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FINANCIAL ACCOUNTING 2 – 2020

FAC260S
STATEMENT OF CASH FLOWS

…………….. LTD
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED ……………………….
NOTE RAND
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers
Cash paid to suppliers and employees
Cash generated from operations
Interest received
Interest paid
Dividends received

Dividends paid
Taxation paid
Net cash from operating activities

CASH FLOWS FORM INVESTING ACTIVITIES

Net cash flow from investing activities

CASH FLOWS FORM FINANCING ACTIVITIES

Net cash flow from financing activities

NET INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD
CASH AND CASH EQUIVALENTS AT END OF PERIOD
 1

……………… LTD
NOTES TO THE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
……………..
RAND
RECONCILIATION OF PROFIT BEFORE TAX AND CASH
GENERATED FROM OPERATIONS:
Profit before taxation
Adjustments for :
Depreciation (Items which do not result in a cash flow)
Interest received (Items which will be shown on the face of the
SOCI)
Interest paid
Loss on sale of ……………..
Profit on sale of …………….

Operating profit before working capital changes

Increase in working capital:

Cash generated from operations

NOTE WE ARE ONLY DOING THE DIRECT METHOD

 2

QUESTION 1

Bafedile and her brothers started a company on 1 January 2010.

On 1 January 2010 the following transactions occurred:

 Ordinary shares issued – R20 000

 Long term loan acquired – R20 000
 Vehicles purchased – R15 000

The following transactions occurred during the year ended 31 December 2010:

 Cash purchases of goods – R10 000

 Cash sales of goods – R35 000
 Operating expenses – R6 000
 Interest on loan – R2 000
 Depreciation on vehicles – R3 000
 Company tax paid – R4 000
 Final stock – Nil
 Transfer to asset replacement reserve – R2 000
 Ordinary dividends paid – R4 000

REQUIRED:

Draft the following financial statements for the year ending 31 December 2010:
 The Bank account for the year ended 31 December 2010
 Statement of comprehensive income
 Statement of changes in equity
 The Note to reconcile the ‘Profit before tax’ with the ‘Cash generated from
operations.’
 Statement of cash flows. (Direct method.)

QUESTION 1 ANSWER
BANK
2010 2010
Jan 1 Ordinary share
capital 20 000 Jan 1 Vehicles 15 000
Jan 1 Long term loan 20 000 Dec 31 Purchases 10 000
Dec 31 Sales 35 000 Operating expenses
6 000
Interest on loan 2 000
Taxation expense 4 000
Ordinary dividends 4 000
Balance c/f 34 000
75 000 75 000
2011
Jan 1 Balance b/d 34 000
 3

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2010

Revenue 35 000
Cost of sales (10 000)
Operating cost (9 000)
Interest paid (2 000)

Profit before tax 14 000

Income tax expense (4 000)

Profit for the year 10 000

Other comprehensive income -

Total comprehensive income 10 000

STATEMENT OF CHANGE IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2010

RETAINED
INCOME
RAND
Balance 1 January 2010 -
Total comprehensive income 10 000
Transfer to Asset Replacement Reserve (2 000)
Ordinary dividend (4 000)
Balance 31 December 2010 4 000

BAFEDILE LTD
NOTES TO THE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2010

RECONCILIATION OF PROFIT BEFORE TAX AND CASH RAND

GENERATED FROM OPERATIONS:
Profit before taxation 14 000
Adjustments for :
Depreciation (Items which do not result in a cash flow) 3 000
Interest received (Items which will be shown on the face of the SOCI) -
Interest paid (Items which will be shown on the face of the SOCI) 2 000
Loss on sale of ……………..(Items which do not result in a cash flow)
Profit on sale of …………….(Items which do not result in a cash flow)
Operating profit before working capital changes 19 000

Increase in working capital:

…………… ….
………….. ….
Cash generated from operations 19 000
 4

QUESTION 1

BAFEDILE LTD
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2010
NOTE RAND
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers -
Cash paid to suppliers and employees -
Cash generated from operations 19 000
Interest received
Interest paid (2 000)
Dividends received -
Dividends paid (4 000)
Taxation paid (4 000)
Net cash from operating activities 9 000

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of vehicles (15 000)
Net cash flow from investing activities (15 000)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from shares issued 20 000
Proceeds from long term loan acquired 20 000
Net cash flow from financing activities 40 000

NET INCREASE IN CASH AND CASH EQUIVALENTS 34 000

CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD Nil
CASH AND CASH EQUIVALENTS AT END OF PERIOD 34 000
 5

QUESTION 2

STATEMENT OF FINANCIAL POSITION OF ABC LIMITED - 31 DECEMBER :

ASSETS: 20X6 20X5
Land and buildings 120 000 100 000
Vehicles 40 000 50 000
160 000 150 000
Current Assets 126 000 120 000
Trade stock 93 000 90 000
Accounts receivable 24 000 25 000
Bank 9 000 5 000

286 000 270 000

CAPITAL AND LIABILITIES
Ordinary share capital 124 000 100 000
Retained profit 50 000 40 000
Preference share capital 70 000 80 000
10 % Debentures 25 000 30 000
Current liabilities 17 000 20 000
Accounts payable 17 000 20 000

286 000 250 000

ADDITIONAL INFORMATION:
1. The following items appeared in the Statement of Comprehensive Income:
Depreciation on vehicles amounted to R4 000.
Sales - R147 000
Cost of sales - R131 000
Share issue expenses written off – R2 000
Interest received – R2 000
Interest paid - R1 000
2. R3 000 Income tax was paid during the year.
3. Profit before taxation amounted to R13 000.
4. R6 000 Cash was received on a vehicle which was sold during the year.
(Sold at carrying value.)

