QUESTION 3 (20 Marks)

REQUIRED

Use the information provided below to prepare the Statement of Changes in Equity of Richmond Traders for the year ended 29 February 2020. Use the following format: STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 29 FEBRUARY 2020

Capital Accounts Richie Mondli Total Balance at 28 February 2019 _______ ______ ________ Changes in capital _______ ______ ________ Balance at 29 February 2020 (______) (_____) (_______) 

Current Accounts

Balance at 28 February 2019 Net profit for the year Interest on capital Salaries Bonus Profit Share Drawings Balance at 29 February 2020 

INFORMATION

Extract from the ledger of Richmond Traders as at 29 February 2020

 Debit R Credit R  Capital: Richie _______ 300 000 Capital: Mondli _______ 200 000 Current a/c: Richie (01 March 2019) _______ 50 000 Current a/c: Mondli (01 March 2019) 30 000 ______ Drawings: Richie 250 000 ______ Drawings: Mondli 350 000 ______ 

The following must be taken into account:

(a) On 29 February 2020 the Profit and Loss account reflected a net profit of R700 000. (b) The partners are entitled to interest at 15% p.a. on their capital balances. Note: Mondli decreased his capital contribution by R100 000 on 31 August 2019. This capital change has been recorded.

(c) Partners are entitled to the following monthly salaries: Richie R13 000 Mondli R11 000 (d) Mondli is entitled to a bonus equal to 10% of the net profit before any of the above appropriations have been taken into account.

(e) The remaining profit/shortfall must be shared between Richie and Mondli in the ratio 3:2 respectively

QUESTIONS 4 AND 5 ARE BASED ON THE FOLLOWING INFORMATION:

The information given below was obtained from the books of Libra Limited:

A. STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER:

 2019 R 2018 R ASSETS Non-current assets 1 008 000 636 000 Property, plant and equipment (cost) 996 000 648 000 Accumulated depreciation (252 000) (192 000) Long-term investments 264 000 180 000 Current assets 1 224 000 1 140 000 Inventories 420 000 516 000 Trade and other receivables 504 000 360 000 Bank 300 000 264 000 

2 232 000 1 776 000

EQUITY AND LIABILITIES

Equity 2 040 000 1 663 200 Ordinary Share Capital 1 440 000 1 200 000 Retained Income 600 000 463 200 Current liabilities 192 000 112 800 Trade and other payables 180 000 91 200 Income tax payable 12 000 21 600 

2 232 000 1 776 000

B. EXTRACT FROM THE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 SEPTEMBER 2019

 R Sales 1 680 000 Cost of sales (1 060 800) Gross profit 619 200 Depreciation (84 000) Other expenses (235 200) Operating profit 300 000 Interest income 24 000 Profit before tax 324 000 Company tax (96 000) Profit after tax 228 000 

C. ADDITIONAL INFORMATION

All purchases and sales of inventories are on credit.

Equipment was purchased for cash.

A vehicle with a cost price of R144 000 and accumulated depreciation of R24 000 was sold at carrying value.

Interim dividends paid during the year amounted to R91 200. No final dividends were declared.

The issued share capital for the year ended 30 September 2019 consisted of 500 000 ordinary shares.

Trade and other payables consisted of trade creditors only.

QUESTION 4 (20 MARKS)

REQUIRED

Use the information provided above to prepare the Cash Flow Statement of Libra Limited for the year ended 30 September 2019.

QUESTION 5 20 MARKS

REQUIRED

5.1 Use the information provided above to calculate the following ratios for the financial year ended 30 September 2019. (Where applicable, round off answers to two decimal places.)

5.1.1 Profit margin (Net profit margin) (2 marks)

5.1.2 Acid test ratio (2 marks)

5.1.3 Return on equity (2 marks)

5.1.4 Inventory turnover (2 marks)

5.1.5 Debt to assets (2 marks)

5.1.6 Dividends per share (2 marks)

5.1.7 Creditors payment period (2 marks)

5.2 Comment on the following ratios that have been calculated for Libra Limited. Provide two significant comments for each ratio.

 2019 2018 5.2.1 Return on assets 13.44% 18.78% (2 marks) 5.2.2 Earnings per share 45.60 cents 50 cents (2 marks) 5.2.3 Current ratio 6.38:1 10.11:1 (2 marks) 

QUESTION 1 (20 Marks)

1.1 State why each of the following user groups require the accounting information from the financial statements of a business entity:

1.1.1 Banks (2 marks)

1.1.2 Owners (2 marks)

1.1.3 Managers. (2 marks)

1.2 Explain THREE (3) limitations of financial statements. (6 marks)

1.3 Explain FOUR (4) characteristics of good financial statements. (8 marks)

QUESTION 2 (20 Marks)

REQUIRED

Use the information provided below to prepare the Statement of Comprehensive Income for the year ended 29 February 2020. Use the following format as a guide: Statement of Comprehensive Income format

Sales Cost of sales Gross profit Other operating income Gross operating income Operating expenses Operating profit Interest income Interest expense Net profit for the year 

INFORMATION

DURAVIT TRADERS

PRE-ADJUSTMENT TRIAL BALANCE AS AT 29 FEBRUARY 2020

 Debit (R) Credit (R) Balance Sheet accounts section Capital 1 255 000 Drawings 80 000 Land and buildings 900 000 Vehicles at cost 680 000 Equipment at cost 500 000 Accumulated depreciation on vehicles 380 000 Accumulated depreciation on equipment 160 000 Fixed deposit: Sen Bank (6% p.a.) 150 000 Trading inventory 115 000 Debtors control 130 000 Provision for bad debts 8 000 Bank 67 000 Cash float 6 000 Creditors control 110 000 Mortgage loan: Sen Bank (12% p.a.) 320 000 

Nominal accounts section

Sales 1 500 000 Cost of sales 480 000 Sales returns 10 000 Salaries and wages 419 000 Bad debts 12 000 Stationery 20 000 Rates and taxes 58 000 Motor expenses 90 000 Repairs to building 17 000 Telephone 38 000 Electricity and water 46 000 Bank charges 8 000 Insurance 20 000 Interest on mortgage loan 33 000 Interest on fixed deposit 6 000 Rent income 140 000 

3 879 000 3 879 000

Adjustments and additional information

1. The electricity and water account for February 2020, R4 000, was due to be paid on 03 March 2020.

2. A debtor, P. Smith, was declared insolvent. His insolvent estate paid R600 which represented 40% of his debt. The balance of his account must now be written off.

3.Stocktaking on 29 February 2020 revealed the following inventories

3.1 Trading inventory R110 000

3.2 Stationery R2 000

4. The provision for bad debts must be decreased by R1 500.

5. Rent has been received up to 30 April 2020.

6. The insurance total includes an annual premium of R6 000 that was paid for the period 01 September 2019 to 31 August 2020.

7. Provide for outstanding interest on the mortgage loan for February 2020.

8. Provide for outstanding interest on fixed deposit. The investment in fixed deposit was made on 01 June 2019.

9. The credit purchase of tyres for 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.