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Prepare the Retained Income Note for the year ended 28 February 2023 - NSC Accounting - Question 2 - 2023 - Paper 1
Question 2
Prepare the Retained Income Note for the year ended 28 February 2023. Calculate the following figures for the 2023 Cash Flow Statement: 1. Change in loan 2. Procee... 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
Answer
To prepare the Retained Income Note for the year ended 28 February 2023, we must start with the balance at the beginning of the year:
- Balance at beginning of year: R237,400
- Net profit after tax: R1,526,000
- Less: Shares repurchased (180,000 shares at R1.20): R216,000
- Ordinary share dividends: R(191,800) which includes interim dividends of R342,400 and final dividends
Thus, the balance at the end of the year can be calculated:
- Calculate the retained income:
- Retained income = Starting balance + Net profit - Shares repurchased - Ordinary share dividends
- The final balance will be R629,600.
Step 2
Step 3
Calculate the following figures for the 2023 Cash Flow Statement: Proceeds from shares issued
Answer
The proceeds from shares issued can be calculated as follows:
- Shares repurchased: 1,370,000 shares.
- This does not qualify for shares issued, therefore we focus solely on the initial share capital:
- The amount generated from shares = R3,420,000.
Step 4
Complete the Cash Effects of Operating Activities section of the Cash Flow Statement.
Answer
This section includes:
- Cash generated from operations: R2,340,000
- Interest paid: R648,000
- Tax paid: R723,600
- Dividends paid: R(817,400)
Summarizing, total cash flow from operations would then aggregate these figures.
Step 5
Step 6
Calculate the following financial indicators on 28 February 2023: Net asset value
Answer
Net asset value is calculated as:
- Total assets: R13,959,500
- Total liabilities: R629,600
- Therefore:
- Net asset value = (Total assets - Total liabilities) / Total shares = (R13,959,500 - R629,600) / 1,370,000 = 1,064.9 cents.
Step 7
Calculate the following financial indicators on 28 February 2023: % return on total capital employed (ROTEC)
Answer
ROTEC is computed via:
- Net profit after tax: R1,526,000
- Average capital employed: R20,343,500
- Formula:
- ROTEC = (Net profit / Average capital employed) * 100 = (R1,526,000 / R20,343,500) * 100 = 7.5%.