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Prepare the Ordinary Share Capital Note on 28 February 2021 - NSC Accounting - Question 2 - 2021 - Paper 1
Question 2
Prepare the Ordinary Share Capital Note on 28 February 2021. 1 March 2020 800 000 in issue 30 June 2020 100 000 new shares issued 1 January 2021 ... show full transcript
Worked Solution & Example Answer:Prepare the Ordinary Share Capital Note on 28 February 2021 - NSC Accounting - Question 2 - 2021 - Paper 1
Step 1
Prepare the Ordinary Share Capital Note on 28 February 2021
Answer
To prepare the Ordinary Share Capital note, we start by accounting for the shares issued and repurchased:
- Ordinary shares at the beginning (1 March 2020): 800,000 shares
- New Shares issued (30 June 2020): 100,000 shares
- Shares repurchased (1 January 2021): 30,000 shares at R8.50 more than average share price
- Shares at the end of the year (28 February 2021): 870,000 shares
Using the formula:
Ordinary Shares at Year End = (Shares at Beginning + New Shares Issued - Shares Repurchased)
Thus, we can calculate:
870,000 = 800,000 + 100,000 - 30,000.
Therefore, the Ordinary Share Capital on 28 February 2021 is R7,395,000.
Step 2
Calculate the following financial indicators on 28 February 2021: % operating expenses on sales
Answer
To calculate the percentage of operating expenses on sales, use the formula:
Using the data:
- Operating Expenses: R1,458,600
- Sales: R7,293,000
The calculation is as follows:
= 20\% $$ Therefore, the % operating expenses on sales is 20%.Step 3
Calculate the following financial indicators on 28 February 2021: Dividend per share
Answer
To calculate the dividend per share, we first ascertain the total payment of dividends and the number of shares:
- Total interim dividend paid: R162,000
- Final dividend declared: 22 cents per share
- Total shares at the end of the year: 870,000
We can now calculate:
- Total dividends declared = $162,000 + (870,000 imes 0.22) \ = R162,000 + R191,400 = R353,400.
Now, take the total dividends and divide by the number of shares:
= 40.5 cents. $$ Thus, the dividend per share is 40.5 cents.Step 4
Calculate the following financial indicators on 28 February 2021: % return on average shareholders’ equity
Answer
To find the % return on average shareholders' equity, use the following formula:
Where:
- Net Profit After Tax: R985,500
- Average Shareholders Equity = rac{(Ordinary Share Capital at beginning + Ordinary Share Capital at end)}{2}
- Using the ordinary share capital:
- At Beginning: R6,450,000.
- At End: R7,395,000.
Thus,
Average Shareholders Equity = rac{6,450,000 + 7,395,000}{2} = R6,922,500
Now compute:
ext eturn.} $$Step 5
Complete the Cash Flow Statement for the year ended 28 February 2021.
Answer
To complete the Cash Flow Statement, we need to identify cash inflows and outflows:
Cash generated from operations: R1,180,000.
- Interest paid: R429,500 (outflow)
- Taxation paid: R428,500 (outflow)
- Dividends paid: R270,300 (outflow)
Compute cash flow from operating activities:
Total inflows - Total outflows = R1,180,000 - (429,500 + 428,500 + 270,300), resulting in cash flow from operating activities of R1,180,000.
Next, consider cash flows from investing and financing activities:
- Total of (315,000) loss from investing activities and (291,000) loss from financing activities.
Finally, calculate the net change in cash and cash equivalents, ending balances needed for up-to-date information for January and February 2021. Adjusting for these will indicate overall cash position.