Module
Applied Financial Accounting
AFAC02-6
NQF LEVEL 6
FORMATIVE ASSESSMENT – ASSIGNMENT C
Assignment C (AFAC02-6/DLO6 12/2020)
Exam Date
Marks
14 December 2020
50
© Milpark Education Applied Financial Accounting AFAC02-6 Assignment C November 2020
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Assignment C (AFAC02-6/DLO6 12/2020)
Total: 50 marks
Note to student: You will be penalised for the copying of theory without
explanation/application to the scenario provided. You should use the theory in
support of your own answer. Non-application will result in a zero mark being
awarded.
SECTION A (50 MARKS) – PARAGRAPH QUESTIONS
Answer all of the following questions.
Question 1 (10 marks)
Read the content below and answer the questions that follow:
The following transactions are in respect of Hope (Pty) Ltd for the month of
September 2020:
1.
On 7 September, the business sold goods on credit. These goods had a
cost price (inclusive of VAT) of R69 000 and a mark-up (on cost) of 30%.
Both the cost of sales and sales needs to be accounted for.
2.
On 9 September, the owner took trading inventory with a selling price of
R11 500 (VAT-inclusive) for personal use. The goods had a margin (on
sales) of 20%.
3.
On 15 September, the business purchased trading inventory and paid
using Electronic Funds Transfer (EFT) for R57 500 (VAT-inclusive).
4.
The business paid electricity on 30 September, of R11 500.
All amounts stated are inclusive of VAT (at 15%), except where otherwise stated,
or where VAT is not applicable. The business uses the perpetual system when
accounting for inventory.
© Milpark Education Applied Financial Accounting AFAC02-6 Assignment C November 2020
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Prepare the general journal of Hope (Pty) Ltd for the month of September 2020.
Workings are not required. Use the format provided in the template below.
Ignore folio column and narrations.
No.
Details
Debit
Credit
(10)
Question 2 (20 marks)
You are provided with the following financial records of Good Life Retailers:
Extract of the Statement of Comprehensive Income of Good Life Retailers for
the year ended 30 June 2020
R
Sales
10 640
Cost of sales
4 720
Profit on sale of disposal
380
Operating expenses
3 200
Depreciation
600
Impairment loss
400
Interest expense
1 000
Profit after tax
792
Statement of Financial Position of Good Life Retailers at 30 June 2020
2020
2019
R'000
R'000
16 400
17 045
680
740
Trade receivables
1 040
1 093
Cash and cash equivalents
3 518
2 487
TOTAL ASSETS
21 638
21 365
Ordinary share capital (par value of R0.50)
5 000
5 000
Share premium
1 000
1 000
Retained earnings
2 909
2 417
ASSETS
Non-current assets
Property, plant and equipment (PPE) (@ carrying value)
Current assets
Inventories
EQUITY AND LIABILITIES
© Milpark Education Applied Financial Accounting AFAC02-6 Assignment C November 2020
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Statement of Financial Position of Good Life Retailers at 30 June 2020
2020
2019
R'000
R'000
10 000
10 000
1 532
1 406
Dividends payable
988
1 308
Tax payable
209
234
21 638
21 365
Non-current liabilities
Long-term loan
Current liabilities
Trade payables
TOTAL EQUITY AND LIABILITIES
Additional information:
•
On 15 March 2020, the company declared an interim dividend of three
(3) cents per share.
Required:
Note: ensure all outflows are put in brackets. Where necessary, show all
applicable workings.
2.1
Using the indirect method, prepare the operating section only of the
Statement of Cash Flows of Good Life Retailers for the year ended
30 June 2020.
2.2
2.3
(12)
Prepare the following T-accounts:
•
Tax payable
•
Dividends payable.
(6)
Calculate the cash generated by Good Life Retailers during the financial
year ended 30 June 2020.
Hint: you do not have to draw up the whole cash flow.
© Milpark Education Applied Financial Accounting AFAC02-6 Assignment C November 2020
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(2)
Question 3 (20 marks)
You are provided with the following ratios and other metrics for two food and
drug retailers listed on the Johannesburg Stock Exchange (JSE) in South Africa:
Clicks Ltd And Dischem Ltd (for 2017, 2018 and 2019 financial years).
Clicks
Dischem
2019
2018
2017
2019
2018
2017
Gross margins
21.34%
21.13%
20.98%
24.38%
24.38%
24.38%
Net margins
5.43%
5.05%
4.77%
3.43%
3.50%
3.55%
79.09
75.34
75.06
79.61
65.43
56.60
21.18
21.50
22.60
7.85
8.76
10.47
66.14
63.16
62.30
102.12
88.61
84.41
62.37%
61.83%
66.18%
76.17%
76.37%
80.86%
7.67
9.35
9.85
0.85
0.80
0.81
36.46%
38.18%
44.12%
40.04%
49.47%
66.94%
31 352
29 239
26 809
21 420
19 480
17 170
PROFITABILITY
RATIOS
EFFICIENCY RATIOS
Creditors' payment
period (days)
Debtors' collection
period (days)
Inventory days
LEVERAGE RATIOS
Debt ratio
SHAREHOLDER
RATIOS
Earnings per share
(rands)
Return on equity
OTHER METRICS:
Revenue (Millions of
rands)
Number of
15 400
17 500
employees
Source: Morningstar. 2020. Available from: https://www.morningstar.com/stocks/xjse/cls/performance
& https://www.morningstar.com/stocks/xjse/dcp/performance (Accessed: 09/10/2020).
Required:
1.1
Calculate the percentage growth in revenue for 2019 and 2018 for each
of the two food and drug retailers.
1.2
(4)
Calculate the revenue per employee for each of the two retailers for 2019
only. Which company is more efficient in that regard? Explain your
answer.
(4)
© Milpark Education Applied Financial Accounting AFAC02-6 Assignment C November 2020
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1.3
Calculate the working capital cycle (in days) of both retailers for 2019
only and explain your answer. Using the answer calculated, which of the
two retailers has an advantage (in comparison to the other) in terms of
the working capital cycle days? Motivate your answer.
1.4
(6)
An investor has R10 000 and can only invest in one of the two retailers.
Advise him on which of the two retailers he should choose. Clearly
articulate your reasons using at least three (3) of the categories of ratios
provided in the table above.
(6)
TOTAL MARKS: 50
© Milpark Education Applied Financial Accounting AFAC02-6 Assignment C November 2020
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