Financial Reporting and Analysis Final OSA

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FINAL ONLINE SUMMATIVE ASSESSMENT

Bachelor of Public Administration

Bachelor of Business Administration

Bachelor of Commerce in Project Management

Bachelor of Commerce in Financial Management

Bachelor of Commerce in Marketing Management


PROGRAMME
Bachelor of Commerce in International Business

Bachelor of Commerce in Supply Chain Management

Bachelor of Commerce in Human Resource Management

Bachelor of Commerce in Tourism and Hospitality Management

Bachelor of Commerce in Information and Technology Management

MODULE Financial Reporting and Analysis

YEAR One (1)

INTAKE January 2023 Semester 2

DATE 07 November 2023

TOTAL MARKS 100


Answer ALL questions in this paper. [100 MARKS]
QUESTION 1 (20 MARKS)
REQUIRED
Use the information provided below to prepare the Statement of Comprehensive Income for the year ended
28 February 2023.
INFORMATION
FIESTA TRADERS
PRE-ADJUSTMENT TRIAL BALANCE AS AT 28 FEBRUARY 2023
Debit (R) Credit (R)
Balance Sheet accounts section
Capital 2 520 000
Drawings 160 000
Land and buildings 1 800 000
Vehicles at cost 1 360 000
Equipment at cost 1 000 000
Accumulated depreciation on vehicles 760 000
Accumulated depreciation on equipment 320 000
Fixed deposit: Rio Bank (10% p.a.) 300 000
Trading inventory 230 000
Debtors control 260 000
Provision for bad debts 16 000
Bank 134 000
Cash float 12 000
Creditors control 220 000
Mortgage loan: Rio Bank (12% p.a.) 640 000

Nominal accounts section


Sales 3 000 000
Cost of sales 960 000
Sales returns 20 000
Salaries and wages 838 000
Bad debts 24 000
Stationery 40 000
Rates and taxes 116 000
Motor expenses 180 000
Repairs to building 34 000
Telephone 76 000
Electricity and water 92 000
Bank charges 16 000
Insurance 40 000
Interest on mortgage loan 66 000
Interest on fixed deposit 12 000
Rent income 270 000
7 758 000 7 758 000
Adjustments and additional information
1. Stocktaking on 28 February 2023 revealed the following inventories:
1.1 Trading inventory R220 000
1.2 Stationery R4 000
2. The telephone account for February 2023, R6 000, was due to be paid on 01 March 2023.
3. A debtor who was declared insolvent paid R900 which represented 30% of her debt. The balance of
her account must now be written off.
4. The provision for bad debts must be decreased to R14 000.
5. Rent has been received up to 31 March 2023. Note: The rental was increased by R2 000 per month
with effect from 01 November 2022.
6. The insurance total includes an annual premium of R15 000 that was paid for the period 01 June 2022
to 31 May 2023.
7. Provide for outstanding interest on the mortgage loan for February 2023.
8. Provide for the outstanding interest on fixed deposit. The investment in fixed deposit was made on
01 September 2022.
9. A payment for the annual service of a motor vehicle was not recorded, R5 000.
10. Provide for depreciation as follows:
10.1 On equipment at 10% p.a. on cost.
10.2 On vehicles at 20% p.a. using the diminishing balance method. Note: A vehicle with a cost price of
R360 000 was purchased on 01 December 2022. The purchase has been recorded.
QUESTION 2 (20 MARKS)

REQUIRED
Use the information provided below to prepare the Statement of Financial Position of Trent Limited as at 31
July 2023. The notes to the financial statements are not required.
INFORMATION
TRENT LTD
Extract of PRE-ADJUSTMENT TRIAL BALANCE AS AT 31 JULY 2023
Balance Sheet Accounts Section Debit (R) Credit (R)
Ordinary share capital (200 000 shares) 4 000 000
Retained earnings 589 200
Land and buildings 3 904 100
Vehicles (cost) 1 400 000
Equipment (cost) 900 000
Accumulated depreciation on vehicles 510 000
Accumulated depreciation on equipment 397 000
Debentures (12% p.a.; Maturity date 31 July 2028) 1 700 000
Investment (25 000 shares in ABC Limited) 500 000
Trading inventory 1 090 000
Debtors control 360 000
Provision for bad debts 30 000
Bank 287 000
Creditors control 484 000
South African Revenue Services: Company tax 140 000

