Study the Statement of Cash Flows provided below and answer the following questions:

Calculate the following:
Company tax paid (3 marks)

Carrying value (Book value) of the machinery sold. (2 marks)

Identify TWO (2) items from this statement of cash flows that increase the cash balance but do not increase the profit. (2 marks)
Did the company issue any ordinary shares during the financial year ended 30 June 2021? Motivate your answer. (3 marks)

Comment on the following.
Cash flow from operating activities, (R920 000) (2 marks)

Increase in inventory, (R1 800 000) (2 marks)

Increase in receivables, (R1 000 000) (2 marks)

Non-current assets purchased, (R600 000) (2 marks)

Increase in long-term borrowings, R800 000 (2 marks)


The Statement of Cash Flows provided below was obtained from the records of Mitre Ltd:



Cash flows from operating activities(920 000)
Profit before interest and tax/Operating profit2 200 000

Non-cash flow adjustments


380 000

Depreciation400 000
Profit on disposal of machinery(20 000)

Profit before working capital changes

2 580 000

Working capital changes

(2 400 000)

Increase in inventory

(1 800 000)
Increase in receivables(1 000 000)

Increase in payables

400 000

Cash generated from operations


180 000


Interest paid


(100 000)


Dividends paid


(400 000)


Company tax paid




Cash flows from investing activities


(420 000)


Non-current assets purchased

(600 000)

Proceeds from disposal of machinery

180 000

Cash flows from financing activities




Proceeds from issue of ordinary shares




Increase in long-term borrowings


800 000


Net decrease in cash and cash equivalents


(540 000)


Cash and cash equivalents at the beginning of the year


600 000


Cash and cash equivalents at the end of the year


60 000

Answer the questions from the information provided. As far as possible use the contribution margin model to present your answers.

2.1 Use the information provided below to calculate the expected Operating Profit/Loss of each proposal.(8 marks)


The following budgeted information for the year ended 30 June 2023 was provided by Aster Ltd, a manufacturer of a single product:

Sales (R30 per unit)R4 800 000
Total variable costs(R2 880 000)
Total fixed costs(R1 600 000)
Operating profitR320 000

The sales manager suggested two proposals to improve the expected operating profit:

¦ Proposal A involves launching an improved marketing campaign. This would involve an additional R360 000 outlay for advertising. Sales commission will increase by R2 per unit. Sales are expected to increase by 25% above the budgeted sales volume, with no change in the unit selling price.

¦ Proposal B involves a 10% reduction in the unit selling price. Fixed selling overheads will reduce by R240000. The sales volume is expected to increase by 16 000 units.

Melton Ltd sells only one product. The following information, which includes all costs, is available for the month ended July 2022:

Variable costsR800 000
Fixed costsR600 000
Operating profitR600 000

Study the information provided below and calculate the following:
Break-even value (4 marks)

Sales value required to achieve an operating profit of R80 000, after spending an additional R400 000 on advertising. (4 marks)


A summary of the budgeted Statement of Comprehensive Income of Mac’s Eatery for July 2023 is as follows:

Sales1 600 000
Expenses1 760 000
Operating loss(160 000)

Additional information:

¦ Mac’s Eatery’s expenses are classified as fixed or variable. The fixed expenses (included in the statement above) are estimated at R800 000.

Use the information provided below to prepare the following for Warner Limited for August and September 2023 (using separate monetary columns for each month):

Debtors Collection Schedule (4 marks)

Cash Budget (16 marks)

Warner Limited sells computers. The following information is available to assist in the preparation of its cash budget for August and September 2023:

1. An unfavourable bank balance of R22 500 is expected on 31 July 2023.

2. Sixty percent (60%) of all the sales are for cash; the balance is on credit. Cash sales for June and July 2023 are forecasted at R72 000 and R144 000 respectively. Sales are expected to increase by 10% per month from August 2023. Sixty percent (60%) of the credit sales is collected in the month after the sale. The remainder is collected two months after the sale.

