Orbit Limited Statement of Financial Position as at 31 December: 2022 2021 R R ASSETS Non-current assets 11 810 000 7 560 000 Property, plant and equipment 10 025 000 6 250 000 Investments 1 785 000 1 310 000 Current assets 4 190 000 4 690 000 Inventories 1 875 000 2 350 000 Accounts receivable 1 925 000 2 200 000 Cash 390 000 140 000 Total assets 16 000 000 12 250 000 EQUITY AND LIABILITIES Equity ? ? Ordinary share capital 5 480 000 3 680 000 Retained earnings ? ? Non-current liabilities 4 500 000 3 800 000 Loan (20% p.a.) 4 500 000 3 800 000 Current liabilities 2 300 000 1 500 000 Accounts payable 2 300 000 1 500 000 Total equity and liabilities 16 000 000 12 250 000 Statement of Comprehensive Income for the year ended 31 December: 2022 2021 R R Sales 10 800 000 7 150 000 Cost of sales (6 000 000) (3 650 000) Gross profit 4 800 000 3 500 000 Operating expenses (1 800 000) (1 200 000) Depreciation 580 000 200 000 Other selling, general and administrative expenses 1 220 000 1 000 0000 Operating profit 3 000 000 2 300 000 Investment income ? ? Interest expense (880 000) (600 000) Profit before tax 2 600 000 2 030 000 Company tax (728 000) (568 400) Profit after tax 1 872 000 1 461 600 Question REQUIRED 1.1 Calculate the increase in the retained earnings over the two-year period. 1.2 By how much did the interest income increase or decrease from 2021 to 2022? Provide a possible reason for the change. 1.3 Comment on the investing activities of the company. 1.4 Calculate the amount that would be reflected as “Changes in working capital” in the Statement of Cash Flows for the year ended 31 December 2022. 1.5 Without making use of any ratios, provide an interpretation of the following over the twoyear period: 1.5.1 Inventories 1.5.2 Accounts receivable 1.6 Calculate the cost (as a percentage) of not accepting discounts from creditors in settlement of accounts.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Orbit Limited
Statement of Financial Position as at 31 December:
2022	2021
R	R
ASSETS
Non-current assets	11 810 000	7 560 000
Property, plant and equipment	10 025 000	6 250 000
Investments	1 785 000	1 310 000
Current assets	4 190 000	4 690 000
Inventories	1 875 000	2 350 000
Accounts receivable	1 925 000	2 200 000
Cash	390 000	140 000
Total assets	16 000 000	12 250 000
EQUITY AND LIABILITIES
Equity	?	?
Ordinary share capital	5 480 000	3 680 000
Retained earnings	?	?
Non-current liabilities	4 500 000	3 800 000
Loan (20% p.a.)	4 500 000	3 800 000
Current liabilities	2 300 000	1 500 000
Accounts payable	2 300 000	1 500 000

Total equity and liabilities

16 000 000

12 250 000

Statement of Comprehensive Income for the year ended 31 December:
2022	2021
R	R
Sales	10 800 000	7 150 000
Cost of sales	(6 000 000)	(3 650 000)
Gross profit	4 800 000	3 500 000
Operating expenses	(1 800 000)	(1 200 000)
Depreciation	580 000	200 000
Other selling, general and administrative expenses	1 220 000	1 000 0000
Operating profit	3 000 000	2 300 000
Investment income	?	?
Interest expense	(880 000)	(600 000)
Profit before tax	2 600 000	2 030 000
Company tax	(728 000)	(568 400)
Profit after tax	1 872 000	1 461 600

Question

REQUIRED
1.1	Calculate the increase in the retained earnings over the two-year period.
1.2	By how much did the interest income increase or decrease from 2021 to 2022? Provide a possible reason for the change.
1.3	Comment on the investing activities of the company.
1.4	Calculate the amount that would be reflected as “Changes in working capital” in the Statement of Cash Flows for the year ended 31 December 2022.
1.5	Without making use of any ratios, provide an interpretation of the following over the twoyear period:
1.5.1	Inventories
1.5.2	Accounts receivable
1.6	Calculate the cost (as a percentage) of not accepting discounts from creditors in settlement of accounts.

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