Adjustments and additional information


The profit after tax for the year ended 31 July 2023 amounted to R392 100. The following adjustments were
made to the income and expenses but not to the balance sheet accounts:
1. A physical stocktake on 31 July 2023 revealed the following:
1.1 Trading inventory on hand amounted to R1 050 000.
1.2 Stationery unused amounted to R2 000.
2. Rent for August 2023 was received and recorded on 31 July 2023, R14 000.
3. Dividends of 70 cents per share are due from ABC Limited.
4. Commission on sales of R30 000 is owed to the salespersons.
5. Equipment, cost price R120 000, was purchased on credit on 01 July 2023 but no entry has been made
for this. Depreciation on equipment is calculated at 15% p.a. on cost and on vehicles at 20% p.a. on the
diminishing balance.
6. The bank statement was received after the trial balance was prepared and it reflected bank charges of
R1 800.
7. The provision for bad debts must be adjusted to 5% of debtors.
8. Two of the directors of the company are owed remuneration of R20 000 each.
9. Based on the profit for the year, an amount of R30 000 is still owed to South African Revenue Services
for company tax.
10. The directors declared a final dividend of 12 cents per share. The interim dividend amounted to
R100 000.
QUESTION 3 (20 MARKS)

REQUIRED
Use the information provided below to prepare the Statement of Changes in Equity of Sunray Traders for the
year ended 28 February 2023.
INFORMATION
EXTRACT FROM THE LEDGER OF SUNRAY TRADERS AS AT 28 FEBRUARY 2023
Debit Credit
R R
Capital: Sunny 600 000
Capital: Raymond 400 000
Current a/c: Sunny (01 March 2022) 100 000
Current a/c: Raymond (01 March 2022) 60 000
Drawings: Sunny 500 000
Drawings: Raymond 700 000

The following must be considered:


(a) On 28 February 2023 the Statement of Comprehensive Income reflected a net profit of R1 400 000.
(b) The partners are entitled to interest at 15% p.a. on their capital balances. Note: Raymond decreased
his capital contribution by R200 000 on 31 August 2022 whilst Sunny increased his capital balance by
the same amount on 01 December 2022. These capital changes have been recorded.
(c) The partners are entitled to the following monthly salaries:
Sunny R25 000
Raymond R20 000
(d) Raymond is entitled to a bonus equal to 10% of his annual salary.
(e) The remaining profit/shortfall must be shared between Sunny and Raymond in the ratio of the capital
balances as at the beginning of the financial year.
QUESTION 4 (20 MARKS)
REQUIRED
Use the information provided below to prepare the Cash Flow Statement of Alto Limited for the year ended 31
December 2022.
INFORMATION
The following amounts were obtained from the Statement of Comprehensive Income for the year ended 31
December 2022 and Statement of Financial Position of Alto Limited as at 31 December 2022 and 31
December 2021:
31 Dec 2022 31 Dec 2021
R R
Sales 11 000 000
Cost of sales 6 500 000
Depreciation 750 000
Operating profit 1 650 000
Interest expense 450 000
Company tax for the year 400 000
Property, plant and equipment (carrying value) 6 250 000 5 000 000
Long-term investments 350 000 400 000
Inventories 2 150 000 2 050 000
Accounts receivable 1 700 000 1 700 000
Prepaid expenses 200 000 50 000
Cash and cash equivalents 500 000 350 000
Ordinary share capital (All shares issued at R10 each) 3 100 000 3 100 000
Retained earnings 3 000 000 2 500 000
Non-current liabilities 3 600 000 3 350 000
Accounts payable 1 100 000 200 000
Accrued expenses 100 000 70 000
Dividends payable 200 000 250 000
Company tax payable 50 000 80 000

Note:
■ Dividends paid and recommended during 2022 amounted to R300 000.
■ All purchases and sales of inventories are on credit.
■ Some of the investments were redeemed during the financial year ended 31 December 2022.
■ Debtors are granted credit terms of 30 days.
QUESTION 5 (20 MARKS)

REQUIRED
Use the information provided in QUESTION 4 to answer the following questions:
5.1 Calculate the following ratios (expressed to two decimal places) for 2022 only. Note: Use formulas
provided in the formula sheet only (that appear after QUESTION 5).
5.1.1 Gross margin (2 marks)
5.1.2 Dividend per share (2 marks)
5.1.3 Return on assets (2 marks)
5.1.4 Current ratio (2 marks)
5.1.5 Acid test ratio (2 marks)
5.1.6 Debt to equity (2 marks)
5.1.7 Creditor payment period (2 marks)
5.2 Comment on the following ratios:
2022 2021
5.2.1 Inventory turnover 3.10 times 6.35 times (2 marks)
5.2.2 Debtors collection period 56.41 days 29.45 days (2 marks)
5.2.3 Return on equity 13.11% 18.80% (2 marks)

END OF PAPER
FORMULA SHEET

Gross profit X 100 Total debt X 100


Sales 1 Total assets 1

Profit after tax X 100 Non-current debt X 100


Sales 1 Equity 1

Operating profit X 100 Operating profit


Total assets 1 Interest expense

Profit after tax X 100 Profit after tax X 100


Equity 1 No. of ordinary shares issued 1

Current assets Dividends for the year X 100


Current liabilities No. of ordinary shares issued 1

Current assets – Inventory Market price per share


Current liabilities Earnings per share

Cost of sales Earnings per share X 100


Average inventory Market price per share 1

Accounts receivable X 365 Dividend per share X 100


Credit sales 1 Market price per share 1

Accounts payable X 365


Credit purchases 1

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