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Prepare the Retained Income Note for the year ended 28 February 2023 - NSC Accounting - Question 2 - 2023 - Paper 1

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Prepare the Retained Income Note for the year ended 28 February 2023. Calculate the following figures for the 2023 Cash Flow Statement: - Change in loan - Proceeds... show full transcript

Worked Solution & Example Answer:Prepare the Retained Income Note for the year ended 28 February 2023 - NSC Accounting - Question 2 - 2023 - Paper 1

Step 1

Prepare the Retained Income Note for the year ended 28 February 2023.

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Answer

To prepare the Retained Income Note, we begin with the balance at the beginning of the year:

  • Balance at beginning of year: R237,400
  • Add: Net profit after tax: R1,526,000
  • Less: Shares repurchased: R216,000
  • Less: Ordinary share dividends (Final + Interim): R575,400

Calculating the final balance:

  • Total: R237,400 + R1,526,000 - R216,000 - R575,400 = R629,600

Final Retained Income Balance: R629,600

Step 2

Calculate the following figures for the 2023 Cash Flow Statement: Change in loan.

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Answer

To calculate the change in loan, we subtract the loan at the beginning from the loan at the end:

  • Loan (end): R7,200,000
  • Loan (begin): R6,348,000

Change in loan = R7,200,000 - R6,348,000 = R852,000.

Step 3

Calculate the following figures for the 2023 Cash Flow Statement: Proceeds from shares issued.

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Answer

The proceeds from shares issued can be calculated as follows:

  • New shares issued: (1,370,000 - 250,000 shares repurchased) = R1,120,000

Using the share data:

  • Shares issued = 300,000 * R11.40 = R3,420,000.

Step 4

Complete the Cash Effects of Operating Activities section of the Cash Flow Statement.

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Answer

  1. Cash generated from operations: R2,340,000.
  2. Less: Interest paid: R648,000.
  3. Less: Income tax paid: R719,700 (calculated as 42,100 + 23,600).
  4. Less: Dividends paid: R817,400 (calculated from Dividend Note).

Total Cash Effects of Operating Activities = R155,200.

Step 5

Calculate the following financial indicators on 28 February 2023: Current ratio.

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Answer

The current ratio is calculated as follows:

Current Ratio = Current Assets / Current Liabilities = R1,479,600 / R822,000 = 1.8.

Step 6

Calculate the following financial indicators on 28 February 2023: Net asset value.

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Answer

Net Asset Value (NAV) can be calculated as:

NAV = (Total Assets - Total Liabilities) / Number of Shares = (R13,959,500 + R629,600) / 1,370,000 = R1,064.9.

Step 7

Calculate the following financial indicators on 28 February 2023: % return on total capital employed (ROTC).

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Answer

ROTC is calculated as follows:

ROTC = (Net profit after tax / Average capital employed) * 100 = (R1,526,000 / R20,343,500) * 100 = 7.5%.

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