REQUIRED:
A statement of cash flows for the year ended 31 December 20X6.
 6

QUESTION 2

ABC LTD
NOTES TO THE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
31 DECEMBER 20X6
RAND
Reconciliation of profit before tax with cash generated
from operations:
Profit before tax 13 000
Adjustments for :
Depreciation 4 000
Interest income (2 000)
Interest expense 1 000
Share issue expenses written off 2 000
Loss on sale of …………….. -
Profit on sale of ……………. -
Operating profit before working capital changes 18 000

Decrease in working capital: (5 000)

Increase in inventory (3 000)
Decrease in trade and other receivables 1 000
Decrease in trade and other payables (3 000)

Cash generated from operations 13 000

 7

QUESTION 2

ABC LTD
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 20X6
Note Rand
Cash flows from operating activities 11 000
Cash receipts from customers 148 000
Cash paid to suppliers and employees (135 000)
Cash generated from operations 13 000
Interest received 2 000
Interest paid (1 000)
Dividends received -
Dividends paid -
Income tax paid (3 000)

Cash flows from investing activities (14 000)

Acquisition of land (20 000)
Proceeds from disposal of vehicle 6 000

Cash flows from financing activities 7 000

Proceeds from issue of ordinary shares
(24 000 - 2 000 share issue expenses) 22 000
Redemption of preference shares (10 000)
Redemption of debentures (5 000)

Net increase in cash and cash equivalents 4 000

Cash and cash equivalents at beginning of period 5 000
Cash and cash equivalents at end of period 9 000
 8

QUESTION 3 (30 MARKS)

SCOOBIE LTD
STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2020
2020 2019
ASSETS RAND RAND
Non-current assets 1 366 000 1 365 000

Property 875 000 1 100 000

Equipment 156 000 140 000
Equipment : cost 240 000 200 000
Accumulated depreciation (84 000) (60 000)

Vehicles 150 000 -

Vehicle: cost 180 000 -
Accumulated depreciation (30 000) -
Investments 185 000 125 000

Current asset 255 816 187 550

Inventory 73 000 65 600
Accounts receivable 70 825 76 580
Current tax refundable: Income Tax - 3 220
Bank 111 991 42 150

TOTAL ASSETS 1 621 816 1 552 550

EQUITY AND LIABILITIES

Share capital and reserves 1 317 197 1 106 300

Non-current liabilities
Mortgage loan 125 000 312 500

Current liabilities 179 619 133 750

Account payable 48 175 71 250
Current tax payable: Income Tax 6 444 -
Short term loan 50 000 -
Shareholders* 75 000 62 500

TOTAL EQUITY AND LIABILITIES 1 621 812 1 552 550

Shareholders*: This amount represent dividends owed to Ordinary and Preference

shareholders
 9

The following information is relevant:

1. On 31 May 2020 250 000 preference shares were issued at R0,55 per share.
Share issue expenses of R1 150 were paid.

2. During the year the following transactions took place with regards to the non-
current assets and were included in the profit before tax:

 Investments, which cost R 62 500 were sold at a profit of R6 225.

 Property was sold for R260 000. No further sales or purchases of property
were made during the year.
 No equipment was sold during the year.

3. There were no components of other comprehensive income.

4. An additional short term loan of R50 000 was raised during the year.

The following extract from the financial statements of Scoobie Ltd is available:

SCOOBIE LTD
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR
ENDED 30 SEPTEMBER 2020

Rand
Revenue: Sales 1 750 000
Revenue: Interest income 1 600
Other income: Profit on sale of investment 6 225
Profit on sale of property 35 000
Cost of sales (1 266 225)
Operating expenses (169 975)
Finance costs (68 134)
Profit before tax 288 491
Income tax expense (88 944)
Profit for the period 199 547
Other comprehensive income -
Total comprehensive income 199 547
 10

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED

30 SEPTEMBER 2020
Ordinary Preference Retained
share capital share capital Earnings
Rand Rand Rand
Balances as at 1 October 2019 925 922 - 180 378
Total comprehensive income 199 547
Shares issued 137 500
Share issue expenses (1 150)
Dividend : Ordinary (112 500)
Dividend : Preference (12 500)

Balances at 30 September 2020 925 922 136 350 254 925

REQUIRED:

3.1 The statement of cash flows for the year ended 30 September (20)
2020.

3.2 The note to reconcile the net profit before tax with cash generated
from operations. (10)

QUESTION 3 ANSWER

SCOOBIE LTD
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 SEPTEMBER
2020

Rand
Cash flows from operating activities 84 766
Cash received from customers 1 755 755 
Cash paid to suppliers and employees (1 412 675) P
Cash generated from operations 343 080 

Interest paid (68 134) 

Interest received 1 600 
Dividends paid (112 500) 
Income tax paid (79 280) 

Cash flows from investing activities (13 775)

