KB Oa | Oe | ONT] ISH Ie POS? [TO waa] a OUT [oa 15 sets 07s [oss [ost [ 040 [nal [oes [assy [amas [nen Toa [oss [015 an [029 aoe [us [uss rs Tous [os Teas wa [we | ON | a em | NT | Wa [ne [vw || os | ee oe [oe [ra | om oar [oT [ose arie [oes [ost [oes [7s [ost | cz [can [usr [os | ose | 01257 [rs wos [om [uss [usw [es Tour [owes TE [ONE [OSs | ORG [ASS 60 [OH | CAST [TAN | TW OI [oN | OO | a Neo ORE [ sme | A [OTE [oa Ta armas [osm [oars [03057 as [res [azar [ais [ ess [O17 [ons [ower one ora [acs [us | aor] aos [OUTS [ome RT| i OT [OST [04S [ TH STN [UAE [eS [CIE | aR [O.DWT| O17 | RAE DOES com [OAS [USS [WAS MOTOS ous | OE | OTE | ORT | ART [A | IAT | OTR] TTR TS YOR | OER | OO [OORT | OAH | OT [WOT oT OOTY | OOS [OT 4s [ost [oan [03 [0205 ovat [34 [ams [rs [ous ous [ oe [es [oo [oust [unis [uo wooo aust ome [om TTT [OSS [0m | ORF TEN [OT ue [UM NT [OAT FOOSE] OMT] OS [OUT [OMT [om [uly] oo -auoh FONT |OwNT = fel} tua [oss [oa [or wo [oss [cy [wor [1s [oom omse[ omxs| o> [ous [omny [um [uae [acs Povo | omn ss [ost [0167 | 095 | wos Foes [urs [uso [ans Toons Fowis [omit [oar Tout Town tumor fumnit * [ * | * + Tei iszeo tr dvinal pesAPPENDIX 2 i i ° LU arto Tale: Present value of regular anny of per prin for periods: PVFA (hn) = eo Hi (1tK} 7 Ta otf as | ae | os | ax | ov | om | ow | aw | oe | ams fa fw fom | aes | an | ni | ne | os | om Peis [oa AO OR OR AR || OO OT WR ORT OT |S | Aa aT Tam | va | | | | SRS aR a | ||| AT RT a [UT | [TT | [mn ssa | || Srey | [2s [2 aso wo 2 [2M [286 aa ams 7 A [A [a | [ [| SOS | Sms | SAT | SDL | SOToT | AOU | ATS | SN] RD eT SD | STE | STS | HANTS | SRT | ND | a | mw | aS | BANS | SE |S |u| SRN [TD | Asa ee [aes [ae ee 9m | is [AT [aes gs [a i [oa [ 4a [6 [4200 [40s [a5 [37 a Lisi res roi amer SE) a 0] BI | TT TA 515 | SAH | R52 | 5750 | S590 [SD | STT [4866 | a7 | AS As [ [8 [ 0510 TO) 9a | ee | a2 RI OER | ATION | AT | UG | SBD | S452 | SND [SUV | SOUS [aT as [Hl [| LORS TH [one | met | ose Ares | TERT | TUG | 6D | ET | CARS| ST | Sen | SAT | ST |S | a | eH [as [TT 1 USST [STD | Sasa 9ST | SD THT] TSR] TNT [BRST | ODE [OV | SoH | SAR | SNS [ITT [A | SA [SD [SD 13_[ats7 [eer [ness [9s [96 wasr | syn | 18 [70 [ 799 [ons [aus [sees [sou [5303 [sane [ss [eer [45507 TE [ASNT TRE [TRA ST | ES ON EE 15ST [ao [ 9 TS | OST ENG MES OC TO MS BST TE Tamw [RST | OT | AS | WORE | TOD Wale | RAST |e | TT | Town [eae | ew | ne | | ms ca | Se (oT | aT 17_[issos [zany [ane [es [ural [oars | aw [912 | 6 [sore | vst [re [at [ears | aan [ran | sad [3.2 [4967 [476 1s_[issos[rgay [sis [oes [uve [oss | inom | osr9 se [some | re | 27 [i [an | az [sar | sua [327m [sms [gan 1g [ire [sas [eos [1.9 [mss [sa [03886 [oe ur [5 | 7n [ vse [ssn [esse [aso [sar [ sss [sie [somo [4as "MNS [SS USAT | HUT | TAD TLAD| TSN | ORTRT| BIDS | RST TIT TARE [TOA [RT| NT [SOAR] SATE | SSTT [SIO |G [Haar [so | Ta | OT TER [TER HDG | HTN] RANT | TAT | HOT AT] AT | KOT STD | SH |SHST | TO sao [2395 [sas Ten [ass rorr [9am | wes | 0s [ras [zor [se [cura [sm [see [s.5e7 [aT SD | SUIT | SADE [ | TD [SSH | THI AIT | DPS | OKT [DER] SOIT [SES [TARE TIT |S [DS | SO SM [4995 a a_i [ras [| T0719 TOs TN | ASAT NN | TA | TORT] TN [EE STD 3 a “3550 [4.8 | TATE] TAT 8 | TST THT | TH HD 99m | HOT | DATARS | uM | RAT [OD] SIG | SE [0 | 41 QUESTION 4 Vietnam Limited ‘Statement of Comprehensive income for the year ended 31 December 2016 (extracts) R Sales 179 000 Cost of sales (727 200) Gross profit 1051 800 Selling, general and administrative expenses (651 800) Income from operations “400 000 Interest income 64 000 Interest expense Profit before tax Income tax (@30%) Profit after tax Eamings per share Required: (20 Marks) Study the statement of Comprehensive Income of Vietnam Limited for the year ended 31 December 2016 above and answer the following questions: The eamings per share for the year ended 31 December 2015 was 89 cents. Comment on the eamings per share from the point of view of the shareholders, Provide two possible reasons why the gross profit margin is lower in 2016 than in 2015. (63% in 2015) Calculate the income tax liability, profit after tax and recommend two ways in which the company can improve its profitability. (2marks) (4 marks) (4 marks)12 Umnfatazi Limited ‘Statement of Financial Position as at 31 December 2016 R ASSETS Non.current assets +500 000 Fixed assets (Property and vehicles) [1500000 | Current assets 7335 000 Inventories ‘900000 Trade and other receivables 360.000 Cash and cash equivalents 75.000 Total assets ~~ 2835000 EQUITY AND LIABILITIES — ‘Shareholders’ equity 1945 000 Ordinary share capital 540 000 