INSTRUCTIONS AND INFORMATION
Read the following instructions carefully and follow them precisely.

1. Answer ALL questions.
2. A special ANSWER BOOK is provided in which to answer ALL questions.
3. Show ALL workings to earn part-marks.
4. You may use a non-programmable calculator.
5. You may use a dark pencil or blue/black ink to answer the questions.
6. Where applicable, show ALL calculations to ONE decimal point.
7. If you choose to do so, you may use the Financial Indicator Formula Sheet attached at the end of this question paper. The use of this formula sheet is NOT compulsory.
8. Write neatly and legibly.
9. Use the information in the table below as a guide when answering the question paper. Try NOT to deviate from it.

QUESTION 1: STATEMENTS: COMPREHENSIVE INCOME AND FINANCIAL POSITION (60 marks; 45 minutes)
The information relates to John-Vos Ltd for the financial year ended 28 February 2022.
REQUIRED:

Complete the following:
(NOTE: Some information is printed in the ANSWER BOOK.)
1.1 Statement of Comprehensive Income for the year ended 28 February 2022. (40)
1.2 Retained income note on 28 February 2022. (7)
1.3 EQUITY and LIABILITIES section of the Statement of Financial Position on 28 February 2022. (13)
INFORMATION:

A. Amounts extracted from the records on 28 February 2022.

B. Additional information:

1. Mark-up:
   A mark-up percentage of 100% on cost was maintained during the financial year.
2. Ordinary share capital and dividends
   
   •  On 1 May 2021 an additional 300 000 shares were issued.
   •  On 1 September 2021 the company repurchased 40 000 shares at 80 cents above the average share price of R8,50 each.
   • 950 000 shares were in issue on 28 February 2022.
   • The total dividend for the year amounted to R570 000.

C. Adjustments not taken into account:

1. Totally damaged goods returned on 26 February 2022 was incorrectly recorded as R7 200. The amount according to the credit note issued is R2 700.
2. Consumable stores on hand on 28 February 2022, R5 900.
3. An amount of R2 240 received from F. Solomon, whose account had been written off as irrecoverable, was posted in error to the bad debts account.
4. Provision for bad debts should be adjusted to R29 660.
5. The insurance account includes an annual premium of R22 500 paid for the period 1 July 2021 to 30 June 2022.
6. The premises has been rented since 1 April 2021 with an agreement that rent will be reduced by R1 000 per month with effect from
   1 January 2022. The rent for February 2022 is still outstanding.
7. The company pays the same monthly fee to all directors. One of the three directors resigned on 30 November 2021 and a new director was appointed on 1 February 2022. The fees of the new director is still outstanding.
8. Sundry expenses is the missing figure in the Statement of Comprehensive Income.
9. After taking all adjustments into account, the operating profit was accurately calculated as R1 602 190.
10. Extract from the loan statement received from Sparks Bank:
    

    Interest capitalised	?
    Repayments (including interest)	161 280
    Balance at the end of the financial year	703 800

    R100 000 of the loan will be paid back in the next financial year.
11. The income tax rate is 30%.
    60

QUESTION 2: FINANCIAL INDICATORS AND CASH FLOW STATEMENT (40 marks; 30 minutes)
REQUIRED:

2.1 Calculate the following financial indicators for the financial year ended 30 April 2022:
2.1.1 Debt-equity ratio (3)
2.1.2 Earnings per share (EPS) (4)
2.1.3 Dividend pay-out rate (%) (3)
2.1.4 % return on average equity (ROSHE) (5)

2.2 Complete the following section for Cash generated from operations:

• Cash effects of changes in working capital.
  (Cash outflows must be shown in brackets.) (9)

2.3 Calculate the following amounts for the Cash Flow Statement:

2.3.1 Taxation paid (5)
2.3.2 Proceeds from sale of fixed assets (5)
2.3.3 Funds used for the repurchase of shares (2)

2.4 Complete the following section of the Cash Flow Statement:

• Net change in cash and cash equivalents (4)

INFORMATION:

1. Extract from the Statement of Comprehensive Income on 30 April 2022:
   

   Depreciation	R 280 800
   Interest expense	151 200
   Net profit before tax	1 660 000
   Net income after tax	1 162 000

2.  Extract from the Statement of Financial Position and notes:
   

   	30 April 2022	30 April 2021
   Fixed assets (carrying value)	11 434 000	9 984 400
   Fixed deposits	120 000	600 000
   Current assets	1 202 400	906 000
   Trade and other receivables (Note 1)	481 800	352 500
   Cash and cash equivalents	6 000	67 800
   Shareholders' equity	10 776 400	8 893 800
   Non-current liabilities	1 080 000	1 440 000
   Current liabilities	900 000	1 156 600
   Trade and other payables	432 000	814 600
   Bank overdraft	264 000	0
   Shareholders for dividends	144 000	192 000