Proceeds from the sale of property 260 000 
Acquisition of vehicle (180 000) 
Proceeds from sale of investment 68 725 
Acquisition of equipment (40 000) 
Acquisition of investment (122 500) 
 11

Cash flows from financing activities (1 150)

Proceeds from issue of preference shares 136 350
(137 500 – 1 150)
Repayment of mortgage bond (187 500) 
Proceeds from short term loan raised 50 000 

Net increase in cash and cash equivalents (½) 69 841 (½)

Cash and cash equivalents at the beginning of the
year (½) 42 150 (½)

Cash and cash equivalents at the end of the year  111 991 (20)

Reconciliation of profit before tax with cash generated from

operations

Profit for the year before tax 288 491 

Adjustments for: 12 775

Depreciation (Non-cash flow item) 54 000 
(24 000 Equipment + 30 000 Vehicles)

Profit on sale of Property (Non-cash flow item) (35 000) 

Profit on sale of investment (Non-cash flow item) (6 225) 

Interest expense (Items shown in main statement) 68 134 


Interest income (Items shown in main statement) (1 600)

Decrease in working capital (24 720)

Increase in inventories (7 400) 
Decrease in trade and other receivables 5 755 
Decrease in trade and other payables (23 075) 

Cash generated from operations 343 080 (10)

 12

Workings Dividends Taxation

Balance at beginning of the year 62 500 (3 220)
Amount as per Statement of Changes in Equity/SOCI 125 000 88 944
Balance at end of the year (75 000) (6 444)
PAID 112 500 79 280
OR
Ordinary & Preference Shareholders Current tax payable: Income tax
Bank 112 500 B b/d 62 500 Bal b/d 3 220 Tax exp 88 944
B c/f 75 000 Dividends Bank 79 280
(ord+pref) 125 000

187 500 187 500 Bal c/d 6 444

B b/d 75 000 88 944 88 944

Equipment: Acc depreciation Debtors

B b/d 60 000 B b/d 76 580 Bank 1 755 755
Bal c/d 84 000 Depreciation 24 000 Sales 1 750 000 B c/f 70 825

84 000 84 000 1 826 580 1 826 580

B b/d 84 000 B b/d 70 825

Equipment: cost Property : cost

Asset
B b/d 200 000 Bal b/d 1 100 000
disposal
225 000

Bank 40 000 Bal c/d 875 000

B c/f 240 000
240 000 240 000 1 100 000 1100 000
B b/d 240 000 B b/d 875 000

Preference share capital Investment: cost

Share Disposal
issue
B b/d - Bal b/d
125 000 of investm 62 500
expenses 1 150 Bank 137 500 Bank 122 500 Bal c/d 185 000
B c/f 136 350
137 500 137 500 247 500 247 500
Balance b/d 136 350

Calculation of Working Capital:

Accounts payable Inventory
Bank 23 075 B b/d 71 250 B b/d 65 600
B c/f 48 175 Bank 7 400 B c/f 73 000
71 250 71 250 73 000 73 000

Accounts receivable
B b/d 76 580 Bank 5 755
Bal c/f 70 825
76 580 76 580

Disposal of Property Disposal of Investment

Property: Investment:
- -
Cost 225 000 Cost 62 500
Profit on Profit on
Bank 260 000 Bank 68 725
Disposal 35 000 Disposal 6 225

260 000 260 000 68 725 68 725

 13

QUESTION 4 (30 MARKS)

The following are the abridged Statement of Financial Positions of Cheddar Limited.

STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2020 AND 2019

2020 2019
Assets:
Non-current assets: 298 000 210 000
Property: Cost 264 000 180 000
Vehicles: Cost 47 000 38 000
Vehicles: Accumulated depreciation (13 000) (8 000)

Current assets: 50 000 78 000

Inventory 26 000 20 000
Accounts receivable 24 000 28 000
Bank - 30 000

348 000 288 000

Capital and liabilities
Ordinary share capital 142 000 100 000
10 % Redeemable preference share capital - 30 000
Retained earnings 141 500 124 000
Shareholders’ interest 283 500 254 000
Non-current liabilities:
Long term liability (Debentures) 30 000 15 000

Current liabilities: 34 500 19 000

Bank overdraft 6 500 -
Accounts payable 21 000 14 000
Ordinary shareholders* 7 000 5 000

348 000 288 000

Ordinary shareholders*: Represent an amount owed for dividends.

 14

Additional information:

1. During 2020 the company issued bonus shares as follows to ordinary shareholders
whose names appeared on the share register on 31 December 2019:

One ordinary share for each four ordinary shares held was issued at R0,84 each.

The issue was made out of the retained income account.

2. On 31 December 2020, 20 000 ordinary shares were issued to the public at R1,20 each
and share issue expenses of R3 000 were paid. The share issue expenses were
written off in accordance with IAS32.

3. The 10 % redeemable preference shares were redeemed on 31 December 2020, out

of profits at a premium of 5 %. All preference dividends due were paid on this date
and the full premium at redemption was written off against the retained income
account.