Retained earnings 405.000 Non-current liabilities 0.000 Long-term loan 450 000 Current liabilities TAT OOO ‘Trade and other payables 240000 Notes payable 1.200 000 Total equity and liabilities 2635 000 Information Sales forthe year is estimated to be R3 000 000. The business maintains @ cash balance of R75 000. Trade and other receivables represent 20% of sales Inventory represents 30% of sales. ‘A motor vehicle costing R450 000 will be purchased in 2017. Total depreciation for 2017 is expected tobe R225 000 Trade and other payables represent 5% of sales. There willbe no change in notes payable and share capital Dividends of R135 000 will be paid in 2017. The business predicts a 10% profit mergin. R50 000 ofthe iong-erm loan will be repaid during 2047. ‘The amount of external funding required must be calculated.Required Use the percentage-of-sales method and the following information above to prepare the pro forma balance sheet of Umialazi Limited as at 31 December 2017. (10 marks) QUESTION 2 (20 Marks) ‘Sussex Ltd Information extracted from the Statement of Comprehensive Income for the year ended 28 February: 2017 (R) 2016 (R) Sales ‘000 600 000 Cost of sales {640 000) (B75. 000) Gross profit 288 000 225 000 ‘Operating expenses (145 600) (106 000) Depreciation 15 000 73000 Other operating expenses 730600 93.000 Operating profit 142400 719000 Interest on mortgage loan (12.000) (86.000) Net profit before tax 130 400, ‘83.000 Income tax (45 120) (29 050) ‘Net profit after tax 85 280 53 950 Information extracted from the Statement of Financial Position as at 28 February: 2017 (R) 2076 (R) ASSETS Non-current assets 7232 080 7222.00 Property, plant and equipment (fixed assets) 7232 080 1222 000 Current assets 178 000 768 000 Inventories (all Trading stock) 60 000 125 000 Trade & other receivables 20 000 32000 Cash & cash equivalents ‘98 000 11 000 T4i0 080 7390 000EQUITY AND LIABILITIES 1216 760 ‘990 000 ‘950 000 ‘800 000 140 000 8) 000 128 780 710 000 Non-current liability (Mortgage loan, 12% p.a.) 700 000, ‘300 000 ‘Current liabilities ‘97 300 100000 Trade & other payables 49 000 ‘69 000 ‘SARS (Income tax) 4300 3000 ‘Shareholders for dividends: 38 000 2B 000 1470 080 1390 000 24 244 212 213 214 245 216 247 22 224 222 223 Additional information New shares were issued on the first day of the financial year. Interim and final dividends for the year ended 28 February 2017 amounted to R66 500. Fixed assets were sold at carrying (book) value during the year for R72 000. Additional information New shares were issued on the first day of the financial year. Interim and final dividends for the year ended 28 February 2017 amounted to R66 500. Fixed assets were sold at carrying (book) value during the year for R72 000. Required Calculate the following ratios for 2017. Where applicable, round off answers to two decimal places. Net profit margin Inventory turnover Return on captal employed Earnings per share Earnings retention ratio Current ratio Debt to equity Comment briefly but meaningfully on the following ratios: BT 2016 ‘Raid test ratio THT ort Debtors collection period 3B days 30 days Rolum on assets 125% 75% (2 marks) (2 marks) (2marks) (2marks) (2 marks) (marks) (2 marks) (2marks) (2marks) (2 marks)QUESTION 3 (20 Marks) The information provided below relates to Mthatha Enterprises. 1. The bank account on 30 September 2016 was a favourable balance of R7 000. 2. Actual and budgeted sales are as follows: R September 2016 220 000 October 2016 200 000 November 2016 240 000 Cash sales are estimated at 10% of total sales. Debtors are expected to settle their accounts as follows: - 70% during the month of sale (These debtors receive a 5% discount.) = 30% in the following month. 3. Actual and budgeted purchases for each month are as follows: R September 2016 120 000 October 2016 100 000 Novernber 2016 110 000 Fifty percent (50%) of all purchases are for cash. Creditors are paid in full in the month following the purchase transaction, 4. Rent expense amounts to R9 000 per month, payable monthly. Rent will increase by 10% from 5. Selling and administrative expenses are estimated at 25% of sales. They are payable during the month of sale. 6. Insurance amounts to R30 000 per annum payable monthly. 7. The proprietor intends to make the folowing drawings during November 2016: ~ Cash R8 000 ~ Trading merchandise, R5 500. Required 3.1 Prepare a Debtors collection schedule for October and November 2016 (6 marks) 3.2 Prepare the Cash budget for October and November 2016. (14 marks) Note: Where applicable, round off all amounts to the nearest Rand.