Calculate the increase in the retained earnings over the two-year period.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Orbit Limited : Statement of Financial Position as at 31 December

  2022 2021
Non-current Assets R11 810 000 R7 560 000
Property, Plant, Equipment R10 025 000 R6 250 000
Investments R1 785 000 R1 310 000
Current Assets R4 190 000 R4 690 000
Inventories R 1 875 000 R2 350 000
Account Receivable R1 925 000 R2 200 000
Cash R390 000 R140 000
Toatal Assets R16 000 000 R12 250 000
Equities & Liabilities    
Equity ? ?
Oridanary share capital R5 480 000 R3 680 000
Retained earnings ? ?
Non-current Liabilities R4 500 000 R3 800 000
Loan (20% p.a) R4 500 000 R3 800 000
Current Liabilities R2 300 000 R1 500 000
Accounts payable? R2 300 000 R1 500 000
     
     
     

Calculate the increase in the retained earnings over the two-year period.

 

 

Total equity and liabilities
Statement of Comprehensive Income for the year ended 31 December:
Sales
Cost of sales
Gross profit
Operating expenses
Depreciation
Other selling, general and administrative expenses
Operating profit
Investment income
Interest expense
Profit before tax
Company tax
Profit after tax
16 000 000
R
10 800 000
(6 000 000)
4 800 000
(1 800 000)
580 000
1 220 000
hp
3 000 000
?
(880 000)
2 600 000
(728 000)
1 872 000
12 250 000
2021
R
7 150 000
(3 650 000)
3 500 000
(1 200 000)
200 000
1 000 0000
2 300 000
?
(600 000)
2 030 000
(568 400)
1461 600
In addition to the above, the following information is available:
All sales and purchases of inventory are on credit. Inventories on 31 December 2020 amounted to R1
500 000. Credit terms of 5/10 net 90 days are granted by creditors. Credit terms of 60 days are granted to
debtors. Dividends declared for the years ended 31 December 2021 and 2022 amounted to R1 169 280 and
R1 422 000 respectively.
The financial manager of Orbit Limited provided the following forecasts for 2023:
Sales are estimated at 8 000 units with a selling price of R1 800 each. The manufacturing costs include direct
materials of R460 per unit, direct labour of R315 per unit, variable overheads of R170 per unit and fixed
overheads of R880 000. Fixed selling and administration costs are estimated at R2 000 000 and the variable
selling costs are estimated to be 7.5% of sales.
The directors are contemplating diversification in 2024 by entering the passenger transport market. This could
be achieved through the purchase of a fleet of midi buses that are expected to cost R9 500 000. An additional
R500 000 will be spent on import duties. The cost of operating the buses each year is expected to be R4
100 000 and the annual revenues from transporting the passengers are estimated at R7 000 000. The buses
Transcribed Image Text:Total equity and liabilities Statement of Comprehensive Income for the year ended 31 December: Sales Cost of sales Gross profit Operating expenses Depreciation Other selling, general and administrative expenses Operating profit Investment income Interest expense Profit before tax Company tax Profit after tax 16 000 000 R 10 800 000 (6 000 000) 4 800 000 (1 800 000) 580 000 1 220 000 hp 3 000 000 ? (880 000) 2 600 000 (728 000) 1 872 000 12 250 000 2021 R 7 150 000 (3 650 000) 3 500 000 (1 200 000) 200 000 1 000 0000 2 300 000 ? (600 000) 2 030 000 (568 400) 1461 600 In addition to the above, the following information is available: All sales and purchases of inventory are on credit. Inventories on 31 December 2020 amounted to R1 500 000. Credit terms of 5/10 net 90 days are granted by creditors. Credit terms of 60 days are granted to debtors. Dividends declared for the years ended 31 December 2021 and 2022 amounted to R1 169 280 and R1 422 000 respectively. The financial manager of Orbit Limited provided the following forecasts for 2023: Sales are estimated at 8 000 units with a selling price of R1 800 each. The manufacturing costs include direct materials of R460 per unit, direct labour of R315 per unit, variable overheads of R170 per unit and fixed overheads of R880 000. Fixed selling and administration costs are estimated at R2 000 000 and the variable selling costs are estimated to be 7.5% of sales. The directors are contemplating diversification in 2024 by entering the passenger transport market. This could be achieved through the purchase of a fleet of midi buses that are expected to cost R9 500 000. An additional R500 000 will be spent on import duties. The cost of operating the buses each year is expected to be R4 100 000 and the annual revenues from transporting the passengers are estimated at R7 000 000. The buses
are expected to have a total salvage value of R1 000 000 and the estimated useful life of the buses is five
years. The company's cost of capital is expected to reduce to 15%. Depreciation is calculated using the
straight-line method.
Transcribed Image Text:are expected to have a total salvage value of R1 000 000 and the estimated useful life of the buses is five years. The company's cost of capital is expected to reduce to 15%. Depreciation is calculated using the straight-line method.
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