4. The following items appeared in the Statement of Comprehensive Income and in the
Statement of Change of Equity for the year ending 31 December 2020:

R
Interest on debentures and bank overdraft 4 000
Income tax expense (provided and paid) 35 000
Preference dividend 3 000
Ordinary dividend 12 000

5. During 2020 the following items were sold:

Cost Sales price

R R
Property 60 000 60 000
Vehicles (book value R19 000) 24 000 30 000

5. Cash paid to suppliers and employees was R54 000.

REQUIRED:

Complete the following for the year ending 31 December 2020:

4.1 The statement of changes in equity – retained income column. (6)

4.2 The cash flow statement according to IAS7 (direct method). (24)
 15

QUESTION 4 (SOLUTION)

WORKINGS:

Retained Income Profit and Loss

Ord div 12 000 B b/d 124 000
Pref div 3 000 Profit & Loss 55 000
Prem on Tax
prefr shares 35 000
redeemed 1 500
Ord share Retained
cap
21 000 income 55 000
B c/f 141 500
179 000 179 000

Ordinary Share Capital Preference Shareholders

B b/d 100 000
Pref Share
30 000
Cap
Share issue Retained Bank Prem at red
expenses 31 500 of pref
3 000 income
21 000 shares 1 500
25 000 X R0,84
Bank 24 000 5% 30 000
B c/f 142 000
31 500
145 000 145 000 31 500

4.1
THE STATEMENT OF CHANGES IN EQUITY FOR THE RETAINED INCOME
YEAR ENDED 31 DECEMBER 2020
Balance 1 January 2020 124 000
Total comprehensive income 55 000
Ordinary dividends (12 000)
Preference dividends 3 000)
Premium on redemption of preference shares (1 500)
Capitalisation shares issued (21 000)
Balance 31 December 2020 141 500
 16

QUESTION 5 (37 MARKS) (19 NOVEMBER 2007)

( ) = Credit balance

The following is an extract from the annual financial statements of Ecko Ltd
for the year ended 30 June 20X7:

20X7 20X6

Ordinary share capital (20X6: 50 000 shares) (204 000) (170 000)
10 % Redeemable preference share capital
(15 000) (25 000)
(shares of R1 each)
Cash in bank 22 900 -
Bank overdraft - (11 000)
Retained earnings (242 000) (231 000)
Debtors 150 000 180 000
Creditors (18 800) (60 990)
Machinery: cost 75 625 50 625
Furniture: cost 19 500 36 800
Current tax refundable: Income tax 46 000 6 000
Accumulated depreciation: Machinery (20 250) (10 125)
Accumulated depreciation: Furniture (13 600) (32 000)
Inventory 270 625 306 690
Investments 50 000 40 000
Debentures (120 000) (80 000)

The following information is an extract from the Statement of Comprehensive

Income:

20X7 20X6

Income tax expense 14 400 11 000

Inventory written off 1 000 -
Finance cost 5 000 4 000
Investment income 8 500 7 500
Profit before taxation 49 900 40 000
Gross revenue 200 000 190 000

The following information is an extract from the Statement of Change in Equity:

20X7 20X6
Ordinary dividends declared and paid 20 000 20 000
Preference dividend declared and paid 1 500 2 500
 17

Additional information:

1. On 28 February 20X7 a rights issue of 1 share for every 5 shares held, were
issued at R3,40 per share.

2. On 1 June 20X7 10 000 redeemable preference shares were redeemed at

R13 000. The premium on redemption of preference shares were written off
against the retained income as required in IAS32.

3. The following transactions regarding furniture took place during 20X7:

 Furniture to the amount of R5 500 was purchased.

 Furniture with a cost of R800 and an accumulated depreciation of R700,

was written off.

 Furniture with a carrying amount of R3 200 was sold for R8 000.

 Depreciation for the year amounts to R1 100.

4. No machinery has been sold during the year.

REQUIRED:

1.1 The following ledger accounts for the year ended 30 June 20X7.

1.1.1 Furniture at cost. (3)

1.1.2 Disposal of furniture. (3)

(The other ledger accounts indicated on the answer sheet are for your
own workings.)

1.2 The reconciliation of net profit with cash generated from operations. (12)

1.3 The cash flow statement for the year ended 30 June 20X7. (19)
 18

QUESTION 6 (25 MARKS) (AS ADJUSTED)

Sweet & Sour Limited is a distributor of various leisure products. The company has
approached you to assist them in the preparation of its cash flow statement for the year
ended 28 February 2018. They have provided you with the following financial
statements:

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED

28 FEBRUARY 2018
2018 2017
Rand Rand
Sales 1 025 000 808 000
Cost of sales (528 000) (437 000)
Other income 40 000 -
Operating expenses (200 000) (182 000)
Operating profit 337 000 189 000
Interest paid (40 000) (13 000)
Net profit before tax 297 000 176 000
Tax expense (78 000) (61 000)
Total comprehensive income 219 000 115 000

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 28 FEBRUARY 2018

ORDINARY TREASURY RETAINED

SHARE SHARES INCOME
CAPITAL
Balance 1 March 2018 110 000 235 000
Share buy-back of ordinary shares - (82 500) -
Total comprehensive income - - 219 000
Ordinary dividend - - (65 000)

Balance 28 February 2018 110 000 (82 500) 389 000

 19

STATEMENT OF FINANCIAL POSITION AT 28 FEBRUARY 2018

2018 2017
Rand Rand
ASSETS
Non-current assets 578 000 440 000
Property, plant and equipment 468 000 345 000
Financial assets 110 000 95 000

Current assets 408 000 387 000

Inventory 212 000 195 000
Trade and other receivables 194 000 140 000
Prepaid expenses 2 000 6 000
Cash and cash equivalents - 46 000

TOTAL ASSETS 986 000 827 000

Share capital and reserves 416 500 335 000

Ordinary share capital
(2017: 55 000 shares in issue) 110 000 110 000
Treasury shares (82 500)
Retained income 389 000 235 000

Non-current liabilities
Long term loan 327 500 315 000

Current liabilities 242 000 167 000

Bank overdraft 49 000 -
Short term loan 25 000 30 000
Trade payables 168 000 137 000

TOTAL EQUITY AND LIABILITIES 989 000 827 000

FURTHER INFORMATION:

1. Property with a book value of R100 000 were sold on 1 March 2017 for R140 000.
Operating expenses for the year includes depreciation of R30 000.

