ACCOUNTING AND FINANCIAL MANAGEMENT QUESTION 1 XXXXXXXXXX) The following information was extracted from the accounting records of Belle Mare Limited: Statement of Comprehensive Income for the year...

all is in the file



ACCOUNTING AND FINANCIAL MANAGEMENT QUESTION 1 (20) The following information was extracted from the accounting records of Belle Mare Limited: Statement of Comprehensive Income for the year ended 31 December 2018 (R) 2017 (R) Sales 1 856 000 1 200 000 Cost of sales (1 280 000) (750 000) Gross profit 576 000 450 000 Operating expenses (291 200) (212 000) Depreciation 30 000 26 000 Other operating expenses 261 200 186 000 Operating profit 284 800 238 000 Interest on mortgage loan (24 000) (72 000) Profit before tax 260 800 166 000 Income tax (90 240) (58 100) Profit after tax 170 560 107 900 Statement of Financial Position as at 31 December 2018 (R) 2017 (R) ASSETS Non-current assets 2 464 160 2 444 000 Property, plant and equipment 2 464 160 2 444 000 Current assets 356 000 336 000 Inventories (all Trading Inventory) 120 000 250 000 Trade & other receivables 40 000 64 000 Cash & cash equivalents 196 000 22 000 2 820 160 2 780 000 2018 (R) 2017 (R) EQUITY AND LIABILITIES Equity 2 437 560 1 980 000 Ordinary share capital (issued at R10 each) 2 180 000 1 760 000 Retained income 257 560 220 000 Non-current liability (Mortgage loan, 12% p.a.) 200 000 600 000 Current liabilities 182 600 200 000 Trade & other payables 98 000 138 000 South African Revenue Services (income tax) 8 600 6 000 Shareholders for dividends 76 000 56 000 2 820 160 2 780 000 Additional information *New shares were issued on 1 January 2018. *Interim and final dividends for the year ended 31 December 2018 amounted to R133 000. *Fixed assets were sold at carrying (book) value during the year for R144 000. Required: Study the information provided above by Belle Mare Ltd and prepare the Statement of Cash Flows (using the indirect method) for the year ended 31 December 2018. QUESTION 2 (20) The Statement of Comprehensive Income provided below was obtained from the accounting records of Dreamonline Limited: Statement of Comprehensive Income for the year ended 31 August 2018 (Extract) R Sales 5 000 000 Cost of sales (1 900 000) Gross profit 3 100 000 Operating expenses (700 000) Operating profit 2 400 000 Interest income 50 000 Interest expense ? Profit before tax 2 200 000 Income tax (630 000) Net profit 1 570 000 Required: 2.1 Explain SIX (6) reasons why shareholders and financial managers would be interested in the Statement of Comprehensive Income. (6) 2.2 Calculate the interest expense for the year ended 31 August 2018. (3) 2.3 Explain the accounting treatment of sales returns and allowances. (3) 2.4 Interest has been calculated at 8% per year on the amount invested. Assume that there was no change in investments during the year, determine the value of the investment. (2) 2.5 Which method of depreciation will result in lower net profit in the early years of the life of the asset? Explain why. (3) 2.6 Of what significance is the operating profit to investors? (3) QUESTION 3 (20) Universal Ltd plans to manufacture a new product and the following information is applicable: Estimated sales for the year 2019 40 000 units at R140 each Estimated costs for the year 2019 Direct material R72 per unit Direct labour R12 per unit Factory overheads (all fixed) R110 000 per annum Selling expenses 30% of sales Administrative expenses (all fixed) R180 000 per annum Required: Calculate the following independently: 3.1 Break-even quantity. (4) 3.2 Break-even value. (3) 3.3 Break-even quantity, if the direct labour cost is increased by R2 per unit. (3) 3.4 Selling price per unit, if the profit per unit is R12. (6) 3.5 New break-even quantity and value if the selling price is increased by 5%. (4) QUESTION 4 (20) 4.1 Rover Traders is considering selling a refrigerator to a customer on credit. The cost of the refrigerator is R8 000 and the selling price is R10 000. A credit term of 2/10 net 30 was agreed upon. The cost of capital to Rover Traders is 15%. Required: Use the information given above to answer the following questions: 4.1.1 Calculate the profit that Rover Traders would make if the account is settled within 10 days. (4) 4.1.2 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? (3) 4.2 The annual sales of product Y of Govender Limited is 400 000 units. The purchase price is R12 per unit. The carrying cost of product Y amounts to 30% of the unit purchase price. The ordering cost is R45 per order. Required: Use the information provided above by Govender Limited to calculate the: 4.2.1 Economic order quantity (EOQ). (5) 4.2.2 Number of orders that need to be placed