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AVENGERS LTD The information relates to the financial year ended 31 March 2020 - NSC Accounting - Question 4 - 2020

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AVENGERS LTD The information relates to the financial year ended 31 March 2020. 4.1 Refer to Information B. Calculate the missing amounts denoted by (i) to (iv). ... show full transcript

Worked Solution & Example Answer:AVENGERS LTD The information relates to the financial year ended 31 March 2020 - NSC Accounting - Question 4 - 2020

Step 1

Calculate the missing amounts denoted by (i) to (iv)

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Answer

To find the missing amounts in the fixed asset note:

  1. (i) The cost of land and buildings at the beginning of the year can be calculated from the carrying value and accumulated depreciation:

    extCost=extCarryingvalue+extAccumulateddepreciation=9650000+650000=10500000 ext{Cost} = ext{Carrying value} + ext{Accumulated depreciation} = 9 650 000 + 650 000 = 10 500 000

  2. (ii) The depreciation of the vehicles for the year can be calculated as follows:

    • For new vehicles: 625,000 x 20% = 125,000
    • For old vehicles: 1,281,000 x 20% = 256,200
    • Total depreciation for vehicles = 125,000 + 256,200 = 381,200

  3. (iii) The disposal of equipment on 30 September 2019 would account the accumulated depreciation prior to sale:

    • The accumulated depreciation needs to be calculated over the period it was in use before disposal:

    extoldequipmentcosts=21000−(15000extdepreciationbeforesale)=6000 ext{old equipment costs} = 21 000 - (15 000 ext{ depreciation before sale}) = 6 000

  4. (iv) The accumulated depreciation for equipment needs to be derived from total asset costs and disposals:

    • Since total cost minus carrying value = accumulated depreciation, calculate:

    extAccumulateddepreciation=21000−15450=5550 ext{Accumulated depreciation} = 21 000 - 15 450 = 5 550

Step 2

Prepare the following notes to the Balance Sheet on 31 March 2020: Ordinary share capital

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Answer

The ordinary share capital can be prepared as follows:

  • Total shares at the beginning of the year = 800,000 shares
  • Shares issued during the year = 400,000 shares
  • Shares repurchased = 60,000 shares

Thus,

extIssuedordinarysharecapital=800,000+400,000−60,000=1,140,000 ext{Issued ordinary share capital} = 800,000 + 400,000 - 60,000 = 1,140,000

Therefore, the ordinary share capital at the end of March 2020 is R7,980,000.

Step 3

Prepare the following noted to the Balance Sheet on 31 March 2020: Retained income

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Answer

To calculate the retained income, follow these steps:

  • Beginning retained income: R1,181,250
  • Net profit after tax: R2,534,400
  • Interim dividends paid: R1,488,000
  • Final dividends declared: R889,200

The formula then becomes:

extEndingretainedincome=extBeginningretainedincome+extNetprofitaftertax−extTotaldividends ext{Ending retained income} = ext{Beginning retained income} + ext{Net profit after tax} - ext{Total dividends}

Thus,

extEndingretainedincome=1,181,250+2,534,400−(1,488,000+889,200) ext{Ending retained income} = 1,181,250 + 2,534,400 - (1,488,000 + 889,200)

Ending retained income amounts to R1,110,450.

Step 4

Complete the Balance Sheet (Statement of Financial Position) on 31 March 2020.

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Answer

The Balance Sheet can be structured as follows:

ASSETS

  • Non-current assets: R11,458,500
  • Current assets: R2,715,750
  • Total Assets: R14,174,250

EQUITY AND LIABILITIES

  • Equity:
    • Ordinary share capital: R7,980,000
    • Retained income: R1,110,450
  • Non-current liabilities: R2,382,000
  • Current liabilities: Trade and other payables: R1,318,000

As a result, the total liabilities and equity match the total assets, validating the Balance Sheet.

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