2. Part of the financial assets were sold for R5 000. (It was sold at cost price.)

3. On 28 February 2018 the company did a share buy-back of 27 500 ordinary shares.
The average share price was R2 and the market price was R3.

4. Trade payables were made up as follows: 2018 2017

Trade creditors 108 000 95 000
Interest payable 10 000 17 000
Current tax payable: Income tax 25 000 15 000
Shareholders for dividend 25 000 10 000
168 000 137 000
 20

REQUIRED:

6.1 The statement of cash flows for the year ended 28 February 2018.
6.2 The note to reconcile the profit before tax with cash generated from operations.

QUESTION 7 (20 MARKS) (24 OCTOBER 2008) (To be done in Tutor class.)

STATEMENT OF CASH FLOWS:

You are presented with the following Statement of Financial Position as at 30 June 2008 of
Anneke Ltd:

STATEMENT OF FINANCIAL POSITION 2008 2007

R R
ASSETS Notes
Non-current assets 455 000 400 000
Property plant and equipment at cost 1 740 000 625 000
Accumulated depreciation (285 000) (225 000)

Current assets 685 000 550 000

Inventory 325 000 265 000
Trade and other receivables 285 000 225 000
Cash and cash equivalents 75 000 60 000

TOTAL ASSETS 1 140 000 950 000

EQUITY & LIABILITIES 707 500 525 000

Ordinary share capital
(2007: 225 000 shares) 2&3 424 500 225 000
Retained income 283 000 300 000

Non-current liabilities
10 % Debentures 175 000 100 000

Current liabilities 257 500 325 000

Trade payables 218 750 247 500
10 % Debentures - 45 000
Current tax payable: Income tax 3 750 2 500
Ordinary shareholders 35 000 30 000

TOTAL EQUITY AND LIABILITIES 1 140 000 950 000

 21

The following Statement of Comprehensive Income for the year ended 30 June 2008 of
Anneke Ltd was drafted:

STATEMENT OF COMPREHENSIVE INCOME

Sales 750 000

Cost of sales (430 000)
Expenses: (175 500)
Depreciation (75 000)
Loss on sale of equipment (5 000)
Other operating expenses (94 500)

Net profit before interest 145 500

Finance cost (15 000)
Net profit before taxation 130 500
Income tax expense (25 000)
Net profit for the period 105 500

ADDITIONAL INFORMATION
1. On 29 June 2008 equipment which had a cost of R25 000 and accumulated
depreciation of R15 000 was sold at a loss of R5 000.

2. The company made a capitalisation issue of one share for every three shares
held by the shareholders on 1 July 2007. For this purpose, the retained income
account was used.

3. On the same date 62 500 shares were issued to the public at R2 per share and
share issue expenses of R500 were paid. The share issue expenses were
written off in accordance with IAS32.

4. The following dividends were declared:

Interim dividend – 30 December 2007 R17 500
Final dividend – 30 June 2008 R30 000
R47 500

5. The accountant calculated the “Cash generated from operations” at

R76 750. This amount was correctly calculated.

REQUIRED:

Prepare the Cash Flow Statement for the year ended 30 June 2008.
NOTE: No notes are required.
 22

SUBJECT PAGES TIME

FINANCIAL ACCOUNTING II 7 2 HOURS

SUBJECT CODES DATE MARKS 13:00

to
FIA213S & FIA214S 11 NOVEMBER 2014 70 15:00
FULL TIME & PART TIME

FACULTY OF BUSINESS

FINAL ASSESSMENT: SEMESTER TWO

COURSE: NHC: ACCOUNTANCY

NHC: FINANCIAL INFORMATION SYSTEMS

EXAMINER : C W JANSEN VAN RENSBURG

MODERATOR (INTERNAL) : J C BORNMAN

SPECIAL INSTRUCTIONS
 Answer all questions.
 Hand in question paper and answer sheet.
 Pencil work will not be marked.
 23

QUESTION 1 (38 MARKS) FA2 11 NOV 2014

You are compiling the annual financial statements of your company, Greyhound
Limited, for publication in the annual report. Only the statement of cash flows
(and its relevant notes) must still be finalised. The financial statements and notes
you have already completed so far are listed below.

