FORMATIVE ASSESSMENT 1 [100 MARKS] Read the CASE Study below and answer ALL questions that follow CASE STUDY Information Established Manufacturers (Pty) Ltd is a South African company specialising in producing and distributing electronic components. The company operates in a highly competitive market and sells its products locally and intermationally. The year has been particularly eventful for the company, filled with growth, challenges, and critical decisions that will shape its financial future. Reflections on the Past Year The management team, led by CEO Mr Dlamini, reviewed the company's performance and presented the financial statements for Established Manufacturers (Pty) Ltd for the year ended 30 June 2025: Income Statement for the Year Ended 30 June 2025 Sales 120,000 Cost of Sales (78.000) Gross Profit 42,000 Operating Expenses (30,294) Depreciation Insurance Salaries and Wages Rent Operating Profit Interest Expense Profit Before Tax Income Tax Expense (30%) Net Profit Statement of Financial Position as of 30 June 2025 Non-Current Assets Property, Plant, and Equipment Intangible Assets Currant Assets Inventory Trade Receivables Cash and Cash Equivalents Total Assets Equity Share Capital Retained Eamings Non-Current Liabilities Long-term Loan Current Liabilities Trade Payables 'Short-temm Loan Total Equity and Liabilities The Road Ahead Looking forward to the next financial year, the management team identified opportunities and challenges. Salas were evenly distributed over the past 12 months and ane expected to grow by 5% in the next financial year, while the cost of sales remains constant at 655% of total sales revenue. Cost pressures. are real in the current economy and the following have been identified: * Salaries and Wages were incurred evenly throughout the year. However, this is expected fo increase by 4.25% afler the anticipated industry-wide union negotiations in Ochober 2025. * Rent is paid quarterly, with the annual 10% increase effective 1 January 2026. Insurance premiums are paid monthly and increase by 6% on 1 July, each year. Due to planned changes in Established Manufacturers' credit policy, the total value of debtors is expected to double in the financial year. However, the 45-day payment terms granted to debtors will remain, despite the widely varying payment pattems. 505% of credit sales are collected within 30 days. = 30% are collected within 60 days. * 5% are written off as bad debts. 1596 of sales are cash sales, with a 1% discount offered. Purchases are linked io sales, with monthly purchases equal to 50% of monthly sabes. 655 of purchases are made on credit, with 60-day payment terms. The balance is paid for in cash. The total trade creditors at the end of the financial year are envisaged to increase by R4.4m YOY, while the opening inventory as of 7 July 2026 is expected to be Rim more than 1 July 2025. A new project will commence in January 2006, with a capital investment of R12 million to be mada in a new tock. While a 12% cash deposit is required 30 days prior, the first repayment for the truck will be on 1 duly 2026. Old equipment with a zero-book value will be sold in October 2025 for R800,000, with payment terms of 30 days after the sale. The company maintains a depreciation policy of 10% per annum on a straight-line basis. The short-tenm loan will be exdinguished by October 2025, while the term loan with Home Bank has an annual repayment of Rom due on 31 March 2026. The total interest expense for FYE 2026 is expected in nee by 6% Based on the review and discussion, the CFO projected an unfavourable hank balance of R1 837 350 at the end of October 2025. He also mentioned that given the boyalty and support of the shareholders, it is antiqnated a dividend of 65 cents per share wall be declared and paid outin the financial year. Established Manufacturers (Pty) Lid has an authorised share capital of B00 000 ordinary shares of which 690 000 have been issued. QUESTION 3 (25 marks) 3.1 Using the relevant information in the Case Study, and other calculations undertaken in questions one and two, prepare a Projected Statement of Financial Position for Established Manufacturers (Pty) Lid for the next financial year. (show all calculations) (15 marks) Hint/Tip: You may use the closing year-end bank amount as your "balancing figure"