ASSIGNMENT 2 SEMESTER QUESTION 3 (33 MARKS) Molelo Ltd (Molelo) is an unlisted South African company...

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ASSIGNMENT 2 SEMESTER QUESTION 3 (33 MARKS) Molelo Ltd ("Molelo") is an unlisted South African company that offers engineering services to private sector clients. The company has been in operation since 2010 and has experienced tremendous growth over the last decade. Management is considering whether to expand or sell the company. The following information for Molelo is available in a condensed format. Forecasted Statement of Financial Position for the year 2024 to 2026 Assets Notes 2023 2024 2025 Actual Forecast Forecast Forecast R'mil R'mil R'mil R'mil 2026 Non-Current Assets Property plant and equipment Other Investments - cost 81 56 182 115 138 150 58 92 115 127 23 23 23 23 Current assets 75 Inventory 7 Trade and other receivables 8 Cash and Cash equivalents 126 89 130 161 40 46 58 75 29 35 52 69 8 20 17 Total Assets 156 204 268 311 Equity Share Capital Accumulated Profits 222 62 100 20 62 110 25 58 110 58 103 Non-current liabilities Long term borrowings 9 20 67 10 67 77 Current Liabilities 7 11 23 Short term borrowings 9 1 1 2 Trade and other payables 9 6 10 21 21 75 222 75 23 Total Liabilities 74 78 100 98 Total Equity and liabilities 156 203 268 311 Additional information in case of selling the company. 1. Included in Property plant and equipment amount for year 2023 is machinery with a carrying amount of R15 mil which has a market value of R25 mil at date of forecast. The independent valuator estimates that it will cost the company R1 mil to dispose the machinery. Page 6 of 10 ASSIGNMENT 2 SEMESTER QUESTION 3 (continued) 2. Property with the carrying value of R30 mil for year 2023 was valued by the independent valuator for an estimated value of R50 mil. The cost to dispose the property is expected to be borne by the prospective buyer. All other remaining property plant and equipment can be disposed off at carrying values. 3. Other investments relate to shares acquired in a listed company. The shares were acquired at a cost of R2 per share in year 2022. The shares are currently trading at R5 per share and can be disposed of without incurring any substantial costs. 4. Inventory on hand at year 2023 will not be recoverable as it is specifically designed for one particular customer who might not be interested in acquiring it in case of liquidation. 5. Trade and other receivables at year 2023 will be offered 20% discount to settle their respective accounts. All outstanding debtors will exercise this discount option. 6. The carrying value of all liabilities at year 2023 approximates its fair market value. ASSIGNMENT 2 SEMESTER QUESTION 3 (33 MARKS) Molelo Ltd ("Molelo") is an unlisted South African company that offers engineering services to private sector clients. The company has been in operation since 2010 and has experienced tremendous growth over the last decade. Management is considering whether to expand or sell the company. The following information for Molelo is available in a condensed format. Forecasted Statement of Financial Position for the year 2024 to 2026 Assets Notes 2023 2024 2025 Actual Forecast Forecast Forecast R'mil R'mil R'mil R'mil 2026 Non-Current Assets Property plant and equipment Other Investments - cost 81 56 182 115 138 150 58 92 115 127 23 23 23 23 Current assets 75 Inventory 7 Trade and other receivables 8 Cash and Cash equivalents 126 89 130 161 40 46 58 75 29 35 52 69 8 20 17 Total Assets 156 204 268 311 Equity Share Capital Accumulated Profits 222 62 100 20 62 110 25 58 110 58 103 Non-current liabilities Long term borrowings 9 20 67 10 67 77 Current Liabilities 7 11 23 Short term borrowings 9 1 1 2 Trade and other payables 9 6 10 21 21 75 222 75 23 Total Liabilities 74 78 100 98 Total Equity and liabilities 156 203 268 311 Additional information in case of selling the company. 1. Included in Property plant and equipment amount for year 2023 is machinery with a carrying amount of R15 mil which has a market value of R25 mil at date of forecast. The independent valuator estimates that it will cost the company R1 mil to dispose the machinery. Page 6 of 10 ASSIGNMENT 2 SEMESTER QUESTION 3 (continued) 2. Property with the carrying value of R30 mil for year 2023 was valued by the independent valuator for an estimated value of R50 mil. The cost to dispose the property is expected to be borne by the prospective buyer. All other remaining property plant and equipment can be disposed off at carrying values. 3. Other investments relate to shares acquired in a listed company. The shares were acquired at a cost of R2 per share in year 2022. The shares are currently trading at R5 per share and can be disposed of without incurring any substantial costs. 4. Inventory on hand at year 2023 will not be recoverable as it is specifically designed for one particular customer who might not be interested in acquiring it in case of liquidation. 5. Trade and other receivables at year 2023 will be offered 20% discount to settle their respective accounts. All outstanding debtors will exercise this discount option. 6. The carrying value of all liabilities at year 2023 approximates its fair market value.