EXERCISE 7.7 7.

7
SERVICE MANUFACTURERS
STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2021
Notes 2021 2020
ASSETS R R
NON-CURRENT ASSETS
Property, plant and equipment 2 31 050 000 9 600 000

CURRENT ASSETS 4 800 000 5 000 000

Inventory 1 800 000 2 000 000
Accounts receivable 3 000 000 1 500 000
Cash in bank - 1 500 000

R35 850 000 R14 600 000

CAPITAL AND LIABILITIES
CAPITAL 1 24 250 000 10 250 000

NON-CURRENT LIABILITIES
Loan: Boland Bank 2 500 000 1 000 000

CURRENT LIABILITIES 9 100 000 3 350 000

Accounts payable 3 600 000 2 350 000
Loan: Boland Bank (current portion) 1 500 000 1 000 000
Bank overdraft 4 000 000 -

R35 850 000 R14 600 000

NOTES TO FINANCIAL STATEMENT:
1. Capital
Balance 1 January 10 250 000 1 700 000
Capital introduced 7 000 000 1 500 000
Profit 10 050 000 9 050 000
27 300 000 12 250 000
Less: Drawings 3 050 000 2 000 000
R24 250 000 R10 250 000

2. Property, plant and equipment 31 050 000 9 600 000

Plant and machinery 20 000 000 7 000 000
Cost 24 000 000 10 000 000
Accumulated depreciation 4 000 000 3 000 000
Vehicles 3 000 000 2 600 000
Cost 6 200 000 5 600 000
Accumulated depreciation 3 200 000 3 000 000
Investments 8 050 000 -

Additional information:

1. Plant which had cost R5 000 000 and which had a net carrying amount of R3 000 000 was sold during
the year at a profit of R500 000. New plant was purchased to replace the plant sold.

2. During the year ended 31 December 2021, the owner contributed a vehicle at a cost of R800 000 to the
business. This entry was correctly recorded.

3. A vehicle which had cost R1 000 000 was sold during the year for R200 000. Depreciation expense on
vehicles for the current year amounted to R900 000. A new vehicle was purchased to replace the
vehicle sold.

REQUIRED:
(a) Prepare the Statement of Cash Flows for the year ended 31 December 2021.
(b) Write a brief explanation to the owner in which you comment on the fact that despite the introduction of
additional capital and a substantial profit for the year there is a bank overdraft at the end of the year.
(RV102 : 31 minutes)
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