ACCOUNTING GRADE 12 TEST 7 SELF-STUDY (LOCKDOWN)
TOPIC : CASH FLOW STATEMENT AND INTERPRETATION
QUESTION 1 CASH FLOW AND INTERPRETATION
(75 marks, 45 minutes)
1.1 AMATHOLE LTD.
You are provided with extracts from the financial records of Amathole Ltd.
REQUIRED
1.1.1 Calculate the total dividends paid that will be reflected on the
Cash Flow Statement on 30 June 2019. (4)
1.1.2 Calculate the balance on the SARS (Income Tax) account on
1 July 2018. (5)
1.1.3 Movements in fixed assets:
(a) Calculate the amount of cash received for the equipment
sold during the year. (2)
(b) Calculate the cost of the new assets purchased during the
financial year. (5)
1.1.4 Complete the “Cash flow from Financing Activities” section of the (8)
Cash Flow Statement on 30 June 2019.
1.1.5 Calculate the closing balance of Retained Income on (7)
30 June 2019.
1.1.6 On the AGM of Amathole Ltd. there was interest shown in
purchasing additional machinery and equipment. The company
will have to obtain a loan of R2 million at an interest rate of 14%.
(a) Calculate the Return on total capital employed (ROTCE). (9)
(b) Show how the proposed additional loan will impact on the
debt/equity ratio. Provide a calculation. (4)
INFORMATION
A. Extract from the Income Statement for the year ended
30 June 2019:
Interest on loan R140 000
Depreciation R136 000
Net profit before tax R1 144 000
Income tax R376 000
B. Extract from the Balance Sheet on:
30 June 2019 30 June 2018
Fixed assets 6 480 000 5 324 000
Land and Buildings 4 900 000 4 100 000
Equipment (carrying value) 1 580 000 1 224 000
Shareholder’s equity 5 782 000 5 470 000
Share capital ? 4 500 000
Retained income ? 970 000
Long term loan 950 000 1 038 000
C. Extract from the notes to the financial statements on 30 June 2019:
Trade and other receivables 30 June 2019 30 June 2018
SARS (Income tax) 23 900 0
Trade and other payables 30 June 2019 30 June 2018
SARS (Income tax) 0 ?
Shareholders for dividends R108 000 R143 000
D. Fixed assets:
New equipment was bought during the year and an additional
warehouse was built.
Old equipment was sold at carrying value on 1 February 2019:
o Cost price R160 000
o Accumulated depreciation on date of sale R54 500
o Asset sold for cash R ?
No Land and Buildings were sold during the year.
E. Shares:
On 1 July 2018 the company had an issued share capital of 937 500
shares.
On 1 July 2018 the company repurchased 50 000 shares at 60c
above the average share price. The average price per share at that
stage was R4,80.
During the financial year new shares were issued.
F. Dividends and Tax:
Dividends paid and declared during the year, R333 000.
Tax paid during the year, R532 000.
1.2 STIYANA LTD.
The following information pertains to the financial records of Sitiyana Ltd. for
the year ended 29 February 2020.
REQUIRED
1.2.1 Calculate the following financial indicators on 29 February 2020:
(a) Net Asset Value per share (NAV). (3)
(b) % Return on average Shareholder’s Equity (ROSHE). (5)
1.2.2 Comment on the liquidity of the company. Quote THREE
financial indicators (with figures and trends) to support your (8)
answer.
1.2.3 U. Tsipa is a shareholder and she is unsure if she should sell her
shares or not. She asks for your advice. Provide figures in your
answer. (3)
1.2.4 Refer to Information C. Calculate the total dividends Charlie
Darries received during the year. (6)
1.2.5 The dividend pay-out policy has changed from the previous year.
Provide calculations to show the change and provide ONE
possible reason for the change. (6)
INFORMATION
A. Extract from the Income Statement for the year ended
28 February 2020:
Interest on loan (14%) 87 000
Net profit before tax 635 000
Net profit after tax 457 200
B. Other financial information and indicators for the past two years:
2020 2019
Number of issued shares on 28 Feb 2019 700 000
Number of issued shares on 28 Feb 2020 762 000
Shareholder’s equity R1 690 000 R1 510 000
Current ratio 4,1 : 1 2,1 : 1
Acid test ratio 1,6 : 1 1,4 : 1
Stock turnover rate 10 times 6 times
Debtors’ collection period 30 days 30 days
Creditor’s payment period 30 days 60 days
Debt/Equity ratio 0,4 : 1 0,3 : 1
% return on shareholder’s equity ? 22,3%
Net asset value per share (NAV) ? 216c
Dividends per share (DPS) 45c 15c
Earnings per share (EPS) 60c 55c
Market price per share 252c 236c
C. Details on Charlie Darries’ dividends:
On 1 March 2019 Charlie Darries owned 10 400 shares in Sitiyana Ltd.
He bought 10% of the new shares issued during the year.
The interim dividend paid during the year was 20c per share (the new
shares did not qualify for the interim dividend).
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