QUESTION 1 (20 MARKS)
REQUIRED
Use the information provided below to prepare the following:
1.1
Pro Forma Statement of Comprehensive Income for the year ended 31 December 2021 using the percentage-of-sales method.
(4 marks)
1.2
Pro Forma Statement of Financial Position as at 31 December 2021.
(16 marks)
INFORMATION
Klicks Ltd
Pro Forma Statement of Comprehensive Income for the year ended 31 December 2020
R
Sales
16 000 000
Cost of sales
(12 000 000)
Gross profit
4 000 000
Expenses
(2 000 000)
Profit before tax
2 000 000
Company tax (30% of pre-tax profit)
(600 000)
Profit after tax
1 400 000
Pro Forma Statement of Financial Position as at 31 December 2020
R
ASSETS
Non-current assets
7 000 000
Fixed/Tangible assets
7 000 000
Current assets
6 000 000
Inventories
2 000 000
Accounts receivable
3 000 000
Cash
1 000 000
Total assets
13 000 000
EQUITY AND LIABILITIES
Shareholders’ equity
6 450 000
Ordinary share capital
3 000 000
Retained earnings
3 450 000
Non-current liabilities
4 000 000
Long-term loan
4 000 000
Current liabilities
2 550 000
Accounts payable
2 500 000
Income tax payable
50 000
Total equity and liabilities
13 000 000
Additional information
1)
Sales for the year ended 31 December 2021 are forecast at R18 000 000. All the sales are expected to be on credit.
2)
Dividends for 2021 are projected to be R700 000. The shareholders will only be paid during February 2022.
3)
The cash balance on 31 December 2021 is expected to be 10% higher.
4)
Accounts receivable will be based on a collection period of 40.15 days.
5)
The company’s closing inventory will change directly with changes in sales in 2021.
6)
New machinery with a cost price of R3 840 000 will be purchased during January 2021. An old machine with a cost price of R200 000 and accumulated depreciation of R180 000 will be sold at carrying value when the new machinery is purchased. Total depreciation for the year ending 31 December 2021 is expected to amount to R640 000.
7)
Accounts payable will change directly in response to changes in sales in 2021.
8)
Income tax payable will equal 10% of the tax liability on the Pro Forma Statement of Comprehensive Income.
9)
The issued share capital consists of 600 000 ordinary shares which represents 75% of the authorized share capital. All the unissued shares will be sold at R6 each during July 2021.
10)
R1 000 000 of the long-term loan will be repaid during 2021.
11)
The amount of external non-current funding required must be calculated (balancing figure).