Answer ALL questions in this paper. [100

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Answer ALL questions in this paper.




[100 MARKS]
QUESTION 1






(25 Marks)
1.1 REQUIRED
Use the information provided below to prepare the following:
1.1.1 Pro Forma Statement of Comprehensive Income for
the year ended 31 December 2019. (6
marks)
1.1.2 Pro Forma Statement of Financial Position
as at 31 December 2019. The amount of
non-current external funding required must be calculated.



(14 marks)
INFORMATION
Momentum Ltd
Pro Forma Statement of Comprehensive Income for the year ended 31
December 2018
R
Sales



8 000 000
Cost of sales



6 000 000
Gross profit



2 000 000
Expenses



1 000 000
Profit before tax


1 000 000
Company tax


300
000
Profit after tax


700
000
Momentum Ltd
Pro Forma Statement of Financial Position as at 31 December
2018
R
ASSETS
Non-current assets


3 500 000
Fixed/Tangible assets


3 500 000
Current assets


3 000
000
Inventories
Trade and other receivables Cash and cash equivalents Total
assets
1 000 000
1 500 000
500 000
6 500 000
EQUITY AND LIABILITIES
Shareholders’ equity


3 250 000
Ordinary share capital Retained earnings Non-current liabilities
Long-term loan Current liabilities
Trade and other payables Company tax payable Total equity and
liabilities
1 500 000
1 750 000
2 000 000
2 000 000
1 250 000
1 000 000
250 000
6 500 000
1230











1
Additional information
1) The sales for the year
ended 31 December 2019 are expected to amount to R9 000 000.
2) The gross margin percentage
for 2018 will be maintained during 2019.
3) Expenses as a percentage of
sales are expected to increase by 2.5 percentage points.
4) Company tax is calculated at
30% of the pre-tax profit. Company tax payable
(outstanding) on 31 December 2019 is expected to equal 10% of the
total tax.
5) A new machine costing R795 000
will be purchased during January 2019. Total
depreciation for the year ended 31 December 2019 is expected to
amount to R170 000.
6) The dividends for 2019 are
expected to amount to R350 000 and these are payable
during
2020.
7) Cash and cash equivalents are
expected to remain unchanged.
8) Trade and other receivables
represent approximately 18% of annual sales.
9) The company’s closing
inventory as well as trade and other payables will
change
directly with changes in sales during 2019.
10) 100 000 ordinary shares are expected
to be sold during January 2019 at R2.50 per share.
11) R250 000 of the long-term loan will
be repaid during March 2019.
1.2 Provide FIVE (5) reasons why it is
necessary for business entities to prepare budgets.

(5 marks)