3. Warner Limited sells its computers at cost plus 50%. All the computers that are sold each month are replaced in the same month. All purchases are on credit and creditors are paid two months after the purchase.

4. Salaries and wages amount to R44 000 for August, 10% more than the amount for July.

5. Rent expense amounts to R48 000 per annum, payable monthly. Insurance is estimated at R36 000 for the year and is payable in September. Rates are estimated at R54 000 per year, paid half-yearly in August and February in equal instalments. Monthly administration costs of R18 000 (excluding R3 000 for depreciation) are payable in the month in which they are incurred.

6. Advertising expenses are expected to be 6% of the monthly sales and are paid one month in arrears.

7. Machinery with a cost price of R200 000 is expected to be purchased during August 2023. A deposit of R40 000 will be paid in August and the balance is payable in five equal instalments commencing September 2023.

8. A long-term loan of R100 000 at 15% per annum interest is to be raised on 01 September 2023. Interest is payable monthly with the first interest payment to be made on 30 September 2023.

Answer the questions from the information provided.

Study the information given below and answer the following questions:
Calculate the Payback Period of Project B (expressed in years, months and days). (3 marks)

Calculate the Accounting Rate of Return on initial investment of Project A (expressed to two decimal places).(4 marks)

Calculate the Net Present Value (NPV) of both projects. (6 marks)

Based on the NPV, which project should be chosen? Why? (1 marks)

 Project AProject B
Initial capital expenditure1 400 0001 400 000
Net profit per year:  
Year 1670 000270 000
Year 2540 000280 000
Year 3410 000650 000
Year 4270 000710 000
Expected scrap value400 0000

¦ The straight-line method of depreciation is used.

¦ The cost of capital is 15%.

¦ Ignore taxes.

Use the information provided below to answer the following questions:
Calculate the Internal Rate of Return (expressed to two decimal places) using interpolation. (5 marks)

Should the machine be purchased? Why? (1 marks)
Leo Limited has identified a new machine that it is considering for purchase. The machine would cost R600 000 and a further amount of R100 000 is payable for its installation. The machine is estimated to have a useful life of five years. At the end of five years, the machine would be donated. It is expected that the new machine would generate cash revenues of R450 000 per year, and its cash operating expenses would total R250 000 per year. The cost of capital is 15%.

Use the information provided below to answer the following questions.



Calculate the ratios for 2021 (expressed to two decimal places) that would reflect each of the following:
The percentage of profit on sales that the company produced from its operations prior to considering finance charges and taxes. (2 marks)

The amount of time it takes for the clients of Supreme Limited to settle their debts. (2 marks)

The efficiency with which the company used its net assets to produce revenue. (2 marks)

The efficiency of the company in using all its capital to generate profits. (2 marks)

The proportion of the profit after tax that is kept back in the company as retained earnings. (2 marks)

A measure of the company’s ability to pay its short-term debts within one year. (2 marks)

A measure of the proportion of the total assets that are financed by creditors instead of investors. (2 marks)

Comment on your answers in questions 5.1.4, 5.1.5 and 5.1.6 above. (6 marks) INFORMATION
The following information was extracted from the accounting records of Supreme Limited for the financial years ended 31 December 2021 and 2020:


Study the information given below and calculate the percentage by which the selling price per unit must increase, to increase operating profit by 10%. (Assume that there are no changes to the sales volume, total variable costs or fixed costs.)

Property, plant and equipment221 034124 665
Investments10 20026 250
Inventories37 67147 364
Accounts receivable38 82944 034
Cash7 8992 820
Share capital102 33273 500
Retained income74 46465 532
Loan (18%)92 80276 248
Accounts payable46 03529 853
Sales216 486143 499
Cost of sales120 27072 090
Operating profit65 80246 581
Investment income4 1166 237
Interest expense17 63412 198
Profit before tax52 28440 620
Net profit36 59928 434

Get completed answers on above accounting questions

Answer 1: The calculation of company tax paid based on the Statement of Cash Flows is performed as follows:


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