Greyhound Limited
Statement of Financial Position at 31 December 2013
2013 2012
Rand Rand
ASSETS

Non-current assets 1 965 000 2 000 000

Property, plant & equipment 1 765 000 1 750 000

Financial assets 200 000 250 000

Current assets 1 419 836 254 300

Inventory 167 000 133 000

Trade accounts receivable
104 500 109 100

Cash and cash equivalents 1 148 336 12 200

3 384 836 2 254 300

EQUITY AND LIABILITIES

Share capital and reserves 3 322 768 2 029 600

Non-current liabilities – 210 000

Debentures – 210 000

Current liabilities 62 068 14 700

Trade accounts payable 12 000 5 000

Ordinary shareholders 25 000 –

Current tax payable: Income Tax 25 068 9 700

3 384 836 2 254 300

 24

FA2 11 NOV 2014

Greyhound Limited
Statement of Comprehensive Income for the year ended 31 December 2013

2013
Note
Rand
Revenue
3 4 180 000

Other income 21 800

Cost of sales (1 850 400)
Distribution cost (41 500)
Administrative cost (707 000)
Operating cost (546 000)
Finance cost (2 500)
Profit before tax 4 1 054 400
Income tax expense (295 232)
Profit for the period 759 168
Other comprehensive income –
Total comprehensive income 759 168

Greyhound Limited
Statement of Changes in Equity for the year ended 31 December 2013

Ordinary 8% Retained Total

Share Preference Earnings
Capital Share
Capital
Rand Rand Rand Rand
Opening balances
– 1 January 2013 1 250 000 – 779 600 2 029 600
Total comprehensive
– –
income 759 168 759 168
Capitalisation issue 80 000 – (80 000) –
Ordinary shares issued 300 000 – – 300 000
Preference shares issued – 400 000 – 400 000
Ordinary dividend declared – – (150 000) (150 000)
Preference dividend
– – (16 000) (16 000)
declared
Closing balances
– 31 December 2013 1 630 000 400 000 1 292 768 3 322 768
 25

FA2 11 NOV 2014

Greyhound Limited
Notes to the financial statements for the year ended 31 December 2013

3 Revenue Rand

Revenue comprises of the following types of income:

Sales of merchandise 4 150 000

Dividend income 30 000

4 180 000

4 Profit before tax

The following items have been taken into account in determining profit before tax:

Rand

Auditors’ remuneration – for auditing services 30 250

Depreciation 95 000

Employee benefits expense 398 000

Profit on disposal of machinery 21 800

Additional information

1. Property, plant and equipment consist of four categories of assets. There were no
additions or disposals during the year, other than a machine that had to be replaced.
(Refer to Additional information number 2)

2. A machine (which had originally cost R90 000) was replaced during the year. At the
date of the machine’s replacement its carrying amount was R30 000. The money for
the disposal was received before the year-end, and the new machine was paid for in
cash on the same date. (All amounts share are exclusive of value-added tax.)

3. Financial assets consist of an investment in the shares of another company. There

were no additions to financial assets during the year.

4. The dividends tax was paid over to the Revenue Service on the same day that the
dividends were paid out to the shareholders. The dividend tax for the current year is
included in (gross) dividends declared and therefore not disclosed as a separate item.

5. The company had no cash or cash equivalents other than its current account.

6. Included in the revenue from sales of merchandise was an amount of R150 000
relating to cash sales.
 26

FA2 11 NOV 2014

REQUIRED:

1.1 The note that reconciles “Profit before tax” (as disclosed in the statement
of comprehensive income) to the line item “Cash generated from
operations” (as disclosed in the statement of cash flows) for the year
ended 31 December 2013. (10)

1.2 The statement of cash flows of Greyhound Ltd for the year ended
31 December 2013 in accordance with the requirements of IAS7, using
the direct method. (Comparative figures are not required.) (18)

1.3 The following general ledger account reconstructions:

1.3.1 Accounts receivable.

1.3.2 Ordinary shareholders.
1.3.3 Property, plant and equipment at carrying value.
1.3.4 Asset disposal.
1.3.5 Current tax payable: Income tax. (7)

1.4 State whether the following statements are “True” or “False”:

1.4.1 The term “cash” includes bank accounts where the money is available
immediately on demand.
1.4.2 If cash is collected on behalf of a third party, only the net inflow should be
disclosed in the statement of cash flows.
1.4.3 A 12-month fixed deposit account at a bank constitutes a “cash (3)
equivalent”.

QUESTION 2 (19 MARKS) FA2 11 NOV 2014

(Analysis and interpretation question) IGNORE
 27

MEMORANDUM

FINANCIAL ACCOUNTING 2

FULL TIME & PART TIME

11 NOVEMBER 2014

QUESTION 1 (38 MARKS)

1.1
GREYHOUND LIMITED
NOTE TO THE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
31 DECEMBER 2013
RAND
Reconciliation of profit before tax with cash
generated from operations:
Profit before tax  1 054 400
Adjustments for:
Finance cost  2 500
Dividend income  (30 000)
Depreciation  95 000
Profit on disposal of machinery  (21 800)
Operating profit before changes in working capital 1 100 100
Decrease in working capital:  (22 400)
Increase in inventory  (34 000)
Decrease in accounts receivable  4 600
Increase in accounts payable  7 000
Cash generated from operations  1 077 700

[10]
 28

1.2
GREYHOUND LIMITED
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013
RAND
Cash effects from operating activities 1
Cash receipts from customers 5 {4 004 600 + 150 000}  4 154 600
Cash paid to suppliers and employees P (3 076 900)
Cash generated from operations P 1 077 700
Interest paid2   (2 500)
Dividends received2  30 000
Dividends paid2 {125 000 + 16 000 }  (141 000)
Income tax paid2  (279 864)
Net cash inflow from operating activities3 684 336

Cash effects from investing activities1

Proceeds on disposal of machinery  51 800
Acquisition of machinery - replacement  (140 000)
Proceeds on disposal of financial assets  50 000
Net cash outflow from investing activities3 (38 200)

Cash effects from financing activities1

Proceeds from issue of ordinary shares  300 000
Redemption of debentures  (210 000)
Proceeds from issue of preference shares  400 000
Net cash inflow from financing activities3 490 000

Net increase in cash and cash equivalents  1 136 136

Cash and cash equivalents 4 at beginning of year  12 200
Cash and cash equivalents at the end of the year  1 148 336
[18]
1 “Cash flows from…” equally acceptable description.
2 Mark given if “received” or “paid” is indicated for each item.
3 This line description is not necessary if the subtotal has been written next to the caption of the section.
4 Mark is not given if “Bank” is used instead of “cash and cash equivalents”.
5 Deduct half a mark if “Debtors” is used instead of “customers”.
 29

1.3.1 Accounts receivable

Balance b/f 109 100 Bank (receipts from 4 004 600
debtors)

Sales 4000 000 Balance c/f 104 500

{or
R4 150 000}
4 109 100 4 109 100
Balance b/f 104 500

1.3.2 Ordinary shareholders

Bank (Div paid) 125 000 Balance b/f –
Balance c/f 25 000 Ordinary.dividends 150 000 
150 000 150 000

1.3.3 Property, plant and equipment at carrying value

Balance b/f 1 750 000 Asset disposal 90 000
*(or 30 000)
Asset disposal 60 000* Depreciation 95 000

Bank (additions) 140 000 Balance c/f 1 765 000

1 950 000 1 950 000
Balance b/f 1 765 000
 30

1.3.4 Asset disposal account

Machinery: Cost Machinery: 
Accumulated
OR: 90 000* *60 000
depreciation
(Vehicles at
carrying value
30 000)
Profit on disposal  Bank (proceeds on disposal) 51 800
of machinery
21 800
111 800 111 800

1.3.5 Current tax payable: Income tax

Bank (payments to 279 864 Balance b/f 9 700
SARS)

Income tax expense 295 232

Balance c/f 25 068
304 932 304 932
Balance b/f 25 068

(7)
1.4

1.4.1 True

1.4.2 True

1.4.3 False

(3)
 31

SUBJECT PAGES TIME

FINANCIAL ACCOUNTING II 7 2 HOURS

CODE DATE MARKS 14:00

to
FIA213S/FIA213B/FIA214S/FIA214B 19 NOVEMBER 2015 70 16:00
FULL TIME & PART TIME

FACULTY OF BUSINESS

ASSESSMENT: SEMESTER TWO

COURSE: NHC ACCOUNTANCY

NHC FINANCIAL INFORMATION SYSTEMS

EXAMINER : V HOBSON
MODERATOR (INTERNAL) : J C BORNMAN

DO NOT TURN THE PAGE BEFORE THE STARTING TIME

 41

QUESTION 1 (37 MARKS) FA2: 19 NOVEMBER

2015

Rotatrim Limited was incorporated in 2009 with an authorised share capital of 1 000
000 ordinary shares of no par value and 500 000 10% non-redeemable preference
shares of no par value. The draft annual financial statements for the year ended 31
December 2014 are shown below:

Extract from the Statement of Comprehensive Income for the year ended
31 December 2014
R
Revenue from sales 3 600 000
Cost of sales (2 250 000)
Profit from sale of property 85 000
Dividend income 7 500
Operating expenses (672 000)
Finance cost (8 000)
Profit before tax 762 500
Income tax expense (228 750)
Total Comprehensive Income for the year 533 750

Extract from the Statement of Changes in Equity for the year ended 31
December 2014

Retained Preference
Earnings Share
Capital
R R
Balance 1 January 2014 450 600 -
Total comprehensive income 533 750
Preference shares issued - 200 000
Preference share issue expenses - (3 500)
Transfers to reserve at replacement of property (85 000)
(Refer to additional information number 4)
Dividends - ordinary (148 000)
Dividends - preference (39 000)
Balance 31 December 2014 712 350 196 500
 42

FA2: 19 NOVEMBER 2015

Draft Statement of Financial Position as at 31 December 2014

2014 2013

R R

Non-current Assets

Property (at cost) 1 950 000 2 075 000

Equipment (at cost) 620 000 460 000

Accumulated depreciation: equipment (124 000) (92 000)

Investments 366 000 286 000

Current Assets

Inventory 221 390 146 000

Accounts receivable 128 100 135 350

Income tax receivable – 7 200

Cash in bank 184 250 95 600

Total Assets 3 345 740 3 113 150

Equity

Ordinary share capital (R2 per share) 1 250 000 1 250 000

Preference share capital (R1 per share) 196 500 –

Reserve at replacement of property 85 000 –

Retained earnings 712 350 450 600

Non-current Liabilities

Loan 360 000 585 000

Debentures 487 650 487 650

Current Liabilities

Accounts payable 78 400 124 350

Current tax payable: Income tax 15 840 –

Ordinary shareholders 160 000 215 550

Total Equity and Liabilities 3 345 740 3 113 150

 43

ADDITIONAL INFORMATION: FA2: 19 NOVEMBER 2015

1. During the current financial year 20 000 preference shares were issued at R10 per
share. Share issue expenses of R3 500 were paid. Preference dividends of
R39 000 were declared and paid on 31 December 2014. (Ignore dividends tax).

