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ACCOUNTING GRADE 12 TEST 6 SELF-STUDY (LOCKDOWN)
TOPIC : CASH FLOW STATEMENT AND INTERPRETATION
QUESTION 1: FIXED ASSETS, CASH FLOW STATEMENT AND INTERPRETATION
(70 marks; 45 minutes)
The given information relates to Tyali Ltd. The company has an authorised share capital
of 900 000 ordinary shares. The financial year ended on 29 February 2020.
REQUIRED:
1.1
Refer to Information A, B and C.
Calculate the missing figures indicated by (a) to (e) in the Fixed Asset Note below.
(17)
1.2
Prepare the Cash Flow Statement for the year ended 29 February 2020. (Where
applicable show calculations / figures in brackets to earn part marks).
(30)
1.3
Calculate the Debt-Equity ratio for 2020.
(Round-off to TWO decimal points.)
(3)
1.4
The directors decided to increase the loan during the current financial year.
Explain TWO financial indicators to indicate why this was a good decision. Quote
figures.
(8)
1.5
The board of directors is of the opinion that the shareholders should be happy
with their percentage return and the market price of their shares. Quote and
explain TWO financial indicators with figures to support their opinion.
(6)
1.6
The Cash Flow Statement reflects some important decisions taken by the
Directors.
Apart from the loans, identify TWO good decisions. Explain the effect of these
decisions on the company. Quote figures.
(6)
A
Extract from the Income Statement for the year ended 29 February 2020
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R
Depreciation
?
Interest expense
208 800
Net profit before tax
?
Income tax
713 250
Net profit after tax
?
B
Extract from the Balance Sheet on 29 February
2020
2019
Land and Buildings
5 800 000
6 800 000
Vehicles
2 700 000
?
Equipment
?
850 000
Accumulated depreciation on vehicles
?
960 000
Accumulated depreciation on equipment
?
180 000
Financial Assets (Fixed Deposit)
2 000 000
2 000 000
Trade and other receivables
405 750
168 300
Trade debtors
378 675
144 600
Accrued income
27 075
0
SARS (Income tax)
0
23 700
Inventories
360 750
436 185
Cash and cash equivalents
2 841 250
1 429 465
Shareholders’ equity
11 000 250
10 200 000
Ordinary share capital
10 260 000
9 000 000
Retained income
740 250
1 200 000
Mortgage loan SS Bank
2 100 000
1 380 000
Trade and other payables
?
763 950
Trade creditors
55 200
72 450
Income received in advance
19 350
15 000
SARS (Income tax)
31 950
0
Shareholders for dividends
?
676 500
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C
Fixed Asset Note
Land and
Building
Vehicles
Equipment
Carrying value on 28 Feb 2019
6 800 000
840 000
(c)
Cost
6 800 000
(b)
850 000
Accumulated depreciation
0
(960 000)
(180 000)
Movements
Additions at cost
900 000
400 000
Disposals
(a)
0
(d)
Depreciation
(171 000)
(e)
Carrying value on 29 Feb 2020
5 800 000
Cost
5 800 000
2 700 000
Accumulated depreciation
Land and Building
Part of the Land and Building was sold at carrying value during the financial
year.
Vehicles
A new delivery van was bought on 1 November 2019.
No vehicles were sold during the financial year.
Equipment
A printer bought for R150 000 on 1 March 2017, was sold at carrying value
on 31 August 2019.
A new printer was purchased on 31 August 2019.
Depreciation on equipment is written-off at 10% p.a. on the cost price.
D
The following is an extract from Note 1 to the Cash Flow Statement:
Reconciliation between Net Profit before Tax and Cash Generated from
Operations
R
Operating profit before changes in working capital
2 854 800
Cash effects of changes in working capital
(198 615)
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E
Share capital and Dividends
Authorised shares: 900 000
On 1 March 2019, there were 600 000 shares in issue.
On 31 August 2019 an interim dividend of 243 cents per share was paid.
On 1 November 2019, 40% of the unissued shares were issued
for R1 800 000.
On 29 February 2020, 5% of the issued shares were repurchased at
R16 each.
A final dividend of 90 cents per share was recommended. All shares,
including the shares repurchased, qualified for final dividends.
F
Income Tax
Tax is 30% of the net profit.
G
Financial indicators on 29 February:
2020
2019
Earnings per share
252 cents
110 cents
% return on average shareholders’ equity
(ROSHE)
15,7%
12,3%
% return on average capital employed
(ROTCE)
20,9%
21,3%
Net asset value per share
1 608 cents
1 700 cents
Debt-equity ratio
?