   
   Note 1: Trade and other receivables
   

   Net trade debtors	448 000	323 800
   Accrued income	28 400
   SARS (Income tax)	5 400	28 700
   	481 800	352 500

3. Fixed assets:
   
   • The total cost for the acquisition of a new vehicle and extensions to the buildings during the year amounted to R1 632 000.
   • During the year equipment was sold at carrying value.
4. Share capital and shares:
   
   • Additional shares were issued on 1 May 2021.
   • On 30 April 2022 shares were repurchased. The value of the shares as per the average issue price amounted to R25 000. The asking price was 10% more than the average issue price.
5. Dividends and earnings per share:
   

   	30 April 2022	30 April 2021
   Interim dividend (per share)	45 cents	25 cents
   Final dividend declared (per share)	25 cents	15 cents
   Earnings per share	?	94 cents

QUESTION 3: INTERPRETATION OF FINANCIAL INFORMATION (35 marks; 30 minutes)

Related Items

3.1 Choose the financial statement(s) in COLUMN B that matches the financial indicator in COLUMN A. Write only the letter (A–D) next to the question numbers (3.1.1 to 3.1.3) in the ANSWER BOOK.

(3 x 1) (3)

3.2 MIGUELE LTD
The information for this company relates to the financial year ended on 28 February 2022.
REQUIRED:

3.2.1 The directors are satisfied with the improvement in the liquidity of the company. Quote and explain THREE financial indicators with figures and trends that show an improvement of the liquidity position. (6)
3.2.2 Explain why the shareholders should be satisfied with their return on investment in the company. Quote figures and trends in your explanation. (4)
3.2.3 One of the directors feels that the company should pay back the loan as soon as possible. Explain why you disagree with him. Quote TWO financial indicators with figures and trends. (6)
3.2.4 One of the shareholders wants to sell her shares at R6 each.

• Provide ONE reason why you would agree with her to sell her shares. Quote a financial indicator with figures and trends. (2)
• Provide ONE reason why you disagree with her to sell her shares. Quote a financial indicator with figures and trends. (2)

3.2.5 The shareholders should be happy with the earnings per share (EPS) because it is better than the previous year. Explain why you agree with them. Quote figures and calculations. (4)

INFORMATION:

1. Financial indicators, interest rates and market price of shares:
   

   	28 February 2022	28 February 2021
   Current ratio	2,1: 1	2,9 : 1
   Acid test ratio	1,4 : 1	1 : 1
   Average debtors’ collection period	35 days	28 days
   Average creditors payment period	65 days	90 days
   Stock turnover rate	10,2 times	9,1 times
   Debt/equity ratio	0,3 : 1	0,3 : 1
   Dividends per share	80 cents	55 cents
   Earnings per share	104 cents	75 cents
   % return of shareholders’ equity	15,3%	10,4%
   % return on total capital employed	17,2%	12,1%
   Net asset value	650 cents	625 cents
   Interest rate on loans	14%	13%
   Interest rate on fixed deposits	7%	7%
   Market price of shares	600 cents	640 cents

3.3 SOCKER LTD AND BOLL LTD
The information relates to two companies competing in the same industry. The financial year of each company ends on the last day of May.
NOTE:

Alton Flan is a shareholder in both companies:
Both companies will issue new shares in the new financial year.
Alton Flan considers buying new shares in Socker Ltd only.

REQUIRED:

3.3.1 Explain what effect this consideration will have on the % shareholding of Alton Flan in EACH company. Quote figures and trends. (6)
3.3.2 Calculate the number of shares Alton Flan could buy in Boll Ltd. (2)

INFORMATION:

1. Extracts from accounting records on 31 May 2022.
   

   	SOCKER LTD	BOLL LTD
   Number of shares in issue	980 000	1 000 000
   Number of shares owned by Alt Flan	450 800	550 000

2. Shares to be issued in the new financial year.
   

   	SOCKER LTD	BOLL LTD
   Total number of shares	120 000	80 000
   Number of shares Alton Flan considers buying	110 200	0
   Issue price	R5	R4

QUESTION 4: CORPORATE GOVERNANCE (15 marks; 15 minutes)
You are provided with an extract of the audit report for Tantass Ltd for the financial year ended 28 February 2022.

4.1 Explain the role of the remunerations committee and give a reason why there is a need for this committee. (3)
4.2 Explain why the auditor referred to pages 7 to 22 in this report. (2)
4.3 Identify the type of audit report that the company received and give a reason for your answer. (2)
4.4 Explain the effect of this type of report for the image of the company.
Provide TWO points. (4)
4.5 State TWO possible consequences for the independent auditor if he had NOT referred to the increase in directors’ fees. (4)

INFORMATION:
Extract from the Auditor Report: