NSC Accounting Concepts relating to companies: You are provided with informatio

Question

You are provided with information from the records of Gandhi Ltd for the financial year ended 28 February 2017. Note 28 February 2017:

### 3.1 Complete the Income Statement for the year ended 28 February 2017. Note that some information is included in the ANSWER BOOK.

### 3.2 Prepare the following notes to the Balance Sheet:

#### 3.2.1 Ordinary share capital

#### 3.2.2 Retained income

### 3.3 Complete the EQUITY AND LIABILITIES section of the Balance Sheet. Show workings in brackets.

### 3.4
On 1 March 2016, B Sly (a shareholder) owned 400 000 ordinary shares. On 31 March 2016, she bought an additional 80 000 shares.
On 28 February 2017, she convinced the CEO to repurchase 250 000 shares from other shareholders.

#### 3.4.1 Calculate B Sly’s percentage shareholding in the company before and after the share buy-back.

#### 3.4.2 Explain why the other shareholders will be concerned about this transaction.

### INFORMATION:
A. The following balances/totals, amongst others, appeared in the books on 28 February 2017:
Ordinary share capital   R
Retained income          ?
Loan: Anca Bank        433 500
Trading stock (before the annual stock take) 231 700
Debtors' control        540 000
Provision for bad debts (1 March 2016)  24 000
Creditors' control      395 600
SARS: Income tax (provisional tax payments) ?
Rent income            61 900
Interest income        ?
Sundry expenses         ?

B. The gross profit for the year ended 28 February 2017 was calculated at:

C. The following adjustments must still be brought into account:
Stocktaking on 28 February 2017 reflected trading stock of R207 500 on hand.
Provision for bad debts must be increased to R21 600.
One third (1/3) of the audit fee was still due on February 2017.
One of the three directors is still owed her fee for February 2017. All three directors received the same monthly fee.

D. Loan: Anca Bank
Interest on the loan is capitalised, but no entry has been made in the books. A monthly instalment of R5 200 (including interest) is paid. This was taken into account. The loan statement showed a closing balance of R487 000. The company plans to increase their loan repayments in order to settle 20% of the loan balance in the next financial year.

E. Operating profit on sales was 14.5%.

F. Income tax at 32% of the net profit amounted to R396 800.

G. Share capital and dividends:
The company is registered with an authorised share capital of 1 200 000 ordinary shares.
85% of the authorised shares were in issue on 1 March 2016.
On 31 March 2016, the directors issued all the unissued shares. EFT payments totaling R756 000 were received.
On 7 February 2017, the directors repurchased 250 000 shares at R1.45 per share.
An interim dividend was paid on 6 September 2016.
A final dividend of 25 cents per share was declared on 28 February 2017. All shareholders (including the shares repurchased) were entitled to this dividend. This must still be brought into account.

You are provided with information from the records of Gandhi Ltd for the financial year ended 28 February 2017 - NSC Accounting - Question 3 - 2017 - Paper 1

Worked Solution & Example Answer:You are provided with information from the records of Gandhi Ltd for the financial year ended 28 February 2017 - NSC Accounting - Question 3 - 2017 - Paper 1

3.4.2 Explain why the other shareholders will be concerned about this transaction.

Join the NSC students using SimpleStudy...