Page 1 of 6
FINANCIAL REPORTING AND ANALYSIS
PROBLEM-SOLVING QUESTIONS
JUN16
QUESTION 1
REQUIRED
Use the trial balance, adjustments and additional information given below to prepare the Statement of
Comprehensive Income for the year ended 29 February 2024 and Statement of Financial Position as at 29
February 2024.
INFORMATION
Denver Traders
PRE-ADJUSTMENT TRIAL BALANCE AS AT 29 February 2024
Debit (R) Credit (R)
Balance Sheet accounts section
Capital 1 240 000
Drawings 98 000
Land and buildings 910 000
Vehicles at cost 670 000
Equipment at cost 480 000
Accumulated depreciation on vehicles 387 000
Accumulated depreciation on equipment 168 000
Fixed deposit: Leo Bank (6% p.a.) 140 000
Trading inventory 125 000
Debtors control 132 000
Provision for bad debts 7 000
Bank 64 000
Cash float 7 000
Creditors control 130 000
Mortgage loan: Leo Bank (12% p.a.) 300 000
Nominal accounts section
Sales 1 510 000
Cost of sales 430 000
Sales returns 9 000
Salaries and wages 429 000
Bad debts 13 000
Stationery 21 000
Rates and taxes 57 000
Motor expenses 96 000
Repairs to building 17 000
Telephone 32 000
Electricity and water 48 000
Bank charges 6 000
Insurance 62 000
Interest on mortgage loan 33 000
Interest on fixed deposit 7 000
Rent income 130 000
3 879 000 3 879 000
Page 2 of 6
Adjustments and additional information
1. The electricity and water account for February 2024 has not yet been paid, R5 000.
2. A debtor, P. Smith, was declared insolvent. His insolvent estate paid 40% of his debt of R1 000 and
this has been recorded. The balance of his account must now be written off.
3. Stocktaking on 29 February 2024 revealed the following inventories on hand:
3.1 Trading inventory R122 000
3.2 Stationery R1 000
4. The provision for bad debts must be decreased to R6 500.
5. Rent has been received up to 31 March 2024.
6. The insurance total includes an annual insurance premium of R9 000 that was paid for the period
01 June 2023 to 31 May 2024.
7. Provide for outstanding interest on the mortgage loan for February 2024.
8. Provide for outstanding interest on fixed deposit. The investment in fixed deposit was made on 01
March 2023.
9. The credit purchase of tyres for a motor vehicle has not been recorded, R4 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.
Page 3 of 6
QUESTION 2
REQUIRED
Use the information provided below to prepare the Statement of Changes in Equity for the year ended 29
February 2024.
INFORMATION
The information given below was extracted from the accounting records of Maximum Traders, a partnership
business with Maxi and Mumtaz as partners.
Balances in the ledger on 29 February 2024
Debit Credit
R R
Capital: Maxi 600 000
Capital: Mumtaz 400 000
Current a/c: Maxi (01 March 2023) 40 000
Current a/c: Mumtaz (01 March 2023) 30 000
Drawings: Maxi 300 000
Drawings: Mumtaz 200 000
The following must be considered:
(a) The net profit according to the Profit and loss account amounted to R600 000 on 29 February 2024.
The sales for the year ended 29 February 2024 amounted to R1 500 000.
(b) The partnership agreement makes provision for the following:
■ Interest on capital must be provided at 12% per annum on the balances in the capital accounts.
Note: The partners increased their capital contributions by R100 000 each on 01 January 2024.
The capital changes have been recorded.
■ The partners are entitled to the following monthly salaries:
Maxi R11 000
Mumtaz R10 000
■ Maxi is entitled to a special bonus equal to 6% of the annual sales.
■ Maxi and Mumtaz share the remaining profits or losses in the ratio of their capital balances at the
end of the financial year.
Page 4 of 6
QUESTIONS 3 AND 4 ARE BASED ON THE FOLLOWING INFORMATION:
The information given below was obtained from the books of Googly Limited:
1. STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER:
2023 2022
R R
ASSETS
Non-current assets 840 000 530 000
Property, plant and equipment (cost) 830 000 540 000
Accumulated depreciation (210 000) (160 000)
Long-term investments 220 000 150 000
Current assets 1 020 000 950 000
Inventories 350 000 430 000
Trade and other receivables 420 000 300 000
Bank 250 000 220 000
1 860 000 1 480 000
EQUITY AND LIABILITIES
Equity 1 700 000 1 386 000
Ordinary Share Capital 1 200 000 1 000 000
Retained Income 500 000 386 000
Current liabilities 160 000 94 000
Trade and other payables 150 000 76 000
Company tax payable 10 000 18 000
1 860 000 1 480 000
Page 5 of 6
2. EXTRACT FROM THE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR
ENDED 30 SEPTEMBER 2023
R
Sales 1 400 000
Cost of sales (884 000)
Gross profit 516 000
Depreciation (70 000)
Other expenses (196 000)
Operating profit 250 000
Interest income 20 000
Profit before tax 270 000
Company tax (80 000)
Profit after tax 190 000
3. ADDITIONAL INFORMATION
■ All purchases and sales of inventories are on credit.
■ Equipment was purchased for cash.
■ A vehicle with a cost price of R120 000 and accumulated depreciation of R20 000 was sold at
carrying value.
■ Interim dividends paid during the year amounted to R76 000.
■ The issued share capital for the year ended 30 September 2023 consisted of 500 000 ordinary
shares.
■ Trade and other payables consist of trade creditors only.
Page 6 of 6
QUESTION 3
REQUIRED
Use the information provided above to prepare the Cash Flow Statement of Googly Limited for the
year ended 30 September 2023.
QUESTION 4 20 MARKS
REQUIRED
4.1 Use the information provided above to calculate the ratios for the financial year ended 30 September
2023 (Express answers to two decimal places.):
4.1.1 Gross margin
4.1.2 Acid test ratio
4.1.3 Return on equity
4.1.4 Inventory turnover
4.1.5 Debt to assets
4.1.6 Dividend per share
4.1.7 Creditor payment period
4.2 Comment on the following ratios that have been calculated for Googly Limited. Provide two significant
comments for each one.
2023 2022
4.2.1 Return on assets 13.44% 15.54%
4.2.2 Earnings per share 38 cents 45 cents
4.2.3 Current ratio 6.38:1 10.11:1