2. An additional R150 000 loan was borrowed during the year.

3. All sales of goods were done on credit.

4. During the year the following transactions relating to non-current assets took place:

 Property was sold for R600 000 and the profit on sale was transferred to a
reserve at replacement of property. Another piece of land was also
purchased.

 Investments and equipment were acquired during the year.

 No equipment was sold during the year.

REQUIRED:

1.1 The Statement of Cash Flows of Rotatrim Ltd for the year ended 31
December 2014 in accordance with the requirements of IAS7, using the
direct method. (Comparative figures are not required.) (24)

1.2 The note that reconciles “Profit before tax” (as disclosed in the Statement
of Comprehensive Income) to the line item “Cash generated from
operations” (as disclosed in the Statement of Cash Flows) for the year (10)
ended 31 December 2014.

1.3 The following general ledger account reconstructions:

1.3.1 Asset disposal.
1.3.2 Property: cost (3)

QUESTION 2 (18 MARKS) Analysis and interpretation question IGNORE

QUESTION 3 (15 MARKS) Marvel Ltd is….(This question is not applicable for 2021.)
 47

FINANCIAL ACCOUNTING 2
FULL TIME & PART TIME
FA2 : 19 NOVEMBER 2015

QUESTION 1 (38 MARKS)

ROTATRIM LIMITED
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2014
NOTE RAND

CASH FLOWS FROM OPERATING ACTIVITIES

Cash received from customers   3 607 250

Cash paid to suppliers and employees P (3 011 340)

Cash generated from operations P 595 910

Dividends received  7 500

Finance cost paid  (8 000)

Dividends paid (203 550 Ord + 39 000 Pref)  (242 550)

Taxation paid  (205 710)

Net cash from operating activities 147 150

CASH FLOW FROM INVESTING ACTIVITIES

Proceeds from sale of property  600 000

Purchase of property P (390 000)

Cash paid for purchase of equipment  (160 000)

Cash paid for purchase of investments  (80 000)

Net cash flow from investing activities (30 000)

CASH FLOW FROM FINANCING ACTIVITIES

Net proceeds from issue of preference shares (200 000 – 3 500)  196 500

Proceeds from loan raised  150 000

Repayment of loan  (375 000)

Net cash flow from financing activities (28 500)

NET INCREASE  IN CASH AND CASH EQUIVALENTS  88 650

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 95 600


CASH AND CASH EQUIVALENTS AT END OF PERIOD  184 250

(10)
 48

FA2 : 19 NOVEMBER 2015

ROTATRIM LIMITED
NOTES TO THE STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2014
NOTE 1 RAND
RECONCILIATION OF PROFIT BEFORE TAX AND CASH
GENERATED FROM OPERATIONS:
Profit before taxation  762 500

Adjustments for :

Items which do not result in a cash flow

Depreciation  32 000
(124 000 – 92 000)
Profit on sale of land  (85 000)

Items which are shown on face of SOCF

Dividend income  (7 500)

Finance cost  8 000

Operating profit before working capital changes 710 000

Working capital changes: (114 090)

Changes in inventory -increase  (75 390)

Changes in accounts receivable - decrease  7 250

Changes in accounts payable – decrease  (45 950)

Cash generated from operations  595 910

1.3.1 Asset disposal account

201 Land: Cost 201
4 3 515 000* 4 3 Bank (proceeds
De 1 Dec 1 on disposal) 600 000
c
Profit on 
disposal of 85 000
land
600 000 600 000

1.3.2 Property: cost

2014 2014
Jan 1 2 Dec 31 Bank 515 000
Balance b/d 075 000 (Property sold)
2014 Bank 31 Balance c/f 1 950 000
Dec 31 (Property
purchased) 390 000
2 465 000 2 465 000

2014 (3)
Jan 1 Balance b/d 1 950 000
 49

FA2 : 19 NOVEMBER 2015

Accounts Receivable Ordinary Shareholders

B b/d 135 350 Bank 3 607 250 BANK 203 550 B b/d 215 550
Reven 3 600 000 B c/f 128 100 Ord div 148 000
ue
B c/d 160 000
3 735 350 3 735 350 363 550 363 550
B b/d 128 100

Investments Current tax payable: Income tax

B b/d 286 000 B b/d 7 200
BANK 80 000 B c/f Bank Tax
366 000 205 710 Expen 228 750
se
Bal c/f 15 840
495 000 366 000 228 750 228 750

Loan Equipment : Cost

Bank 375 000 Bal b/d 585 000 B b/d 460 000
(Repai Bank
Bank 150 000 160 000
d)
Bal c/f 360 000 (Received) B c/f 620 000

735 000 735 000 620 000 620 000

Interest paid
Bank 8 000 Balance b/d 0
Bal c/f P+L 8 000
8 000 8 000

WORKING CAPITAL CHANGES

Accounts Payable Accounts Receivable

Bank 45 950 B b/d 124 350 B b/d 135 350 Bank 7 250
B c/f 78 400 B c/f 128 100

124 350 124 350 135 350 135 350

Inventory
B b/d 146 000
Bank 75 390 B c/f 221 390

221 390 221 390