0,13:1
The market price of shares on the JSE
1 680 cents
1 560 cents
Interest on alternative investments
7,5%
6,5%
Interest on loans
12,0%
10,5%
70

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ACCOUNTING GRADE 12 TEST 6 SELF-STUDY (LOCKDOWN) TOPIC : CASH FLOW STATEMENT AND INTERPRETATION QUESTION 1: FIXED ASSETS, CASH FLOW STATEMENT AND INTERPRETATION (70 marks; 45 minutes) The given information relates to Tyali Ltd. The company has an authorised share capital of 900 000 ordinary shares. The financial year ended on 29 February 2020. REQUIRED: 1.1 1.2 1.3 1.4 1.5 1.6 Refer to Information A, B and C. Calculate the missing figures indicated by (a) to (e) in the Fixed Asset Note below. (17) Prepare the Cash Flow Statement for the year ended 29 February 2020. (Where applicable show calculations / figures in brackets to earn part marks). (30) Calculate the Debt-Equity ratio for 2020. (Round-off to TWO decimal points.) (3) The directors decided to increase the loan during the current financial year. Explain TWO financial indicators to indicate why this was a good decision. Quote figures. (8) The board of directors is of the opinion that the shareholders should be happy with their percentage return and the market price of their shares. Quote and explain TWO financial indicators with figures to support their opinion. (6) The Cash Flow Statement reflects some important decisions taken by the Directors. Apart from the loans, identify TWO good decisions. Explain the effect of these decisions on the company. Quote figures. INFORMATION: A Extract from the Income Statement for the year ended 29 February 2020 (6) R Depreciation Interest expense Net profit before tax Income tax Net profit after tax B ? 208 800 ? 713 250 ? Extract from the Balance Sheet on 29 February 2020 5 800 000 2 700 000 ? ? ? 2 000 000 405 750 2019 6 800 000 ? 850 000 960 000 180 000 2 000 000 168 300 378 675 27 075 0 144 600 0 23 700 Inventories Cash and cash equivalents Shareholders’ equity 360 750 2 841 250 11 000 250 436 185 1 429 465 10 200 000 Ordinary share capital Retained income 10 260 000 740 250 9 000 000 1 200 000 2 100 000 ? 1 380 000 763 950 55 200 19 350 31 950 ? 72 450 15 000 0 676 500 Land and Buildings Vehicles Equipment Accumulated depreciation on vehicles Accumulated depreciation on equipment Financial Assets (Fixed Deposit) Trade and other receivables Trade debtors Accrued income SARS (Income tax) Mortgage loan SS Bank Trade and other payables Trade creditors Income received in advance SARS (Income tax) Shareholders for dividends C Fixed Asset Note Vehicles Equipment Carrying value on 28 Feb 2019 Land and Building 6 800 000 840 000 (c) Cost Accumulated depreciation 6 800 000 0 (b) (960 000) 850 000 (180 000) (a) 900 000 0 (171 000) 400 000 (d) (e) Movements Additions at cost Disposals Depreciation Carrying value on 29 Feb 2020 Cost Accumulated depreciation 5 800 000 5 800 000 2 700 000 Land and Building • Part of the Land and Building was sold at carrying value during the financial year. Vehicles • • A new delivery van was bought on 1 November 2019. No vehicles were sold during the financial year. Equipment • • • D A printer bought for R150 000 on 1 March 2017, was sold at carrying value on 31 August 2019. A new printer was purchased on 31 August 2019. Depreciation on equipment is written-off at 10% p.a. on the cost price. The following is an extract from Note 1 to the Cash Flow Statement: Reconciliation between Net Profit before Tax and Cash Generated from Operations Operating profit before changes in working capital Cash effects of changes in working capital R 2 854 800 (198 615) E Share capital and Dividends • • • • • • F Income Tax • G Authorised shares: 900 000 On 1 March 2019, there were 600 000 shares in issue. On 31 August 2019 an interim dividend of 243 cents per share was paid. On 1 November 2019, 40% of the unissued shares were issued for R1 800 000. On 29 February 2020, 5% of the issued shares were repurchased at R16 each. A final dividend of 90 cents per share was recommended. All shares, including the shares repurchased, qualified for final dividends. Tax is 30% of the net profit. Financial indicators on 29 February: Earnings per share % return on average shareholders’ equity (ROSHE) % return on average capital employed (ROTCE) Net asset value per share Debt-equity ratio The market price of shares on the JSE Interest on alternative investments Interest on loans 2020 252 cents 2019 110 cents 15,7% 12,3% 20,9% 21,3% 1 608 cents ? 1 680 cents 7,5% 12,0% 1 700 cents 0,13:1 1 560 cents 6,5% 10,5% 70 Name: Description: ...
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